Brexit? Aren’tchajustsickofit? You can’t open a newspaper or click on a financial website without somebody screaming that it’s the best/worst thing since the war. For the next two years, and probably longer, we will be treated to the latest breathless minutiae on negotiations, as Britain escapes the EU yoke/commits economic suicide (delete according to political preference). You had better get used to it.
Those dastardly French
The big question is what type of Brexit we are going to get. A hard Brexit, soft Brexit, red-white-and-blue, or sticky-in-the-middle Brexit. The other big question is just how dastardly the dastardly French are going to behave, to which the only answer is, pretty dastardly.
Now I could tell you that Brexit is going to restore the UK to its destiny as a great global trading nation, making now a great time to buy shares. Alternatively, I could lambast Brexit as the final, dismal triumph of inward-looking little Britishers, dooming us to stagnation and isolation, and urge you to dump your portfolios and buy bottled water and tinned beans while you still can. However, I’m not going to do either of those things.
Rule one: stay sane
First, I do not know which of those two potential scenarios is most likely to come true. I suspect we will muddle through in the traditional British way, and emerge a little tatty, but not traumatised, from the experience. I can’t say for sure — that’s just a hunch. The important point is that you can’t base your decision to buy or sell shares on such unknowables. Trying to work out all the various permutations will drive you crazy.
If you were to delay buying shares until things became clearer, you would have to wait a long time. The picture will remain muddy for a number of years, and I have no plans to be out of the stock market for such a lengthy period. Think of the potential capital growth you will lose, especially if things go better than expected.
Play the percentages
Also, think of all those dividends you will sacrifice, with the FTSE 100 currently yielding 3.70% a year, and some top UK stocks paying income worth 6% or 7% a year. If you don your tin hat and stick your money in the bank, you will miss out on all of that, and get around 1% in return.
Dumping stocks because of short-term political problems will also cost you a load of trading charges and leave you with the tricky decision of when to buy back into the market. Provided you can keep invested for five years or more, it is simpler and wiser to stick these things out.
Buy shares
Share prices could fall if the negotiations take a bad turn. If they do, I would recommend taking advantage of any dips to pick up your favourite companies at temporarily knock-down prices, and wait for the inevitable recovery.
Post-Brexit is neither going to be quite as wonderful as the Brexiteers claim, or as dreadful as the Remoaners would have us believe. The only certainty is that at the end of it, stocks and shares will still be the best place to invest your long-term wealth.