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Brexit poses short-term negatives for SMSFs

The increased uncertainty and volatility following the recent decision made by voters in the United Kingdom to leave the European Union could have a negative short-term effect on the value of SMSF investments, according to a new industry paper.

According to the SMSF Association Insight Paper, “What does Brexit mean for your SMSF?”, trustees’ best defence against the uncertainty was a clearly defined, well-rounded and long-term investment strategy.

“Not only is your SMSF legally required to have an investment strategy, it can be your best friend in guiding your fund through uncertain times, such as the one we now face in the wake of Brexit,” the paper said.

“A key aspect of an investment strategy is to consider the diversification of your SMSF’s assets – diversification across your retirement savings across different assets and regions is key in protecting your fund from volatile financial markets over the long term.”

The paper highlighted that while it was important to keep track of events that affected financial markets and superannuation savings, it was important to remember super was a long-term savings vehicle.

“Sometimes, short-term decisions can do more harm than good,” it said.

“A good investment strategy that keeps us disciplined and focused on the longer term is essential.

“In the short term, the increased uncertainty and volatility may have a negative effect on the value of your SMSF’s investments.

“Over the longer term, it is more difficult to predict how Brexit will continue to shape financial markets as it is not clear in what way it will affect economies in the future.”

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