That, of course, means more uncertainty for investors in the years ahead. But this is nothing new, which is why all the talk of Brexit uncertainty has been faintly ludicrous. In two decades watching the markets, I have witnessed several ends of the worlds – first the dot com boom and latterly the credit crunch. Many of you will also have experienced other bouts of fearfulness, including Black Monday and Britain’s ejection from ERM. But we have come out of the other side of them all. In fact, in each and every case they have provided opportunity for the investor who, with history as their guide, believe markets endure.
Investors live with uncertainty in varying degrees every day – it’s why share prices rise and fall, as expectations of what the future has in store for companies are constantly reassessed and demand for their shares waxes and wanes. Sometimes those expectations shift quite dramatically, usually on the downside and often too far, because it is natural to become overly pessimistic when fearful.
Such fear is also why investors are often prepared to pay handsomely for certainty. But you should be very suspicious of anyone offering you this, especially if it comes attached to generous looking returns. A simple truth in investing is that your returns will often be dictated by the level of uncertainty – or risk – that you are prepared to take on. In other words, the more surety you want the lower your returns are likely to be; take a bet on a growth star and you might be handsomely rewarded, but you might equally lose the lot.
One thing I remain fearful of is the continued regulatory creep that suggests private investors need protecting from risk, something which eurosceptics like Share Centre chief executive Richard Stone, speaking this week, believe stems from a fundamental belief across much of the EU that “the state should protect the individual from taking risks”. I am against the patronising idea of wrapping private investors in cotton wool so they can’t hurt themselves, because it assumes that industry professionals can, for a fee, decide what’s best for them and forgets that this industry has so often put its own interests ahead of their customers’. More widespread financial education rather than regulation that forces us into the arms of intermediaries would be much more helpful.
