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What now for long-term investors? Message from the experts as UK votes for Brexit

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24/06/2016
The decision to leave the EU has sent shock waves through markets and seen the value of the pound plummet.

 

And while there will be extreme short-term turbulence with a retreat in equities and a likely spike in safe haven assets such as sovereign bonds and gold, long-term investors are being urged to “hold their nerve”.

“Markets are likely to be volatile in a general downward direction for a while, not helped by the fact that there are other big issues in the world that could also have an impact: China slowing, the US election and now possible contagion of Brexit to Frexit etc.

“But the world won’t end,” says Darius McDermott, managing director of Chelsea Financial Services.

“And as we know from quite recent experience markets bounce back and good companies continue to thrive in the longer term.”

Adrian Lowcock, head of investing at AXA Wealth, advises investors to “look through the noise and focus on their personal goals”.

He says: “Times of uncertainty will knock investor confidence as they see falling share prices and panicked experts predict doom and gloom. This leads to making quick and often irrational decisions, such as selling after the market has fallen.

“Investors need to remember that, in the short term, markets over-emphasise the importance of current events while they barely register over the long run as markets revert back to fundamentals.

“Companies will adjust and the British economy will adapt.

“Investors need to look through all the noise and focus on their personal gaols. Any sell-off will produce opportunities for prudent investors looking at the big picture and focused on the longer term.”

Jason Hollands, managing director of Tilney Bestinvest, says in the UK stock market financials, property and domestically focused mid-cap stocks are likely to see the most pressure but blue chip firms, which generate significant amounts of earnings overseas, may be cushioned.

“Over 70% of FTSE 100 earnings are international in nature, and are to a degree cushioned from any uncertainties around the impact for the UK domestic economy stemming from this vote,” he says.

“So when we get through the immediate reaction and the dust settles, companies with high non-sterling revenues might actually benefit from the currency impact of translating these back into UK profits and dividends in a scenario.

“Investors are going to need to hold their nerve through the coming days.”

Tom Stevenson, investment director for personal investing at Fidelity International, says investors should “keep a sense of perspective”.

“As hard as it may be right now for investors to remain calm, it is important to remember that market volatility is a normal part of long-term investing and with the benefit of hindsight some of the most turbulent times in stock market history are barely visible on a chart of the market’s ups and downs.

“I urge investors to avoid stopping and starting investments. Timing the market is fraught with danger because the best days in the market often come hot on the heels of the worst.

“Timing the market’s ups and downs is as unwise today as it was before the vote.”

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