Fund Exchange Rate Risk/Reward


Wondered if anyone else had any thoughts on this...

I've been paying into various funds such as VLS mostly for around 10 years now & a large chunk of those holdings are in US stocks. Over that time we've benefited greatly from greater US stock market performance vs UK & also recently a strengthening dollar.

As I'm planning to start drawing on those funds in 5 years time, should I be thinking about re-balancing out of those funds with US exposure & transfer over to solely UK funds. Effectively cash in on the US profit now/soon as I will have to at some point anyway. I have to time the market at some point or is this something that Vanguard build into their funds, some kind of currency re-balancing?

Obviously I could lose out on future gains but if $ hits 1.3-/1.35 for example surely there's a much bigger risk of giving all those profits back in the future...



  • grey_gym_sock
    i would be more inclined to shift gradually towards VLS funds with lower percentages in equities.

    overseas shares may be more volatile than UK shares, when you add in the currency fluctuations on top of the volatility of the shares themselves. but not by that much, because equities generally are very volatile anyway.

    also, there is a fair chance that when equities generally are falling, ppl are generally becoming more nervous, and so keener to hold a safer currency, which usually means the dollar, and therefore the dollar might well be rising when equity markets are falling. so arguably, dollar exposure added to equities exposure is not a bad idea. however, it may not always work out like that ...

    (although i've been arguing against it so far) there is some case for switching a bit to less volatile equities. but i would be more inclined to look at defensively-positioned UK equity income funds than at UK trackers, since the latter are rather concentrated in a few volatile sectors. or perhaps at a global higher-income tracker (VHYL).
  • Linton
    Linton Posts: 17,237 Forumite
    Name Dropper First Post First Anniversary Hung up my suit!
    It is not a good idea to move from funds which invest in the US to funds which invest solely in the UK. The market is global, you need to invest globally for good diversification. One problem with focussing your investing on the UK is that several major global industries are under-represented on the UK stock exchange eg manufacturing, consumer electronics, software.

    If your drawdown is for retirement remember that you could live for another 30 years or more. That is a long time. So there is no great need to go for a major reduction in risk.
This discussion has been closed.
Meet your Ambassadors


  • All Categories
  • 343.6K Banking & Borrowing
  • 250.2K Reduce Debt & Boost Income
  • 449.9K Spending & Discounts
  • 235.8K Work, Benefits & Business
  • 608.8K Mortgages, Homes & Bills
  • 173.3K Life & Family
  • 248.4K Travel & Transport
  • 1.5M Hobbies & Leisure
  • 15.9K Discuss & Feedback
  • 15.1K Coronavirus Support Boards