Will Brexit destroy my wealth?

Canary Wharf, view from Surrey Quays
Canary Wharf, view from Surrey Quays

It was a rainy morning when I woke up to my wife’s shocking voice: “We’re out of the EU!”

Without a second thought, I turned to my phone to check the online news. The British people had voted. England is leaving the European Union.

The stock market was in a free fall, with Lloyds among other banks losing about 30% of its share price.

I had friends texting me whether I will be allowed my entry back to the UK (I was abroad).

Some people were cheering some others were feeling hopeless. One thing was for sure: The whole country was in shock.

Now, a year later, things look calmer and the economy is stable. The inflation has risen up a bit but it’s not all doom and gloom.

Canary Wharf (first photo) is still there and a new $1bn Bloomberg building reminds us that London continues to be trusted as a financial centre. At least for now.

But what will happen to our wealth? What about the long term status of the economy? Will Brexit have a negative impact on my bank account balance? I better get some rice & beans stock before it’s too late 🙂

Joking aside, Brexit and any X, Y, Z events are part of the game. We’ve seen Trump, Brexit, oil crisis, robots taking human jobs, and who knows what else the future will bring.

People who live paycheck to paycheck and like reading the news every day should indeed be worried. But smarter readers like you and me know that we should not worry much about things that sit outside our control. I’m not saying let’s not take any action and ignore it. All I’m saying is let’s not get depressed about it.

Here’s a view of the FTSE 100 market which lists the 100 largest UK companies.

FTSE 100 Brexit
Would you have spotted Brexit without the pointer mark?

Brexit was just a tiny dot and a year later, the markets are up a hefty 21%. I guess we should wait a few years to realise the real long term impact of it. But, who knows, it may actually be a lot more positive given the British diplomatic skills.

The Brits have always been good with diplomacy. To be honest, Britain was never an “all-in country” in Europe anyway. It kept the pound (£) which turned out to be a good choice.

A dropping pound as it happens now, leads to higher cost of living because imported products (i.e. cherries) become more expensive. At the same time, the large British companies are all international players. This helps them to bring more cash in GBP terms back in the country when the pound drops. This is a big win, and one of the reasons the stocks go higher when the GBP (£) drops.

Time will show if Britain can be a dominant world player across the globe, but have trust.

Good old diversification

Wealth should be diversified around the world which is one of the main reasons part of my savings sit in the Vanguard 80% Lifestrategy fund. So I own a little bit of every company in the world!

I think staying diversified and having multiple income sources is a great way to protect ourselves against short-term bumps.

Therefore, I will be slightly more protected from local ups & downs compared to someone owning 10 properties in Bristol.

As you would expect, if Bristol house market roars, I’ll miss on that growth too!

It’s not only about stocks, investing etc. Diversification applies to our income too.

Let’s say I’m a full-time blogger (I wish). It’s much better to have parts of my income coming from e-books, online courses, affiliate links and one-to-one consultation rather than relying entirely on Google ads.

Similarly, in the offline world, one job may be hit by Brexit but having a network and other alternatives will definitely help weather another obstacle.

Do not listen to the news

Seriously. DO NOT.

The news agencies want to sell as many copies as possible. And they have to produce new content every day. Stories showing fear sell much better than rosy ones and bring more money to the house. But they help no one.

I cannot see how Brexit can have an immediate impact on anything. Sure, the exchange rate is something that dramatically changed but everything else will happen slowly and gradually.

So don’t listen to the news because you will get stressed without needing to. I recently heard a beautiful quote: “If you are looking for reasons to be happy, you’ll probably find them”. Same goes for sad and gloomy.

What I do instead is reading books and evergreen content. If you need inspiration, the next in line is the classic 'The Magic of Thinking Big' by David Schwartz.

Anyway, with or without Brexit, our financial independent plan is well under way. As JCollins likes to say, Spend less than you earn, avoid debt and invest the surplus.

And as always, keep calm and carry on…

1 COMMENT

  1. Great article Michael. I agree with your sentiment completely. Cooler heads will prevail, and the UK will survive just fine outside of the EU on whatever terms can be agreed… including the nuclear option of no agreement.

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