Brexit – Should I be worried about my investment portfolio?
It seems the BDB team are keeping their cards close to their chests with respect to which way they are going to vote on 23rd June. A wise move in my view as there is nothing like politics and religion to come between friends.
This last week we have listened to the prophecies of doom from (amongst others) David Cameron, Boris Johnson, Barack Obama, the Chairman of Wetherspoons, Professor Stephen Hawking and the Cornish Pasty Association.
One thing we do all agree on at BDB is that there is a lot of scaremongering about the economy going on and not enough independent facts which we can all use to help us with our decision. This isn’t surprising really, how can anyone be reasonably expected to predict the future consequences of a decision which impacts on, and is impacted by, an unfathomably complex combination of factors which impact on our daily lives.
It would be only natural for all this bad news to create anxieties about what it all might mean for businesses, workers, pensioners and those with money exposed to the investment markets. There will be some who say they can position their portfolios tactically over the coming weeks, to either protect against a downturn, or exploit a short term perceived opportunity. The truth is, some of them will get it right. This is the nature of having such a wide pool of players in the zero sum game of investing, someone has to come top of the pile.
The problem is, it is impossible to know who is going to get it right ahead of time. Those who do well will credit their brilliant skills of decision making, incredible expertise and occasionally the armies of highly paid analysts that helped them make their decisions. At the risk of sounding clichéd, even a stopped watch is right twice a day.
For those who lose, we expect to hear ‘the markets’ taking the blame, not the investor, investment manager nor the process.
Those who know BDB well will have heard before our firmly held belief that all short term tactical tweaking of a portfolio increases risks which are not proven to be rewarded. Think about your portfolio like a bar of soap; the less you touch it, the longer it will last. All this activity surrounding a portfolio looks a lot more like speculation than investing in the true sense of the word. It is not just us who are saying it, the weight of evidence continues to pile up against the traditional active approach to investment management. Almost all active equity funds in Europe and the US underperforming their benchmark over the past ten years.
So, rather than add our voices to the maelstrom, we thought we would make some predictions you can hang your hat (but probably not your vote) on.
- ‘Experts’ will continue to make predictions on what will happen in the future with regard to the economy and investment markets. Some will be right and some will be wrong.
- People will continue to correlate short term economic performance with that of investment markets. They will be proven to be wrong.
- Markets will go up and down during the run-up to the vote and afterwards.
- Those who have taken time at the outset to pick the right portfolio to match their financial plan will be as well placed now as ever.
- A highly diversified portfolio will prove to be the best method of managing short term volatility such as that which may be caused by the vote.
- Lowest costs will continue to be one of the best predictors of who will finish top of the pile in the long run.
- Time in the market will prove to be more successful in the long term than timing the market.
- Investors behaviour will be a much bigger threat to their own portfolios than the short term fluctuations caused by this vote.
Sorry to disappoint the harbingers of doom, it’s ‘as you were’ here at BDB. The fundamental foundations which underpin our investment philosophy will continue to exist in a post referendum world whether the country votes in or out. Companies will still rise and fall and they will all continue to strive for growing dividends for their shareholders. Capitalism won’t be ended by the Great British public, despite what others may say in these remaining few days…
So I hope that this note will provide comfort to anyone who is worried. If you’re investing in one of our portfolios you are as well placed as you can be and we’ve got the evidence to prove it.
If you are still undecided which way you will vote, we have a few seats remaining at a Brexit debate evening we are co-sponsoring on the 21st June in Leeds. Speakers from both sides will attempt to cut through the noise and make a last minute attempt to sway the audience one way or the other. If you are interested in attending do please get in touch with firstname.lastname@example.org.