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Charlie Don't Surf

Simple Question If You Know The Answer!

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I'm sure this is obvious but I still don't know the answer.

If I put money into an overseas stock, index tracker, whatever, as long as it is overseas, and the pound takes a beating (hypothetical of course!!!) will my investment go up in terms of sterling regardless of how the actual market performs independently. (Does that make sense)

If not, what is a good way of sterling-proofing myself without buying other currencies. I already have quite a lot of gold from a few months back so no more gold for the time being.

Thanks

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I'm sure this is obvious but I still don't know the answer.

If I put money into an overseas stock, index tracker, whatever, as long as it is overseas, and the pound takes a beating (hypothetical of course!!!) will my investment go up in terms of sterling regardless of how the actual market performs independently. (Does that make sense)

If not, what is a good way of sterling-proofing myself without buying other currencies. I already have quite a lot of gold from a few months back so no more gold for the time being.

Thanks

It all depends on magnitude.

If your overseas investment goes down 10%, but sterling also goes down 10%, then you are squits. Simple mathematics for differing scenarios.

But basically, a weakening sterling helps, a strengthening sterling hurts. Its a punt which way and how much each vector of the strategy moves.

What is it you want to do? Hedge your sterling by buying overseas investments, or buy overseas investments and hedge you currency risk?

Edited by wayneL

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Thanks for the response Wayne. I guess I knew the answer really.

I don't really have the time (or skill) to hand pick shares so I'm really looking at just buting into trackers (e.g. Japan FTSE tracker) and unit trusts investing in foreign markets (I have India, Europe and Asia Pacific based trusts).

I just wondered what happened if these economies treaded water whilst the UK went down the pan.

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I'm sure this is obvious but I still don't know the answer.

If I put money into an overseas stock, index tracker, whatever, as long as it is overseas, and the pound takes a beating (hypothetical of course!!!) will my investment go up in terms of sterling regardless of how the actual market performs independently. (Does that make sense)

If not, what is a good way of sterling-proofing myself without buying other currencies. I already have quite a lot of gold from a few months back so no more gold for the time being.

Thanks

Can be even more complicated than that. If you have a UK-quoted stock obviously sterling denominated but which derives most of its earnings and profits overseas then the profitability may be heavily influenced by the company's treasury department's ability to play the forex markets.

Alternatively if you purchase a $ denominated stock when £/$ at 1.70 which rises 20% and you liquidate and convert at 2.03 the only person who has made money is the stockbroker.

However if you buy a UK fund which is an S+P500 tracker (say) then there is generally no actual currency exchange. The "return" is synthetically generated through derivatives so no currency risk to you.

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  • 302 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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