Pound to USD exchange rates - should I wait to invest?

snitch

I was about to move some £ to a US investment account a few months back when the value of the pound dropped. I've been waiting for the £ to improve but now I'm wondering if I should go ahead and move it. I'm new to investing and wondered if the question I should ask is - what return on investment will make it worth exchanging the £ rather than just keeping it in a UK savings account?

grumbler

The current rate incorporates all expectations of professional traders and is a balance of 'bulls' and 'bears'.

You can join either camp.

MX5huggy

Why as you are “new to investing” are you looking at any dollar denominated investments? 

If you want to invest in the US buy a UK fund that holds US stocks. The currency risk is then hidden (it’s still there but you don’t see it) and you don’t have to try to time the market in or out. 

Stocks (the whole stock market) always rise (with a couple of exceptions) given enough time. But currency exchange rates just wobble about all the time over any time period they are not predictable. 

masonic

The pound is currently 13% up against the dollar compared with the recent lows. It's been on a multi-decade downward trend, but is undervalued based on purchasing power parity. So anything could happen from here.

eskbanker

snitch said:

I'm new to investing and wondered if the question I should ask is - what return on investment will make it worth exchanging the £ rather than just keeping it in a UK savings account?

No, that isn't the question you should ask!

You should be deciding whether saving or investing is fundamentally more appropriate for your objectives, and only then looking into more detail about what strategy you need to adopt - even at that stage it's unlikely that forex fluctuations should play much of a role in your thinking....

bostonerimus

Yikes, foreign currency speculation as a novice investor...what could go wrong? Forget about dollar denominated investments and stick with main stream platforms and funds invested in your pension and ISA.

wmb194

snitch said:

I was about to move some £ to a US investment account a few months back when the value of the pound dropped. I've been waiting for the £ to improve but now I'm wondering if I should go ahead and move it. I'm new to investing and wondered if the question I should ask is - what return on investment will make it worth exchanging the £ rather than just keeping it in a UK savings account?

Why a US investment account? You could use a British broker and invest in e.g., sterling denominated funds and ITs that own US investments. Lots of British companies earn in US dollars so their share prices are also affected by any strengthening or weakening of the exchange rate.

bostonerimus

There are a few good reasons to have a US based investment account; one is if you are a US citizen and another is if you have US pension investments from some time working there. But even then I would not be looking at short term currency fluctuations and trying to time investments or withdraws.

adindas

snitch said:

I was about to move some £ to a US investment account a few months back when the value of the pound dropped. I've been waiting for the £ to improve but now I'm wondering if I should go ahead and move it. I'm new to investing and wondered if the question I should ask is - what return on investment will make it worth exchanging the £ rather than just keeping it in a UK savings account?

You are talking about two different things the Exchange rate and value of your investment in foreign currency. What happen if the exchange rate is in your favour but the value of your investment is currently down and vice versa?.

Keep in mind Exchange rate go in both directions north and south. Similarly the value of investment could go up and down.

Certainly it is good if you have both in your favour. Focusing too much on the currency make you less focus on the main reason you invest.

If you are worried about currency fluctuation and you still want US equity then you might want to start with a new investment platform with use US$ currency base and if you keep that money in that account to be reinvested to avoid currency conversion and / or fees. eToro and Trading212 are doing that, but if you want these foreign currency basis account you could not have it within tax wrappers.

Alternatively, using a currency hedge version of the investment you are interested with or just invest in GBP.

Adyinvestment

adindas said:

but if you want these foreign currency basis account you could not have it within tax wrappers.

I believe with Interactive Investor you can exchange into USD/others and then when you buy/sell, receive dividends etc it will all stay is USD for you to continue trading with until you want to exchange back, this is within a SIPP/ISA.

masonic

Adyinvestment said:

adindas said:

but if you want these foreign currency basis account you could not have it within tax wrappers.

I believe with Interactive Investor you can exchange into USD/others and then when you buy/sell, receive dividends etc it will all stay is USD for you to continue trading with until you want to exchange back, this is within a SIPP/ISA.

That would be a breach of the ISA rules, and I can confirm that Interactive Investor will not allow cash to be held in anything other than GBP within an ISA. For a SIPP or unwrapped, multi-currency is an option.