How To Protect Against Sterling Falls
Third_Age
Posts: 14 Forumite
Hello everyone,
I have come into a large sum of money which I eventually want to invest is a diverse portfolio but I like the idea doing in in stages.
The problem is that the money is in sterling cash deposit & this does not appear sensible. Is there an effective, easy and inexpensive way to protect my inheritance against sterling fluctuations that does not involve investing 100% in one go?
I have come into a large sum of money which I eventually want to invest is a diverse portfolio but I like the idea doing in in stages.
The problem is that the money is in sterling cash deposit & this does not appear sensible. Is there an effective, easy and inexpensive way to protect my inheritance against sterling fluctuations that does not involve investing 100% in one go?
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Comments
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Invest In a low cost global tracker fund. Many different ones. Then your money is in multiple currencies it's just that the fund is priced is Sterling but for instance you'd have inestements in companies like Apple and Roche and BMW etc which ultimately are priced in dollars, Swiss francs, Euros etc all in this one fund . So if Sterling falls the fund rises. Of course, if longer term Sterling starts to rise again eventually then any rises in the underlying investments will be offset by this.
Examples of such investments would be Vanguard FTSE All-World UCITS ETF, or Vanguard Lifestrategy (several) or Legal and General have one, many different variants.
And if you can't choose, little harm in buying two or three even though in theory there's little,difference between them.0 -
That is one of the answers that I am considering but it means that I am 100% fully invested in the stock market in one go which is what I am trying to avoid.0
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That is one of the answers that I am considering but it means that I am 100% fully invested in the stock market in one go which is what I am trying to avoid.
I don't understand. Why can't you set up for example a monthly subscription and invest 1/12 of your cash each month so it takes a year until you are fully invested??0 -
There is no risk free way to protect the value of your money.
You can buy index linked bonds, but they are so expensive that 36 year ones are trading near double their face value, making a guaranteed 50% loss in real terms over 36 years, and even that is not without some risk
The best advice seems to be diversify - spread your eggs among many baskets and hope for the best. A world tracker is probably the cheapest way of getting reasonable diversification.“It is difficult to get a man to understand something, when his salary depends on his not understanding it.” --Upton Sinclair0 -
Its just the psychological factor really isn't it.I am 100% fully invested in the stock market in one go which is what I am trying to avoid.
Don't think of it as spending your money, its merely moving it from one investment to another. If you invest it all in one go you are taking the same risk as those of us who are already fully invested.
The problem is that if the stock market falls 30% straight after you have invested you will probably feel worse than those of us who have been in it for years, even though we have all lost the same amount.“It is difficult to get a man to understand something, when his salary depends on his not understanding it.” --Upton Sinclair0 -
Ah OK I think I've twigged it, you intend to invest in global funds but over time and are worried that over that time* whilst you invest in global funds , Sterling will continue to fall so you'll be getting less investments.
So you could perhaps look at initially investing 100% in vanguard life strategy 20 which is only 20% equity and the rest stuff like bonds but will be pretty much overseas amd out of Sterling. Then gradually switch it to life strategy 100 or other similar funds. Of course you'll lose out through dealing costs and the spread between buy and sell. No such thing as a free lunch.
Buying currencies instead would be incredibly expensive and risky and pretty much certain to cause a loss. and there are other risks, for example,a trump win unlikely as it seems right now, might cause a big fall in the dollar. Trying to become a currency trader is unlikely to end well
. and makes the risk of investing in a lump sum pale into utter insignificance.
* statistically, FWIW, gradual investing of a lump sum has a poorer payback than just a single purchase. But I can appreciate why you'd do it.0 -
I hear what you are both saying. I was just wondering if there was something that I had missed.
The other option that I am considering is a short duration global corporate bond fund where any change in interest rate has much less effect than longer term bonds. I can then protect my cash in world terms as I feed it into my chosen share investments which may well be a world tracker.
It probably is psychological but I cannot control my mind that easily!!!
The more I look at investing the more I think that a few global trackers might be the total answer for the share part of my portfolio. It is a very large sum of money & I would feel happier if it wasn't all held by the same fund provider.0 -
Glen_Clark wrote: »Its just the psychological factor really isn't it.
Don't think of it as spending your money, its merely moving it from one investment to another. If you invest it all in one go you are taking the same risk as those of us who are already fully invested.
The problem is that if the stock market falls 30% straight after you have invested you will probably feel worse than those of us who have been in it for years, even though we have all lost the same amount.
The stock market (just like any other form of investment) goes through peaks and throughs, and given that you can't time the market, investing a sum of money in several stages is a good idea.0 -
I hear what you are both saying. I was just wondering if there was something that I had missed.
The other option that I am considering is a short duration global corporate bond fund where any change in interest rate has much less effect than longer term bonds. I can then protect my cash in world terms as I feed it into my chosen share investments which may well be a world tracker.
That is what investeing in vanguard life strategy 20 would do I think. But that, or your idea would incur dealing costs so it's not risk free, you are just swapping one risk for another and incurring costs
Bottom line, there is no such thing as a free lunch, whatever you do has differing risks and costs, some known some unknown.0 -
That is one of the answers that I am considering but it means that I am 100% fully invested in the stock market in one go which is what I am trying to avoid.
Well, an alternative way to look at it is that at the moment you are 100% invested in a single currency. And you are trying to get away from that because of the potential continued devaluation of that currency. Yet, at the same time you don't want to be invested in the stock market. Sit back, have a think about what is making you nervous and see if its a rational fear.
It might be worth taking professional advice as well, especially as you don't sound like you are used to the sums that you are talking about. You should also consider other factors such as your age, long term goals, pension position, emergency fund, tax situation, dependants and so on.0
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