The danger of waiting for Brexit

There are many questions that we don´t know the answers to regarding Brexit. There are also questions that we don´t yet know. However, some facts are known. One of these is concerning investing, or not, since 20th February 2016.

This was the day that David Cameron, the then Prime Minister, announced that there would be a referendum on the UK´s membership of the EU. People have been fearful due to the uncertainty as to what will happen post-Brexit.

In the last three years, life has continued in the financial world and investment markets have risen significantly. At the same time, inflation hasn´t disappeared just because Brexit is on the menu. Figure 1 below shows how the FTSE100 has performed since 20th February 2016 along with the UK Retail Price Index.

With dividends reinvested, £100,000 would be worth around £136,000 as at 18th February 2019. If we allow for inflation, this would be more like £128,000 but still 28% up. If the £100,000 had been left in a bank account, with no interest which is commonplace these days, the true value would now be more like £91,000. Waiting for Brexit has cost the wait and see person £9,000.

Figure 1. Performance of the FTSE100 since the referendum announcement in February 2016 along with the UK Retail Price Index.

There are people who are not happy taking on investments which carry risk.

If we ignore the risk of inflation for the time-being, we have solutions which can cater for those who are happy taking some investment risk but without the volatility of stocks and shares.

Figure 2 illustrates that an investment with approximately an eighth* of the risk of the FTSE100 has still managed to perform well, certainly when compared to inflation. One must bear in mind costs but, even allowing for these, people who were invested in this type of investment on 20th February 2016 would have seen an increase of around 23%.

Taking inflation into consideration, it would still have produced growth of around 14%; a lot better than “losing” 9% by leaving the money in the bank.

Figure 2. Performance of a low risk investment along with the UK Retail Price Index

With the exchange rate between GBP and Euros down about 11% over the same period, the need to receive more in income has become even more important. Losing 20% or so in real spending power has proven to be a tough pill to swallow. Get in contact so that the possible “Never Ending Story” of the Brexit can being kicked down the road doesn´t lose you even more over the coming years.

To find out how we can help you with our financial planning in a manner protecting you and your loved ones, contact me at john.hayward@spectrum-ifa.com or call/WhatsApp 0034 618 204 731

* Source: Financial Express