How the Brexit affects your retirement fund

The United Kingdom voting to leave the European Union on Thursday had ripple effects throughout the financial world.
The Dow Jones industrial average fell more than 600 points on Friday, wiping out its gains for 2016 and posting its largest single-day fall since August 2015. With the market falling sharply in one day, some people consider pulling their money from the market.

“What you see right now is uncertainty in the markets,” said Stuart Smith a partner at ML&R Wealth Management. “And because of that, we don't know what's going to happen over the next year or two years as this exit actually takes place. That uncertainty cause a lot of volatility.”

“You should buy low and sell high. Well a lot of small investors do exactly the opposite because they follow the latest news. And they take undue risk based on limited information,” said Robert Duvic, distinguished senior lecturer at the McCombs School of Business at the University of Texas.

Duvic added a diversified portfolio makes it easier to deal with a volatile market.

“Don't make quick decisions,” recommended Duvic. “Diversify. If you have a 401(k), if you have an IRA, you should be diversified across different types of stocks and bonds, large companies, small companies, international.”

“As long as you have a diversified portfolio, you need to stay the course, and not worry about what's going to happen. You have a long-term investment strategy, you should be okay,” Smith said.

Leading up to Thursday’s vote, many polls predicted the UK to remain with the EU.

“When you look at what happened the week leading up to the vote, the markets were really strong and on an upswing. And I think the expectation was that they were going to stay,” said Smith.

An immediate impact was felt on exchange rates between the United States and United Kingdom. When markets closed Thursday, £1 was worth about $1.49. After the votes were tallied and markets opened Friday morning, £1 was worth around $1.36.

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