Non-sterling savings (how to avoid hyperinflation)

gozomark

I didn't say taking zero risk was advisable, merely defined it

If you take no risk with your investments, then you risk being very poor indeed when you retire, as savings rates minus tax would fail to outperform inflation - possibly, but not necessarily (with inflation low and sensible tax planning, its not difficult for riskless savings to atleast keep track with inflation). By taking risk you may be even worse off when you retire - ask those who invested in stockmarkets at any time in the last 10 years...

gozomark

Staying in sterling may be zero risk by your definition, but it could still decimate someone's wealth relative to investors who don't stay in sterling - yes it could, but the other person is taking risk

under your definition, zero risk appears to be equal to the amount of risk the average of your peers is taking - is that right ?

Anyone hoping to cash in their home and buy a place abroad when they retire will be in for a very nasty surprise indeed - I agree, which is why for that type of person, 100% in £ would not be neutral - it all comes down to defining an individuals neutral position (or mazimum comfort zone if you prefer), and then any move away from that is taking on risk - nothing wrong with that, but important to be aware of it and not to take risk without considering the range of implications

Charles1968

gozomark wrote: »

Staying in sterling may be zero risk by your definition, but it could still decimate someone's wealth relative to investors who don't stay in sterling - yes it could, but the other person is taking risk

under your definition, zero risk appears to be equal to the amount of risk the average of your peers is taking - is that right ?

Anyone hoping to cash in their home and buy a place abroad when they retire will be in for a very nasty surprise indeed - I agree, which is why for that type of person, 100% in £ would not be neutral - it all comes down to defining an individuals neutral position (or mazimum comfort zone if you prefer), and then any move away from that is taking on risk - nothing wrong with that, but important to be aware of it and not to take risk without considering the range of implications

No, I don't think there's such as thing as zero risk. Every position is a gamble, whether you invest or don't invest. But some strategies are better or worse than others in the short term or long term. For a long-term investor, investments that appear risky to short-term investors are actually safer by my definition.

back on topic, the quote below is from today's BBC news. Note that sterling is expected to fall again if the Bank of England cuts interest rates again and further falls in sterling likely as interest rates head towards zero. The US dollar is being seen as a safe haven, even with the US economy on the slide.

"Sterling woes
Figures showed that house prices in Britain fell to their lowest level in three years, while manufacturing output was contracting at a record pace. The poor economic data increases the likelihood that the Bank of England will cut interest rates sharply on Thursday.
Lower interest rates make it less attractive to hold sterling.
Also on Tuesday, the euro slid against the dollar on increasing expectations that the European Central Bank will also slash its interest rate this week.
Euro traded at $1.259 in early European trading, down from $1.267 in late New York trading on Monday.
In worrying economic times, the dollar tends to benefit as investors seek more secure assets, such as US Treasury bonds."

edit: another way of looking at the current situation is to think of the UK as potentially being the next Iceland. People are already referring to London as Rekyavik-on-Thames. Only the bravest (or most foolhardy) investors kept their money in Iceland until the last moment.

gozomark

everyone has a zero risk stance - they may not know what it is, and its not stable but it exists

Charles1968

gozomark wrote: »

everyone has a zero risk stance - they may not know what it is, and its not stable but it exists

suppose for the sake of argument I don't want zero risk or neutral risk but want to take a punt on a foreign currency or a tranche of foreign currencies. I'll bet that sterling will continue to fall over the next 6 months or so. If sterling falls another 20%, I will effectively make a 25% gain on my cash (minus fees).

So my question is, how do I go about it? I don't want a pile of euros hidden under my bed, I want a conventional savings account in a foreign currency. Or several currencies.

Does a simple system for doing this exist for retail savers? Does anyone on the forum know?

gozomark

open a Euro and/or dollar account at a bank

eg

http://www.personal.barclays.co.uk/BRC1/jsp/brccontrol?site=pfs&task=homefreegroup&value=12869

soulsaver

Voyager2002 wrote: »

It does depend which foreign currency you chose. I doubt if many people who chose to invest in Zimbabwe dollars are celebrating right now, and yet I can remember when they were seen as a reasonably safe currency. And I think the comparison with Argentina is pure fancy.

Well you'll have a long memory then as there was already a black market in hard currrencies in 1988 when I was there.

soulsaver

"...open a Euro and/or dollar account at a bank"


Do all UK banks offer this facility to UK residents? I suspect one of the reasons this looks more attractive than it did is not just the prospect of falling pounds but also euros interest rates are now looking attractive compared to £, which previously were higher.

purch

open a Euro and/or dollar account at a bank

That must be the 'Rocket Science' bit that is hard for some to get their head around

Charles1968

purch wrote: »

That must be the 'Rocket Science' bit that is hard for some to get their head around

It never ceases to amaze me how needlessly rude people on internet forums are. I suppose the cover of anonymity is partly to blame.

If you'd bothered to read my post, you'd have seen I said "savings account". Not simply a holding account that pays 0.1% interest. I want my money to earn interest as it would in high-interest savings account, but in a foreign currency rather than sterling.