The best protection after Brexit is broad diversification

On June 23, in a long-anticipated, widely reported referendum in the United Kingdom, voters chose to leave the European Union. The debate over whether to stay or leave (which became known as Brexit) began not long after the United Kingdom joined the E.U. in 1973. It finally culminated in this decision—a momentous one for the United Kingdom, Europe, and beyond, given that the United Kingdom is a global financial center and the world’s fifth-largest economy. And the E.U., a union of 28 states, includes four of the world’s seven largest developed economies.

Key highlights:

• The vote will have a significant impact on the U.K. and European economies, with global implications, but the effects may be years in the making.
• The most immediate ramifications will be continued uncertainty and political change in the United Kingdom.
• The IMF projects U.K. GDP could be more than 1% lower by 2021 under its most favorable scenario.
• Given that it may take several years for the specifics to play out, each of which may rattle the markets, the best protection is broad diversification.

Read Vanguard’s analysis on Brexit.

Notes:

• All investments are subject to risk, including possible loss of principal.
• Diversification does not ensure a profit or protect against a loss.

This article was produced by Vanguard and not by the Quartz editorial staff.