The decision made by voters in the United Kingdom (UK) last week to leave the European Union (EU) – known as Brexit – has had an immediate and momentous impact on financial markets across the globe. The UK leaving the EU is one of the most significant political events in recent years, and has implications for the UK and European economics as well as the broader global economy.
As widely predicted, Brexit has increased uncertainty of the UK’s economic future and also that for Europe more generally. As we know, financial markets do not like uncertainty and this has been reflected in the immediate falls and increased volatility seen in stock markets and currencies around the globe, including Australia’s financial markets.
So what does this mean for your SMSF?
In the short-term the increased uncertainty and volatility may have a negative effect on the value of your SMSF’s investments. Over the longer-term it is more difficult to predict how Brexit will continue to shape financial markets as it is not clear in what way it will affect economies in the future.
As an SMSF trustee, your best defence against this uncertainty is to have a clearly defined, well-rounded and long-term investment strategy. Not only is your SMSF legally required to have an investment strategy it can be your best friend in guiding your fund through uncertain times – such as the ones we now face in the wake of Brexit.
A key aspect of an investment strategy is to consider the diversification of your SMSF’s assets. Diversification of your retirement savings across different assets and regions is a key in protecting your fund from volatile financial markets over the long-term.
While it is important to keep track of events that affect financial markets and your superannuation savings, it is important to remember that superannuation is for the long-term and that sometimes, short-term decisions can do more harm than good. A good investment strategy that keeps us disciplined and focused on the long-term is essential.
If you want to take the opportunity to discuss your SMSF investment strategy or your SMSF’s strategy more broadly please feel free to call us to arrange a time to meet so that we can discuss your particular requirements in more detail.