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itsdave

Stocks & Shares Isa - Invest In Usd Or Gbp?

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Hello folks :-)

I'm considering bunging some cash into a reasonably high risk fund - Guinness Alternative Energy Fund - probably this year's £7,200 ISA allowance.

I freely admit I have no idea what I'm doing, so apologies for the stupid question(s)!

It seems I can either invest in the GBP Fund or USD Fund. Can anybody please advise the pros and cons of USD vs GBP with respect to investing? What would it actually mean if I invested in the USD one? Presumably I'd be also gambling on the exchange rate going in a particular direction? Or have I completely misunderstood everything?

Please help!!! And apologies for the daft question.

Thanks in advance.

For info, the funds in question are below:-

http://www.h-l.co.uk/funds/security_details/sedol/B2PGVK3

http://www.h-l.co.uk/funds/security_details/sedol/B3CCJ63

Edited by itsdave

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Hello folks :-)

I'm considering bunging some cash into a reasonably high risk fund - Guinness Alternative Energy Fund - probably this year's �7,200 ISA allowance.

That's a new one on me.

I recently switched money away from a somewhat-similar-looking fund http://www.h-l.co.uk/funds/security_details/sedol/B29Y0P1 because it was underperforming too badly, and into http://www.h-l.co.uk/funds/security_details/sedol/B2PFMN0

H-l provide some useful tools for comparing performance over time (though many green funds are too new to have much of a track record).

I freely admit I have no idea what I'm doing, so apologies for the stupid question(s)!

It seems I can either invest in the GBP Fund or USD Fund.

You already said you're investing GBP, so why faff about with currency? And if you're with H-L, don't be afraid to ask them this kind of question: they're good with dumb newbies (and I should know)!

Can anybody please advise the pros and cons of USD vs GBP with respect to investing? What would it actually mean if I invested in the USD one? Presumably I'd be also gambling on the exchange rate going in a particular direction? Or have I completely misunderstood everything?

The fund (any international fund) will hold assets denominated in a range of currencies, so giving you exposure to a basket of currencies. Don't confuse that with what face of it you invest in.

You clearly want to invest in green energy. Have you considered either or both of:

- Investing in individual shares? I hold for example PVCS (which has underperformed badly, but at least pays a good dividend) and SSE (the major utility that leads the UK field in moving to clean energy, particularly wind). There are some interesting small-caps for the bold, too.

- Investing in VCTs? Since you're happy to put all your eggs into a high-risk basket, you might also fancy the high rewards of big tax breaks. VCTs offer the main advantage of an ISA (tax-free income) but also a 30% up-front tax rebate on the money you invest, so instead of a £7200 investment, you could invest £10000 and get £3000 back from the taxman. I hold several VCTs: in particular Ventus, which is a pure-play clean energy fund, and Foresight, which is more mixed but in recent years focuses on green investments. But obviously, don't do VCTs unless you're OK with tying the money up for at least 5 years.

Don't take any of this as investment advice. Just thoughts from another investor with a green emphasis.

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You clearly want to invest in green energy. Have you considered either or both of:

- Investing in individual shares? I hold for example PVCS (which has underperformed badly, but at least pays a good dividend) and SSE (the major utility that leads the UK field in moving to clean energy, particularly wind). There are some interesting small-caps for the bold, too.

- Investing in VCTs? Since you're happy to put all your eggs into a high-risk basket, you might also fancy the high rewards of big tax breaks. VCTs offer the main advantage of an ISA (tax-free income) but also a 30% up-front tax rebate on the money you invest, so instead of a £7200 investment, you could invest £10000 and get £3000 back from the taxman. I hold several VCTs: in particular Ventus, which is a pure-play clean energy fund, and Foresight, which is more mixed but in recent years focuses on green investments. But obviously, don't do VCTs unless you're OK with tying the money up for at least 5 years.

Hello porca misèria :). Thanks for the links to the alternative funds. I'll definitely take them into consideration before making a decision on where to park my £7,200.

With regard to individual shares, it's something I'm interested in and will probably look into over the next few months, but to be honest, I'm such a novice at this investing lark (I've never managed to save enough to invest!) I thought I'd go with a couple of managed funds first of all and then diversify into other areas.

I'm prepared to put about 15-20% of my money into relatively risky investments, with the rest going into fixed rate bonds /savings accounts (and premium bonds!), but as I'm only just starting, I'll probably stick the £7k somewhere in the next month or so, and then do nothing for a good six months.

I will definitely check out VCTs - I've never heard of them, but any investment where you get tax breaks sounds worthwhile looking into.

Many thanks for taking the time to reply - you've given me a lot to think about and more research to do. Thanks again :).

Edited by itsdave

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Hello folks :-)

I'm considering bunging some cash into a reasonably high risk fund - Guinness Alternative Energy Fund - probably this year's ?7,200 ISA allowance.

I freely admit I have no idea what I'm doing, so apologies for the stupid question(s)!

It seems I can either invest in the GBP Fund or USD Fund. Can anybody please advise the pros and cons of USD vs GBP with respect to investing? What would it actually mean if I invested in the USD one? Presumably I'd be also gambling on the exchange rate going in a particular direction? Or have I completely misunderstood everything?

Please help!!! And apologies for the daft question.

Thanks in advance.

For info, the funds in question are below:-

http://www.h-l.co.uk/funds/security_details/sedol/B2PGVK3

http://www.h-l.co.uk/funds/security_details/sedol/B3CCJ63

I dont know anything about the fund your are considering buying but I will assume its a global fund investing in stocks in alternative energy so assuming this fund buys stocks in the US they must be bought in US Dollars or the currency in use in any country and the fund share price will be valued as to the underlining stock value and exchange rate each day but the value is the stock holdings and when its sold it well end up in GBP

Overseas investing carries exchange rate risk If this fund mainly invests in the US I think the Dollar is the best one I am guessing but it probably dosnt make a differance.

All the hype over green energy I would be very carefull buying into this sector now things may be very overvalued and you may get burnt and VCTs are a very high risk thing and the management fees are extortinate hence most are crap but if you get the right one you will make a killing and is tax free gains after I think 3 years you need top rate managers for this one and luck and have a long term view.

You never asked this but for me invest in things you know about and you think they are undervalued because if you or me invest in things we dont understand its hard to value the assets true value things go down as well as up anyway be careful take your time and good luck

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It seems I can either invest in the GBP Fund or USD Fund. Can anybody please advise the pros and cons of USD vs GBP with respect to investing? What would it actually mean if I invested in the USD one? Presumably I'd be also gambling on the exchange rate going in a particular direction? Or have I completely misunderstood everything?

It makes essentially no difference whether you buy the GBP or USD one. You are buying shares in the same fund.

The only difference is how the value of the fund shows up, when quoting buy/sale prices of shares and in your valuation statements.

You may also have to pay currency conversion charges if you are buying a fund in a currency, but the cash in your account is in a different currency. E.g. if you have an ISA, by necessity, cash transferred into the account for reasons of purchase will need to be in GBP. If you then by shares that are traded in USD, your broker may charge you for the conversion when buying and when selling.

There may be other factors - funds often have different 'classes' of share with different fee structures. E.g they have one type of share for sale to pension funds who invest in bulk, and due to the size of their purchases, they get a discount on the initial purchase fee, and a discount on the annual management fee. It's possible that if the fund is primarily international, that they hold their cash reserves in USD, and therefore they charge a higher fee on the sale of shares in GBP (to cover their additional conversion costs).

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There may be other factors - funds often have different 'classes' of share with different fee structures. E.g they have one type of share for sale to pension funds who invest in bulk, and due to the size of their purchases, they get a discount on the initial purchase fee, and a discount on the annual management fee. It's possible that if the fund is primarily international, that they hold their cash reserves in USD, and therefore they charge a higher fee on the sale of shares in GBP (to cover their additional conversion costs).

H-L give individual small investors big discounts on those initial charges (mostly 100%) and small discounts on the annual charges. That's what they call the "fund supermarket": they use their market clout to negotiate discounts with the fund managers, and pass the discounts on to retail customers.

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