There are lots of headlines right now about Brexit, a potential general election and how these could affect house prices, the economy and so on. We can’t predict the future, but when it comes to investment, we can make smart decisions with the knowledge that we do have.
Here at OpenMoney there are several ways we prepare our investment portfolios for uncertainty. We make sure our portfolios are diversified, this means we spread our investment funds across different markets, and across different geographies. We do this so that if an event affects one industry or market, your overall fund shouldn’t be impacted too much.
We also rebalance your portfolio when needed. Over time as investments rise and fall, the original asset allocation can ‘drift’. Because the value of your better performing funds will grow and those lower risk funds may not grow as fast. Rebalancing is the process of buying and selling assets in a portfolio to maintain the original asset allocation.
Try not to panic
You may be thinking about withdrawing your funds in anticipation of a negative market change. You can of course withdraw your funds at any time. But it’s important to remember that the reason investing is for the long term, is to ride out these changes in the market.
The market has always seen periods of uncertainty and market turbulence is unfortunately just a part of the investing lifecycle. We know that the potential for market fluctuations around political events can be unsettling, however the global stock markets have continued to rise overall for much of the past ten years.
It is also important to remember that you only really lose money if you sell during these dips at a lower price than you bought.
We only allow people to invest if they have a cash buffer of at least 3 months’ outgoings saved. Having these savings easily accessible should help to ease any worry of seeing your investments fluctuate in value.