June 6th, 2017
Most of the country will be aware that the snap election is due to go to the vote on Thursday, but given that there are currently bigger headlines, you may be forgiven for forgetting the importance of the impending vote.
Many had originally predicted a Conservative whitewash, but as we get closer to voting day, as do the opinion polls get closer, with some even believing that a hung parliament could be a realistic outcome. With all this uncertainty, what will the affect be on the markets? And what strategy should the average investor be taking to not get swept up in political change upsetting their investments?
It is a fairly well-known fact that markets don’t like uncertainty, and the outcome for the average investor normally isn’t positive. With the FTSE running at an elevated level, the pound reducing again in value following on from the announcement of the snap election, and the original belief that the Conservatives were going to produce some certainty now gone, the worry for the average investor is what do I do going forward.
One of the main messages that should be coming out of the financial world in the short term is ‘try and not get swept up in the political news, and let it affect your investment strategy’. The reason for this statement is that markets at certain times will be volatile, that is natural and expected, and any experienced investor will know that times of uncertainty are not the time to crystallise investments and cement losses. The key immediate message should be stay the course, and don’t let political unrest affect your decisions.
The next key message should be ensuring that you have an appropriate level of diversification in your portfolio, no matter which investment wrapper you are using, whether it is pensions, Stocks and Shares ISAS, General Investment Accounts or Self-Managed Direct Shares. Ensuring that you have an appropriate level of diversification in your investment portfolio, will not only mitigate to a degree the amount of risk that you are taking, but it may also improve the level of performance it achieves as whilst the UK markets may be uncertain, other markets may be performing better, and holding a wider range of assets will help to ensure that you are not putting too much risk on your portfolio.
And finally, in the last message there should be some spin on positivity included. While uncertain times have affected how the markets are going to react, and how this has had an impact on the pound, there is always the age-old adage of ‘risk means opportunity’. While the pound has been dropping, it could be argued that the overseas weighted FTSE 100 market will do well, and that there could be promising investment opportunity there. Just to be clear, this isn’t advice and should not be construed as such, but it is an example of how there is always the opportunity to make money from the markets, so ensuring that you have some form of disposable funds to invest for opportunities is important.
If you are worried about how the markets are reacting, how your current investments are performing, what the future holds for you, or just simply want some up to date advice, then please get in touch with Duncan Craze, Financial Planner at our sister company Contractor Wealth to receive professional financial planning.
The value of investments may fall as well as rise and past performance is not a guide to future returns.
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