Globalization is perceived to be good, until it is not anymore. Brexit showed that people in Haryana, Mumbai, Hyderabad or other cities in India are not immune to how people vote in Westminster! This is an example of what happens when employees, investors, and retirees don’t have a risk management plan in place. Let’s look at the bloodbath Brexit caused in the Indian financial sector.
Sensex and Nifty lost 2.25% each. The day before the election, even hedge fund managers were optimistic that UK would vote to stay with EU. But it’s the responsibility of individual investors to ask the other important question. “How am I going to safeguard my securities if UK chooses to exit?”
Should people sell all their holdings and take no risk at all? If they do, they leave no room to profit from any potential bump if the result says “stay in EU”. The best approach in such situations is not to make a binary decision but reduce exposure to risky assets and how much to reduce depends on individual risk appetite and risk tolerance. To make such decisions one to needs to review their financial situation often and mymoneykarma.com helps people with exactly that.
Track your expenses, create a budget and monitor it, be informed of fees you are paying, review your mortgage interest rates – all in one location using mymoneykarma.com.
It’s not just your investments that need monitoring. Your cash savings needs to be considered too. Indian Rupee lost a bit but nothing substantial. But could this event lead to higher inflation? Possible but unlikely. The British Pound lost 10% of its value. This implies that goods and services in UK may be cheaper by 10% or even more.
The UK economy is expected to become smaller by 3 to 7% in the next decade. Would this affect outsourcing to India and consequently job losses? Some minimal impact is likely. Those planning to migrate to UK may experience hassles. But rather than waiting with no plan, one should start planning now.
The ‘Brexit’ is not over yet! The people of Scotland voted to stay with EU even though they are part of UK. This may cause more hiccups and more volatility in financial markets.
This is also an opportunity to invest in UK. Now assets in UK are 10% cheaper. Expect a few UK companies to be acquired. If you work in India for a UK company, ask yourself how your job would be affected if your company gets acquired.