Scotland – How Will the Referendum Affect My Investments?

Look at some typical headlines in the mainstream and financial press over the last couple of weeks as people suddenly began to wake up to the importance of the Scottish referendum on Independence:

“Financial stocks push FTSE lower as Scottish vote nears” – Reuters, 16th September

“Billions of pounds wiped from value of Scottish firms after yes vote leads independence poll” – The Guardian, 8th September

“Pound falls on fears of Scottish independence” – BBC website, 8th September

“FTSE left frozen in the headlights by coin toss of a vote” – The Daily Telegraph 13th September

How many investors have agonised over headlines such as these in respect of their investment portfolios? If you are to believe the press then a considerable number of people are making decisions and taking actions based on guesses as to what will happen in Scotland.

No one knows what the outcome of the referendum will be, however many agree that, yes or no, the United Kingdom will be a different place after the 18th September, as constitutional changes are put into effect or a new country appears on the world stage.

From an investment standpoint, it is very important to retain a sense of perspective. Companies traded on the London Stock Exchange will continue to trade, though some may move operational divisions south of the border. Yes, the pound may drop, however less momentous events have been responsible for large swings in the value of a nation’s currency. If you are investing for the medium to long term (5 years plus) then it is important to keep a clear view of your investment goal and the rationale that helped you set that goal. As the credit crisis of 2008 (and previous “crises” that caused similar falls in the value of investments) has demonstrated, over time stock markets continue to grow.

One of the hardest elements about being an investor is ignoring the noise: newspapers, magazines, the internet, investor clubs, television, etc. The Scottish Referendum is a good example of this. The result is extremely important for the people of Scotland and the United Kingdom, but will it really move the needle on a global investment portfolio? Does it really impact a risk-adjusted asset allocation that is aligned with your family’s goals? Beware your own internal bias towards reaction, and remind yourself that you have a plan that is suited to your unique circumstances and stick with it.

Here are some links to useful articles on the Scottish Referendum:

http://www.theatlantic.com/international/archive/2014/09/scottish-independence-update/379803/

http://www.theguardian.com/politics/2014/sep/17/scottish-referendum-campaigns-final-pitches-24-hours-vote

http://www.theatlantic.com/international/archive/2014/09/the-scottish-independence-vote/379755/

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