Fidelity on what Brexit means for your money

With Britain voting to leave the European Union, Fidelity International has rounded up tips from its team of experts to explore what this means for markets, pensions and your investments

Fidelity on what Brexit means for your money

Brexit and the markets

Tom Stevenson, investment director for personal investing at Fidelity International, said: “It is likely to remain an uncertain time for markets in the aftermath of the Brexit result – both the FTSE 100 and FTSE 250 indices have continued to fall this morning (Monday 27 June 2016).

“At times like this it sensible to take a deep breath and focus on your long-term investment goals. Volatility is part and parcel of equity investing and shareholders are invariably rewarded over time for accepting the risks of stock market investing. Attempts to time the market are usually doomed to fail, which is why we caution against trying to finesse the ups and downs of the market.

“Remember that the best days in the stock market very often follow hot on the heels of the worst ones and missing these rallies can seriously compromise long-term investment returns.

“We calculate that missing just the ten best days in the market over the past 30 years would have reduced the annualised return over that period from 8.8% to just 6.6%. That might not sound much but it has the effect of reducing the cumulative return from 1,168% to 572%, a massive difference.”

20/06/86 to 20/06/2016 Whole time in market Less 10 best days Less 20 best days Less 30 best days Less 40 best days
£1000 invested £12,679.61 £6,722.54 £4,352.07 £2,976.05 £2,108.09

Source: Fidelity International, £1000 invested in the FTSE All Share Index. June 2016

Brexit and your pension

Richard Parkin, head of pensions at Fidelity International commented: “As with many of the consequences of Brexit, it’s too early to say how pensions will be affected in the long term. The key message for retirees is to stay calm and avoid taking any unnecessary risks.

“Consider whether you really need to take cash from your retirement investments now. We sometimes see people taking cash from their pension savings at retirement just because they can. Many don’t realise that most pensions allow you to leave the money invested until you need it. If you do need cash now, taking smaller withdrawals over a longer time period will often be less risky than taking a large withdrawal all at once.

“If you are looking to convert your savings to guaranteed income by buying an annuity then it’s more important than ever that you shop around for the best deal. Annuity rates are based on long term interest rates which are already low and could be adversely affected by market uncertainty.”

Brexit and your investments

Maike Currie, investment director for personal investing at Fidelity International, said: “Investors can’t be blamed for feeling unnerved at the moment. With Britain exiting the EU the only certainty for now is uncertainty.

“In uncertain times, wealth preservation is key. And there are few investors who have been better at preserving wealth than the Rothschild family. The RIT Capital Partners investment trust counts the Rothschild family as a 21% shareholder. The investment trust invests in range of asset classes aiming to generate long-term capital growth while preserving capital.

“In an environment which is likely to continue to be punctuated by market and political uncertainty, your best defence is to diversify. An effective way to achieve this is via a multi-asset fund, which aims to smooth returns by combining a range of different assets.

“While the Referendum clearly has global repercussions, its impact, like the ripples from a stone thrown into a pond, will be most intense closest to the action. The Rathbone Global Opportunities Fund has a heavy weighting to the US market and, as such, should be well protected from any upheavals in the UK and Europe.

“Considering that interest rates are likely to continue to be lower for longer, it’s also worth considering a global equity income fund. The Fidelity Global Dividend Fund managed by Dan Roberts boasts an impressive track record and was recently added to our Select List of funds highly rated by our analysts.”

 

Please remember, no news or research item is a recommendation to buy. Every Investor is not responsible for accuracy and may not share the author’s views. If you are unsure of the suitability of any investment for your circumstances please contact an adviser. All investments can fall as well as rise in value so you could get back less than you invest.

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