The Meaning of Brexit: It’s Complicated
By August 1, 2016 0 850•
Every summer, I commute back and forth to the beach, whittling the hours away listening to financial radio shows. In fact, I play a game, and I invite everyone to play with me: How many times do the “financial gurus” say “I think” in a 10-minute segment?
For obvious reasons, the stock market can never be an “I know” game; it’s unpredictable, driven by emotion. But, individually, each commentator has a point. I can’t help but agree that if what they “think” is going to happen happens, then their predicted outcome is likely.
However, our world is more complicated than that. Oil prices may suffer in the Middle East, U.S. housing prices look to be dropping and the U.K. may really exit the European Union, the event known as Brexit. These are different factors, but their outcomes cannot be considered mutually exclusive.
Determining whose advice you should take proves one thing: unless (and even if) you are an expert, investing is often times a crapshoot.
For example, after the Brexit vote, my inbox was flooded with commentaries and expert analysis about what they (the experts) “think” it will mean for your portfolio and the economy.
The news sparked massive selloffs in global equity markets, sterling dropped to a 31-year, all-time low and the S&P cut the U.K.’s credit rating. (Bonds, however — the one area experts were most nervous about, due to rising rates — fared well.)
This alone would leave investors running for the hills, but our multinational, diversified, global economy is more complex. And even as world unrest continues and our country’s political system approaches prime time this month, the U.S. stock market reacted by rebounding to all-time highs, last achieved in May of 2015.
From the cable news networks to financial publications and the internet, investors today are bombarded with an overwhelming and unprecedented amount of information. While this has made our world more interconnected than ever before, it can also drive people to irrational decisions made in an environment of too much complexity and uncertainty.
That’s why robo-advising platforms and institutional managed accounts are slowly changing the dynamics of investing in today’s marketplace — and for good reason.
If you are having a heart attack, you seek out a cardiologist who is a specialist in his or her field, not a general practitioner. But you don’t go to a cardiologist to manage your overall health. I explain it to my clients using a football analogy. The owner hires a general manager, who hires a head coach or strategist, who structures a team of assistant coaches to manage the players.
A financial planner is just that, the general manager, setting the strategy to manage one’s life and building a team of expert investment advisers to manage your money.
Instead of looking at Brexit in a vacuum, maybe it’s time to consider having a team of expert investment professionals, so you can sleep soundly in today’s, and tomorrow’s, turbulent and unpredictable times.
John E. Girouard, CFP, ChFC, CLU, CFS, author of “Take Back Your Money” and “The Ten Truths of Wealth Creation,” is a registered principal of Cambridge Investment Research and an Investment Advisor Representative of Capital Investment Advisors in Bethesda, Maryland.