Investing during Brexit

Hussel

[I don't disagree with much of what you have said (although I think after getting through the Brexit madness an ERG takeover of the UK would probably be pretty good for equities, with some rather "business friendly" policies)./QUOTE]

No way we can “successfully” get through Brexit and then have the ERG in charge. EU won’t accept what they’d want so then it would be WTO rules and being a basket case for the foreseeable future. I’d invest in the US but wouldn’t want to live in the 51st state.

ValiantSon

Hussel wrote: »

There are risks wherever you invest, of course. But I believe leaving the EU without any deal is on another level to the others you mention, particularly over the medium term. And no !!!8220;sunny uplands!!!8221; rhetoric from politicians with Brexit blinkers on is going to change my mind on that.

I!!!8217;m not particularly saying I wouldn!!!8217;t have any exposure to U.K. equities at all (eg I!!!8217;d buy a world index), I just wouldn!!!8217;t have a separate overweight U.K. allocation, something which is quite common amongst U.K. investors who like the idea of overweighting their home market. I just don!!!8217;t see the U.K. market outperforming others over the next few years and I think there are huge risks to smaller companies with exposure to the local economy. For the pound, things could be awful if it all goes wrong.

We certainly live in very uncertain times. I can see the sense of the argument regarding UK overweighting in a portfolio, although, at present, I'm sticking with it. Maybe I will be wrong to have done so.

Hussel wrote: »

Will they vote through a bad deal? Probably not, but what then?

I wish I shared your faith in our elected representatives. Parliaments have repeatedly demonstrated their stupidity and cussedness. The bulk of the Conservative Party will vote for any deal, no matter how bad. They will be backed by the DUP (thanks to all that dodgy cash - never mind the Good Friday Agreement everyone!). There is a strong anti-EU block in the Labour Party, who are also pig-headed enough to vote for it, and then there are all the populist idiots in the Labour Party who will witter on about the "will of the people" (failing to appreciate that parliament is the will of the people) who will also vote for it.

But don't worry because David Davis is on the case, with his hard work and eye for detail! :doh: :eek:

ValiantSon

JohnRo wrote: »

Mr Mogg and the new Victorians will fix everything. Britannia rules the waves.

All we need is to reinstate the slave trade, high seas piracy, control of a few other countries land and resources alongside thousands of empire plantations dotted around the globe, that'll put the Great back into Britain.

It'll be fine!!!8482;

There is a well known phrase beginning with 'f' and ending in 'wits' that aptly describes those particular individuals.

ValiantSon

Filo25 wrote: »

I don't disagree with much of what you have said (although I think after getting through the Brexit madness an ERG takeover of the UK would probably be pretty good for equities, with some rather "business friendly" policies).

I suspect we're going to have to agree to disagree about what that particular prospect would actually mean for the long term position of the British economy (and the British people).

Filo25 wrote: »

My gut for now remains that Britain is a firmly divided country the polls have barely moved for months now, given I don't much care for the direction either major party is going in, I am all in favour of finely balanced parliaments with weak governments unable to push through anything controversial.

In principle I'm with you on the benefit of a strong parliament exercising true control of the executive, so as to stop the steam-rollering of policy into legislation (and also to prevent the massive increase in legislation). Sadly, however, this current hung parliament does not look set to actually prevent the extremely controversial Brexit from going through, and neither am I that persuaded that it will stop a hard Brexit either.

Filo25 wrote: »

It also appears Labour may be about to come out in favour of Customs Union membership , if they do I don't think the government has the votes in Parliament to avoid eventually following that path.

I hope that you are right. Any chance they might back the single market too? (Which was, by the way, something Thatcher pushed for originally, but the right wing Tory nutters and swivel-eyed loons like to ignore that little fact).

Filo25

I think sadly Single market is problematic for too many Labour MPs in seats outside the metropolitan areas, if they can sell their version of Brexit as still controlling immigration they can probably get away with it, also of course none of us can ignore that the leadership of Labour are fervently Eurosceptic, any concessions from that approach will have to be dragged out of them by the members.

We will have to see how it plays out, it sounds like the latest Tory fudge is something that has basically already been rejected by the EU, so not sure how long the cabinet unity is going to last.

I can't say I have ever had much less faith in the 2 main parties!

I can assure you I also wouldn't be in favour of rule by the lunatic right of the Tory party either, I think it would be just as damaging as rule by the lunatic left of the Labour party (although probably better for equities!)

The prospect of a Corbyn led government with a significant majority would make me basically bail on UK equities entirely if I thought it was a likelihood being underpriced by the markets.

economic

economic wrote: »

Im now thinking of selling out of my parents managed funds and into more income orientated funds/stocks/investments. This is all in their ISAs.

The income parts of their portfolios generate a dividend income of around 4k pa. Im looking to sell out of 60k of funds into income investments, is 3.5% possible with diversified risk? This brings income to 6k pa which would nicely supplement their existing income through annuities and later state pension.

anyone any ideas?

JohnRo

JPGI perhaps, just a suggestion. ~4% yield targetted this year.

Premium is currently a tad on the high side though.

Thrugelmir

Hussel wrote: »

Why invest in 6% of the world stock market when other countries haven’t got this hanging over their head.

Somewhere between 5% and 8% of UK companies in total export to the EU. That includes all the US, German, Japanese, Swedish, French, Dutch multinationals that have no UK stock listing. Means that there is a lot of companies who aren't directly effected. Then there's the Pru and HSBC who derive majority of their earnings from Asia.

Shunning a market for no reason makes little sense. Meanwhile all your overseas investments are exposed to currency risk. Then there's the unknown factors when the Fed unwinds it's $4.5 trillion balance sheet....... QE smoothed the waters on the way in. The way out maybe far choppier. Even the Fed has no idea what the impact is going to be, nor any means of controlling markets volatility in terms of bonds, equities nor market interest rates.

Hussel

Thrugelmir wrote: »

Somewhere between 5% and 8% of UK companies in total export to the EU. That includes all the US, German, Japanese, Swedish, French, Dutch multinationals that have no UK stock listing. Means that there is a lot of companies who aren't directly effected. Then there's the Pro and HSBC who derive majority of their earnings from Asia.

Shunning a market for no reason makes little sense. Meanwhile all your overseas investments are exposed to currency risk. Then there's the unknown factors when the Fed unwinds it's $4.5 trillion balance sheet....... QE smoothed the waters on the way in. The way out maybe far choppier. Even the Fed has no idea what the impact is going to be, nor any means of controlling markets volatility in terms of bonds, equities nor market interest rates.

Do you mean have a UK stock listing rather than have no UK stock listing?

Where does the 5% to 8% come from? Is that in terms of number of companies or weighted by market cap? Sorry to be skeptical but it sounds pretty low given around 45% of UK exports go to the EU.

The UK market is very international by market cap and I wasn't suggesting shunning it entirely, just certainly not being overweight (see later quote), particularly in small/mid caps which will have a heavier exposure to the UK domestic economy and which, I think, is exposed to a lot of political risk at the moment. Of course there are risks elsewhere but if the US market starts tanking the UK is certainly not going to be doing well and I would suggest the risks of Brexit mean it could do a lot worse.

Currency risk
1) On the one hand you say most of the UK market is international so not directly affected by Brexit yet then you're saying overseas companies expose you to currency risk. There's a relatively strong negative correlation between the FTSE and sterling so you still get currency risk with the UK stock market unless you focus on companies with little overseas exposure - companies I think could do particularly badly (several hedge funds shorting UK retail at the moment, for example).
2) If I believe the currency risk is pretty much one way at the moment (which was my point), I want to lower my exposure to the pound. You may feel a lot richer if the FTSE's up 18% and sterling's down 14% but you'd be kidding yourself which I think is what a lot of people have been doing since the referendum. You'd have done a lot better investing in most other markets.

All in all, you're right, you don't have too much to worry about from Brexit if your UK exposure is a selection of multi-nationals. Whether your holdings remain UK-listed companies is probably for another thread (cf Unilever/Royal Dutch Shell). There are multi-nationals listed all over the world though so why restrict yourself to 6% of the global market.

If on the other hand you've got 50% of your portfolio in a selection of UK domestic economy companies, I'd be pretty worried that my future returns were in the hands of a bunch of ideologues (who may, or may not, have their own net worth invested with limited UK exposure).

Linton

economic wrote: »

Im now thinking of selling out of my parents managed funds and into more income orientated funds/stocks/investments. This is all in their ISAs.

The income parts of their portfolios generate a dividend income of around 4k pa. Im looking to sell out of 60k of funds into income investments, is 3.5% possible with diversified risk? This brings income to 6k pa which would nicely supplement their existing income through annuities and later state pension.

3.5% income iwith diversified risk is easy. I did publish my 6% portfolio in post #35.
Look in Trustnet for all funds, sort by yield and look at funds in the 3%-5% range. Choose perhaps 6 equity and corporate bond funds that cover a wide range of geographies and industries. Or look in the mixed investment sectors for one diversified fund that provides the income you want.