Taking a Long-term Investor’s View of Independence from the EU

Posted by siteadmin on Friday 1st of July 2016.

On 24 June 2016, as a nation we voted to leave the EU. FTSE100 share values predictably fell by around 10% when British markets opened in the morning, but by lunchtime they’d already recovered half of that fall.

There will be short-term financial market volatility, but pundits are divided over what the long-term effect on trading with European countries will be.

Future-proof your investment portfolio as much as possible
It’s important to realise that many of the recent market fluctuations have been fuelled by influences other than the EU referendum. However, there’s no hiding from the immediate short-term overreaction of the markets to various comments that received widespread coverage in the media.

In reality, seasoned successful investors wouldn’t normally worry about such short-term changes. We believe in medium- to long-term investments, and that there will always be points when markets soar or fall within short periods of time.

The table below demonstrates how second-guessing events is almost always doomed to failure.

Illustration showing why we believe in medium- to long-term investments
Over the past twenty years, using an £10,000 initial investment, an investor who remained in the same market throughout the period could have a potential return of £34,778 (an increase of 247.78% on his initial sum) compared to an investor who missed the best 25 days.

Investor’s status

Total return (%)

Stayed invested

247.78

Missed 5 best days

139.26

Missed 10 best days

88.19

Missed 15 best days

51.56

Missed 20 best days

24.21

Missed 25 best days

3.19

Source: FE Analytics. FTSE All Share, total return, bid-to-bid, throughout period running from 01.03.96 to 29.02.16. The information provided is for illustrative purposes and doesn’t represent the past performance of any particular investment. It is not possible to invest directly into the FTSE All Share.

Spread risk wisely
The best approach to investing is to hold funds that are spread across a wide range of asset classes (e.g. shares, government and corporate bonds, property and cash) that are distributed around the world.

The value of the investment and the income they produce can go down as well as up and you may not get back as much as you put in.

As always, if you would like investment advice about potential or existing assets, please contact us to speak to an expert.

Archive