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The answer to Brexit

12 April 2019

3 minute read

As the chances of a softer, more economically palatable (eventual) exit from the EU increase, we take a look at the latest developments and the lessons for investors from the story so far.

Who's it for? Investors with basic investment knowledge

What you’ll learn:

  • The latest Brexit developments
  • Lessons learnt for investors
  • Ways to invest

While the twists and turns of Line of Duty continue to grip the nation, the appeal of Brexit’s increasingly tortured final act seems to be waning. Many seem to have been bludgeoned into a state of glazed indifference. As the chances of a softer, more economically palatable (eventual) exit from the EU increase, we take a look at the latest developments and the lessons for investors from the story so far.

The latest…

The cross party talks have so far borne no fruit. Nonetheless, the EU has offered to push the date of the UK’s departure back to the end of October. The UK can still leave on the first of any month up to that point if it can ratify the withdrawal agreement.

Lessons from the frontline

1. Populism and investing

There does seem to be some relationship between economic hardship and the rise of political extremes, but not one that is sufficiently robust to base an investment strategy around. Similarly, many have pointed to trends in inequality within the UK and US as a harbinger of Brexit and President Trump respectively. However, US income inequality had been elevated for some time before the US electorate seemed to be ready to succumb to the allure of a President Trump. Translating a prediction of a surge in support for one populist cause or another into an investment recommendation is less easy than it sounds.

2. Diversification is not just about insulation

Diversification now comes with an army of increasingly tired truisms – it’s the only free lunch etc. Many seem to see diversification as solely an expression of caution, something for the meek and indecisive. There is some truth in this of course. However, the more complete reality is that diversifying your assets across regions and sectors is not only a bulwark against inefficient governance in one particular region or another, it is the most efficient way to harvest the many and various opportunities the wider world offers. Accessing this wider world has become progressively easier and more inexpensive in the last few decades in particular.

3. No edge

The most important question for investors who are trying to do more than get passive access to the world’s capital markets is to determine where they might have an edge. This search for a competitive advantage over all other investors should start with the assumption that the competition are competent and highly motivated on average. There are few easy opportunities out there – new information is more often than not quickly and effectively assimilated into asset prices. With regards to Brexit specifically, in the context of the above, we feel we have no edge over the crowd. We believe that more obvious tactical opportunities lie elsewhere in the world.

Investment conclusion

Set Brexit, with all its domestic ramifications, alongside the ongoing fourth industrial revolution and you have all the incentive you need to think about a long-term investment in a globally diversified multi-asset investment portfolio. The fruits of humankind’s innovation are there for all to harvest.

Ways to invest

If you’re looking to invest in developed markets equities, the Barclays Funds List may help you to narrow down the wide range available to invest in. These funds are selected by Barclays investment specialists and based on our research, they’re the funds that we believe have the potential to generate consistent returns over the medium to long term.

Examples of funds invested in developed markets equities on the Barclays Funds list include the Janus Henderson Global Equity Income Fund, and the Jupiter Ecology Fund.

Alternatively, you may want to consider the Barclays GlobalAccess Global Equity Income Fund. Whereas the funds on the Barclays Funds list are managed by 3rd party managers, each GlobalAccess fund is managed by a Barclays portfolio manager, who appoints one or more investment managers to invest a portion of the fund’s assets on its behalf.

However, remember that portfolios usually benefit from a diversified approach to investing.

A multi-asset fund which invests across a range of asset classes and regions offers a globally diversified one-stop solution for investors. Building a diversified portfolio may sound like a daunting task, but there are simple solutions available, such as the Barclays Ready-made Investments. Furthermore, the investor gets to choose the level of risk they are comfortable with.

Designed for the long term, you should be thinking about holding these investments for at least five years.

All of these investments can fall in value as well rise; you may get back less than you invest.

These are our current opinions but the future, as ever, is uncertain and outcomes may differ.

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The value of investments can fall as well as rise. You may get back less than you invest. Tax rules can change and their effects on you will depend on your individual circumstances. Smart Investor doesn’t offer personal financial advice. If you’re not sure about investing, seek independent advice.

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