With only a few months to go until the most anticipated General Election there still no close to a clear outcome. The two biggest political parties have near identical edge but does not have enough for a much-needed majority. Another alliance is possible and trying to work things out might just be a friendly gesture with a confusing notion and even for the most expert analysts. But as in the present markets, three months is simply such a long time in politics and a vote that can swing with substantial repercussions.

The lines are drawn

At Nutmeg, there was a great big deal of consideration on how investors should position their investment portfolios ahead of the eminent election chaos. The battleground is set between labour and conservatives with the former cutting their spending costs but at a less subtle rate. The Tories will be attacking welfare benefits in order to save funds with labour taxing the wealthy in order to gain more funds.

The conservatives will be spending less than £27 billion a year less than labour and the difference translates to an awful lot of public sector employment and state support. It believes that in order to maintain the economy, the government requires more spending in order to naturally balance things between acceptance and borrowing.
Doing much needed research

When considering the markets, there is a more positive chance that the conservative victory is better for long-term British economic and investment outlook. This is owing to several factors and the amount to conservatives being at a much lower debt and lower spending as compared to labour having higher debt spending.

A conservative victory will mean a stronger pound and given that they are incumbent there is relative stability in markets. A labour victory on the other hand, given that there is less strictness, will weaken government bond prices, which will result to higher borrowing costs.

In this case, there will be a fall of bond prices and the value of traditional low risk options will likewise diminish also. If the labour plan to reinvigourate the economy is seen as realistic, then extra money in the economy might push up stock markets valuations even further.

How to better diversify

When it comes to portfolios, being able to diversify it sensibly is the better option. Investors must make sure that their investments are not solely all U.K. focused. It is not wise to follow the herd by picking one of the most sought after fund managers or choosing funds from best buy lists.
It is best to construct a sturdy and robust portfolio that has exposure to different asset classes. For instance, the U.S. is one of the strongest performing stock markets in 2015 and hence, it is imperative to have substantial U.S. exposure. Naturally, U.S. investments won’t be as connected to the U.K. election results as much as U.K. investments.

Calling to action

It is best to ask investment managers and financial advisors what they are contemplating. Since, they are there to look after investor portfolio and it is vital that they have and effective strategy and the means to communicate it.

Doing nothing is as much a bet as really doing something. Even it doing nothing is their plan of action they should be aware of the effects of this, given that several outcomes of a specific side winning or a hung parliament.

Being cautious on currency headwinds

Finally, it is also critical to note currency risks. It will not be a simple stock or fund that is selected which will matter. The election result might affect the value of sterling substantially. A stronger pound means a harder time for exporters to profit in the market while a weaker one will be difficult for companies that are solely relying on importing raw materials. It is important that investors or their respective investment manager to purchase funds with currency risks that are hedged.

Finally, there may also be more opportunities that can be better built from policy changes around smaller companies as those already listed on the Aim. Furthermore, more experienced and high-risk taking investors must consider where they can take a better advantage.