The Brexit question investors need answering is what will happen to their money if the UK votes to leave the European Union?
Not a lot, according to fund managers.
In the short term, Sterling is likely to struggle and stock markets will fizz with volatility, but that’s not too much different from what’s going on already.
But it’s important investors let their heads rule their portfolios rather than their hearts.
Alastair Irvine, of Jupiter Asset Management has assessed the Plan B Prime Minister David Cameron claims not to have – along with Plan C and Plan D.
Plans A to D
Here are his views of the options;
- Plan A – Britain stays in the European Union and life continues much as normal
- Plan B – Britain leaves the EU and joins the European Economic Area along with Iceland, Norway and Liechtenstein.
EEA countries can still work within the single market in return for adopting EU legislation.
However, these countries retain sovereignty over agriculture, foreign and defence policies, justice, home affairs and monetary union.
- Plan C – Britain leaves the EU and joins the European Free Trade Association (EFTA), which is really the EEA plus Switzerland.
Switzerland also has access to the single market, but has had to negotiate numerous treaties with individual nations but retains political and monetary sovereignty
- Plan D – Britain leaves the EU and cuts adrift from the EEA and EFTA. This option gives the government full control of the UK but having to negotiate individual tax, trade and other treaties with individual countries.
Only Plan A gives Britain a voice in the European Parliament.
Not enough information
“For investors, too little information is available, and what there is has too much spin,” said Irvine.
“The best thing to do is retain a balanced portfolio and focus on the long term, not what will happen over the next two to five years. It may be a rough ride, but after the initial upheaval, a Brexit will settle down eventually.
“The markets and sterling will suffer from volatility, but that’s becoming the new normal anyway.”
Another fund manager that believes the British economy will stay resilient regardless of the referendum vote Mark Martin.
“It’s not all bad news and investors may have many reasons to be optimistic if Britain does leave the EU,” he said.
