Funds subject to exchange rate

funnymonkey

I have been looking into various Funds, about 10 that will between them give me global diversity.
Do you think this is a good idea as I'm a newbie?
Also I know that shares are subject to exchange rates but are Funds in which case it would be wise to invest in UK shares?
Thank you very much

bowlhead99

funnymonkey wrote: »

I have been looking into various Funds, about 10 that will between them give me global diversity.
Do you think this is a good idea as I'm a newbie?

No, I think you should buy one or two funds which invest in a diversified set of asset types (company shares, company and government bonds, maybe some commercial property) all over the world, and let the professional asset managers determine the detailed allocation.

Learning from one's own mistakes is jolly good fun but you do not need to try to make your life more complicated and make a bunch of mistakes to learn from, when you could instead just buy one fund that matches your preferences for investment risk/volatility, or rough asset allocation preferences, and just leave it to do its thing.

Also I know that shares are subject to exchange rates but are Funds in which case it would be wise to invest in UK shares?

Funds invest in shares so yes they are exposed to the effects of exchange rate fluctuations on the underlying assets and incomes of what they own, just like shares are.

It would be wise to invest in UK shares via funds just like it would be wise to invest in foreign share via funds. If you invest only in UK assets you are betting that the UK is the very best and only place to be invested over the next one, two, three, four decades or more. You could get an extremely lucky result and be right, or you could get an extremely bad result and destroy your future spending power as the value and costs of assets and goods and services in the rest of the world goes up without you.

So, it's wise to invest broadly, in pretty much everything you can (within reason, and without making it unnecessarily complex).

You live in an increasingly 'global' economy and in the future you will no doubt still want to be buying Korean TVs and Chinese smartphones and French computer software and Japanese sexdolls and German cars and Dutch washing machines and US movies and media streaming services. And when you want to have someone paint your fence or serve you some beer in a pub they will want to take enough money from you to help pay their Polish grandmother's rent and their monthly subscription fees for storage of their documents in a cloud server in the Philippines.

Part of the costs of all those things will be driven by the strength of foreign currencies relative to our own. So, investing solely in UK shares or in funds that hold only UK assets, to avoid owning any foreign currencies, may cause your retirement plans to fail big time.

dunstonh

Do you think this is a good idea as I'm a newbie?

10 funds? if you have built your knowledge to a stage where you can analyse funds and have a structured portfolio and strategy then fair enough. Are you honestly at that level though?

Also I know that shares are subject to exchange rates but are Funds in which case it would be wise to invest in UK shares?

And straight away we can tell from that question that you are not ready.

Funds investing in countries that do not use Sterling are going to be subject to exchange rate movements.

Be aware of what you dont know and dont try to run before you can walk.

Linton

funnymonkey wrote: »

I have been looking into various Funds, about 10 that will between them give me global diversity.
Do you think this is a good idea as I'm a newbie?
Also I know that shares are subject to exchange rates but are Funds in which case it would be wise to invest in UK shares?
Thank you very much

It isnt the fund that is important but rather the shares in which the fund invests. If you buy a fund that invests in US shares the prices will move with changes to the $. However investing in UK shares through funds or directly may not help you. Major UK companies may well be global businesses whose shares happen to be listed on the London stock exchange. Shares in such businesses are traded globally which means in practice that they tend to follow the $ even though the price is stated in £s.

Other companies may be truly British but make most of their money overseas. So their share price will be affected by currency movements.

The best answer is to invest in as many different foreign markets as you can. In that way you will spared some of the worst effects of the fluctuation of individual currencies. Of course the £ changing relative to all other currencies will affect stock market prices, but fortunately if the £ goes lower shares will tend to increase. The risk is that the £ increases in value relative to all other currencies which would cause global investments to fall. However that is perhaps a risk that one may be prepared to take.

funnymonkey

Thank you all for such amazing replies.
I am a novice as I openly admit and have as advised looked at diversified Funds, perhaps I haven't found the right ones but they haven't performed as well as some

I have looked at a few funds that seem to be doing well

Polar capital global tech
First state Asia
Old mutual North American equity
Marlborough nano
Marlborough micro
Lindsell train global equity
Old mutual UK smaller companies
Jupiter European

Would these be any good in the absence of finding a diversified fund with similar growth.
Many thanks

dunstonh

I have looked at a few funds that seem to be doing well

The real test comes if you can explain why each of those is doing well and how you expect it to perform in a period when that will not suit those funds. Would you pass that test? Do you know why they are doing well compared to similar funds?

How does those funds work together in your structured portfolio as picking funds and holding random weightings in each is not a good way to invest.

funnymonkey

I can't explain only that most seem to have performed reasonably well over the last 5 years and others have had more recent growth.
I'm the absence of a crystal ball what would you recommend??

badger09

funnymonkey wrote: »

Thank you all for such amazing replies.
I am a novice as I openly admit and have as advised looked at diversified Funds, perhaps I haven't found the right ones but they haven't performed as well as some

I have looked at a few funds that seem to be doing well

Polar capital global tech
First state Asia
Old mutual North American equity
Marlborough nano
Marlborough micro
Lindsell train global equity
Old mutual UK smaller companies
Jupiter European

Would these be any good in the absence of finding a diversified fund with similar growth.
Many thanks

OP those funds may 'seem to be doing well' but if you invest in them without knowing anything other than that during recent years 'they seem to be doing well', you'll be in for a very bumpy ride:eek:

As a newbie, may I suggest you have a read around this website

http://monevator.com/category/investing/passive-investing-investing/

The author is biased towards Passive Investing (ie not trying to pick the winners;)) but IMHO that's no bad thing for a newbie.

dunstonh

funnymonkey wrote: »

I can't explain only that most seem to have performed reasonably well over the last 5 years and others have had more recent growth.
I'm the absence of a crystal ball what would you recommend??

Until you are able to analyse that, you should stick to multi-asset funds.

Most of those funds are pretty high risk in their respective sectors. So, higher growth in a growth period largely goes without saying. Of course, they will suffer more in a negative or volatile period. Some of them focus on investment methods and assets that work better in a certain part of the economic cycle and not all of it. So, looking backwards is a very bad idea if you are looking at one of those.

Nobody has a crystal ball. However, an investor building a bespoke portfolio of single sector funds needs to understand the risks, investment style etc. Picking on the basis of what they did in one stage of the economic cycle is not going to help you in the next stage when a different set of investment methods will work better.

If you cant adjust accordingly, then you should avoid the targetted sectors and stick with more general funds. They wont be the best in the best periods but wont be the worst in the worst periods. If you go chasing returns without knowing what you are doing, you will lose money.

funnymonkey

Thank you so much and I heed your warnings
So let's say you have 50k
Which specific funds would you put this into?
Thank you

Voyager2002

funnymonkey wrote: »

Thank you so much and I heed your warnings
So let's say you have 50k
Which specific funds would you put this into?
Thank you

My choice would be different from yours, since I prefer particular industries and particular parts of the world.

The standard advice for someone in your situation is to consider something like the Vanguard lifestyle family: part of this is in a global tracker (so essentially split among most of the companies operating throughout the world) while part is in Bonds, which are generally lower risk than shares. Fees are low, but then there are no managers choosing shares for you: the investment is simply spread between companies in proportion to their size.

So, your first decision might be what proportion you would want in shares, and what in bonds. Then you need to consider whether you are happy with this approach; whether you know or expect something that would mean that some of your investment should be placed elsewhere.