United Kingdom Citizens Surprise the Experts and Vote to Leave EU (What Does it Mean to Me?)
On June 23, citizens of the United Kingdom voted to leave the European Union. While there has been much speculation leading up to and since the vote, many of the longer-term implications of the referendum remain unclear, as the process for negotiating what a UK exit may look like are just beginning.
Prudent Investor Advisors and its team of professionals has decades of experience managing portfolios, including during periods of uncertainty and heightened volatility. We monitor market events very closely and consider the implications of new information as it comes to light. We are paying close attention to market mechanisms and they appear to be functioning well. Our investment philosophy and process have withstood many trying times and we remain committed.
We urge caution in allowing market movements to impact long-term asset allocation. Long-term investors recognize that risks and uncertainty are ever present in markets. A drop in prices is generally due to lower expectations of cash flows, higher discount rates, or both. In some cases, a drop is also due to investors demanding liquidity. In the current situation, some investors and economists may expect lower cash flows due to possible trade barriers that may not be implemented. Higher discount rates may be occurring due to uncertainty about changes in the economic landscape and regulations. We have seen markets increase discount rates in times of uncertainty before, resulting in lower prices and increased expected returns.
However, it is difficult to know when good outcomes will materialize in the future. By attempting to time the right moment to buy or sell, one risks not enjoying the potential benefits of such materializations. Many of those who exit the markets miss the recoveries. What we have often seen in the past is that investors who remained in well-diversified portfolios were rewarded over time.
The UK will have up to two years to negotiate a withdrawal, during which time it remains subject to EU treaties and laws. Any potential operational changes depend on what path the UK and EU decide to take. There is plenty of speculation out there about what is going to happen. However, no one knows what the future holds. In fact, the experts were completely wrong about the expectations for this election. The political experts and the famous English bookies were completely wrong about the will of the citizens of the UK to leave the European Union. We would advise against listening to these same so-called experts who are now calling for financial ruin.
The UK has voted to leave the European Union however to the best of our knowledge it remains committed to the planet Earth. There are many questions that remain to be answered but the UK will continue to be a meaningful player in the global economy whether it is a member of the European Union or not.
Prudent remains committed to helping our clients navigate the uncertainties of the world and to help them focus on what is within their control. Our advice to clients remains the same. Focus on your personal situation, make certain your goals are clear, and make changes to your investments based on changes in your circumstances. A well-diversified, lower cost, institutional portfolio like those managed by Prudent are designed as all-weather portfolios.
Poor investment decisions are often made as people react emotionally to news and events. The wall-to-wall coverage of the events in Europe only raise this level of stress. If you want to focus on Europe we have a suggestion for you. Turn the channel to one of the UEFA 2016 soccer games and enjoy the match.
After the soccer match if you are still worried about current events, please take some time to read through our Pursuing a Better Investment Experience paper. It outlines the ten items that any investor should focus on to improve their chances of a better investment experience.
Request a Free Copy of “Pursuing a Better Investment Experience”.
This easy to read document provides a road map for investors to focus on the right things to improve your chances for a successful investment experience.
Contact Gary by email to request a copy of the document. Please put Pursue a Better Investment Experience in the RE line of your email.