What Brexit means to Australian investors

Brexit could hit Australians’ hip pockets.

Make no mistake, today’s 3% fall in the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) could be just the beginning.

The Australian Financial Review quoted three experts who believe global markets could fall as much as 15% as a result of Brexit. The Australian share market could fall half that.

Time to Wave Goodbye to ASX 5000?

A 15% fall is serious no matter which way you cut it.

Right now, no one knows exactly what to expect.

Will more countries leave the Eurozone? Will Britain’s inflation rise dramatically? Will it fall? Will the Australian dollar continue its plummet as investors flock to the safety of the US dollar?

The bottom line is no one knows exactly what will happen, but there are some things you could reasonably expect in coming weeks:

  • The Australian dollar could come under more pressure against its US counterpart;
  • Shares of companies with meaningful exposure to the European or the UK markets could be volatile — Henderson Group plc (ASX: HGG), Macquarie Group Ltd (ASX: MQG), Clydesdale Bank plc (ASX: CYB), BHP Billiton Limited (ASX: BHP) and Rio Tinto Limited (ASX: RIO) are already feeling the heat;
  • Gold investors will look smart as shares of gold producers, and the price of the shiny metal itself, rally because of the uncertainty; and
  • Finally, we will know what the implications of Britain’s exit will be, eventually. That may sound obvious, but it’s worth remembering that the uncertainty won’t last forever.

Foolish takeaway

I’m expecting my share portfolio to take a hit from Britain’s EU departure — every investor should expect as much. However, this could be an opportunity for us to invest excess cash or rebalance our portfolios.

That’s not an easy thing to say staring down the barrel of further losses, but if you truly are investing for the long-term you must acknowledge times of heightened uncertainty are an inevitability. As always, make sure you keep a healthy cash balance and only invest amounts of money you won’t need for an extended period of time (e.g. three years).

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Motley Fool contributor Owen Raszkiewicz has no position in any stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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