With Brexit creating so much uncertainty, should you be looking to international investments, and diversification outside the UK?
Brexit is now less than a year away. So we feel it is timely to ask the question “How insular are your investments?”
Brexit – or more accurately the start of the transition period of the UK leaving the EU – begins on 29 March 2019. By the end of the following year, the UK’s remaining links to the EU are due to be cut.
Keith Bonner, Director and lead IFA at HSC Financial Services of Brighton says “Since June 2016, when the Brexit referendum took place, the FTSE 100 has been one of the world’s poorest performing major indices. So it is perhaps no coincidence that, in March 2018, a survey by the Bank of America (BoA) of 163 global investment managers found the UK stock market was least popular of 22 wide-ranging investment asset classes.”
If you live and work in the UK, then naturally enough you tend to think in terms of UK-based investments, be they shares, bonds or property. The BoA survey is a reminder that taking such a parochial view of investments may come at a price.
Diversification is one way that investment professionals – such as our Investment Committee which manages the 8 unique model portfolios run by HSCFS – limit risk and potentially increase returns. As an example of this, the most recent report from the Pensions Regulator showed that in 2017 the average UK defined benefit pension scheme had only one fifth of its total shareholdings in UK quoted shares.
Diversification into International markets offers:
- Access to industries which are not represented on the UK stock market, such as Amazon or Daimler-Benz.
- The opportunity to benefit from different economies and different stages of the economic cycle for example Emerging Markets. Both are especially important when UK economic growth is forecast to remain weak.
- Exposure to foreign currencies, which can provide an additional boost to returns when sterling is weak, as it was in the 12 months following the Brexit vote.
Further, Keith comments “There are many ways to increase the international element of an investment portfolio, whether it is held directly or via an ISA or pension arrangement. We blend geographies, styles, sectors and asset classes in our portfolios which have been hugely successful in the bull run which we have enjoyed for many years now. We believe that diversity will protect our portfolios in what might well be more volatile times this year. For the strategy appropriate to your circumstances, please talk to us.”
Call us for help with your investments on 01273 710404 or email us by clicking here.
The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance. Investing in shares should be regarded as a long-term investment and should fit in with your overall attitude to risk and financial circumstances.