Should I prioritise US oriented index funds? 30 September 2022 at 5:16PM in ISAs & tax-free savings 2 replies 71 views

plaguedbyfoibles

Intending on opening a Stocks and Shares ISA (effectively the UK equivalent of a Roth IRA used for equity investing, for any Americans out there) with Vanguard, with my first investment being an index fund, pursuing a dollar cost averaging / drip feed strategy.

Given the volatility of sterling right now, should I prioritise a US oriented index fund rather than a FTSE one?

Or should I treat the sterling crisis as short term noise?

My understanding is that the companies listed on the FTSE100 typically have 75% of their earnings denominated in foreign currencies, i.e. not the pound, whereas the companies listed on the FTSE250 index tend to have a 50 - 50 split of income denominated in pound sterling vs income denominated in foreign currencies.

I earn £30,000 per annum at my current employer, have a little over £50,000 in savings, around £3,500 from my previous workplace pension, and have no debt whatsoever, either short- or long-term (I did not pursue tertiary education).

Am in my late twenties.

dunstonh

Given the volatility of sterling right now, should I prioritise a US oriented index fund rather than a FTSE one?

Probably not.    Although you could go with a hedged US fund (Vanguard do offer one)

When Sterling starts to go back up again, it will create a drag on global markets for non hedged funds.   

Historically, global stocks (exc US) and US stocks tend to alternate as to which is best over each cycle.   So, make sure you diversify globally and not just have the US.

Or should I treat the sterling crisis as short term noise?

All short term issues are just noise that will barely register over your investment term.

Albermarle

I earn £30,000 per annum at my current employer, have a little over £50,000 in savings, around £3,500 from my previous workplace pension, and have no debt whatsoever, either short- or long-term (I did not pursue tertiary education).
When thinking about investing, your workplace pension has a more beneficial tax structure than a S& S ISA.
Although the money is tied up until your older.