From an investing perspective, there are basically two ways you can approach Brexit. One is to sit as tight as you can, let Brexit run its course and then see where you stand. The other is to stay alert for opportunities and in particular keep your eyes and ears open for any investing doors opened by Brexit. Possibly the most practical way to look at pre-Brexit investing is to look at it in terms of your investing horizons. We say horizons because we suspect that many people will be looking to create a mixture of short-term, medium-term and long-term investments.
The value of investments and the income they produce can fall as well as rise. You may get back less than you invested.
Short term (less than two years)
We’re saying less than two years as Article 50 has only just been triggered, marking the start of a negotiation period of (up to) two years. If, however, you’re looking at this sort of time-frame then we’re guessing that either you’re unclear about where you will stand after that or you have a specific reason for wanting to collect your investment returns either pre-Brexit or in the next two years. With that in mind, you best option could well be to go for fixed-term bonds as these are possibly the most straightforward investments there are in the sense that investors commit a specific amount of money for a defined period of time in exchange for a guaranteed return. Notwithstanding this, navigating the bond market can be a tricky task at the moment. On the one hand, the fact that low interest rates are widespread means that bonds issued by government and other “blue chip” sources can have unappetizing rates. On the other hand, investors need to make sure they do their due diligence thoroughly before purchasing bonds with higher yields, since these can vary widely in the likelihood of the bond issuer fulfilling their commitment. In short, you need to look for companies, which combine solid fundamentals with innovation and have a Brexit-proof business model in the sense that either they’ll have completed their task before Brexit or (more likely), they have a global business. We appreciate this is asking a lot, but there are options.
Medium term (two to five years)
Investing in this sort of timescale depends largely on your appetite for risk. If you prefer to play safe, then bonds are certainly still an option. Given that investing directly in the property market is probably a bit impractical even at the upper end of this time scale, you may wish to split the difference and look at property bonds and/or funds (although the latter may be better suited to those at the longer end of the medium-term framework). If you are sticking with shorter-term investments due to reasons such as ill-health or age, you may wish to look for investments which qualify for business property relief, although it is generally still preferable that these be solid investments in their own right. Otherwise, peer-to-peer lending could be an interesting possibility.
Longer term (five years or more)
If your investing horizon is five years or more, you may be feeling particularly tempted to “sit out” Brexit and see what happens afterwards. We’d like to remind you of the story of the golfer who decided he would refrain from playing a game until he had made at least one perfect shot in practice. He died without ever playing a game. If you have an investing horizon of five years or more then you have a huge variety of options open to you and may even benefit from professional advice. In any case, always remember that even in a volatile situation, indeed one might say, especially in a volatile situation, solid fundamentals are the basis for solid investments and the turbulence of Brexit may give you the ideal opportunity to pick up a bargain you might otherwise never have been able to afford.