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  • FIRST POST
    • funnymonkey
    • By funnymonkey 9th Feb 18, 7:04 PM
    • 109Posts
    • 15Thanks
    funnymonkey
    Funds subject to exchange rate
    • #1
    • 9th Feb 18, 7:04 PM
    Funds subject to exchange rate 9th Feb 18 at 7:04 PM
    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
Page 1
    • bowlhead99
    • By bowlhead99 9th Feb 18, 7:27 PM
    • 7,974 Posts
    • 14,508 Thanks
    bowlhead99
    • #2
    • 9th Feb 18, 7:27 PM
    • #2
    • 9th Feb 18, 7:27 PM
    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?
    Originally posted by funnymonkey
    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.
    Last edited by bowlhead99; 09-02-2018 at 7:36 PM.
    • dunstonh
    • By dunstonh 9th Feb 18, 9:20 PM
    • 92,964 Posts
    • 60,347 Thanks
    dunstonh
    • #3
    • 9th Feb 18, 9:20 PM
    • #3
    • 9th Feb 18, 9:20 PM
    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.
    I am an Independent Financial Adviser (IFA). Comments are for discussion purposes only. They are not financial advice. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
    • Linton
    • By Linton 9th Feb 18, 10:12 PM
    • 9,392 Posts
    • 9,526 Thanks
    Linton
    • #4
    • 9th Feb 18, 10:12 PM
    • #4
    • 9th Feb 18, 10:12 PM
    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
    Originally posted by funnymonkey
    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
    • By funnymonkey 10th Feb 18, 12:20 PM
    • 109 Posts
    • 15 Thanks
    funnymonkey
    • #5
    • 10th Feb 18, 12:20 PM
    • #5
    • 10th Feb 18, 12:20 PM
    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
    • By dunstonh 10th Feb 18, 12:23 PM
    • 92,964 Posts
    • 60,347 Thanks
    dunstonh
    • #6
    • 10th Feb 18, 12:23 PM
    • #6
    • 10th Feb 18, 12:23 PM
    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.
    I am an Independent Financial Adviser (IFA). Comments are for discussion purposes only. They are not financial advice. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
    • funnymonkey
    • By funnymonkey 10th Feb 18, 12:33 PM
    • 109 Posts
    • 15 Thanks
    funnymonkey
    • #7
    • 10th Feb 18, 12:33 PM
    • #7
    • 10th Feb 18, 12:33 PM
    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
    • By badger09 10th Feb 18, 12:36 PM
    • 6,000 Posts
    • 5,346 Thanks
    badger09
    • #8
    • 10th Feb 18, 12:36 PM
    • #8
    • 10th Feb 18, 12:36 PM
    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
    Originally posted by funnymonkey
    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

    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
    • By dunstonh 10th Feb 18, 12:57 PM
    • 92,964 Posts
    • 60,347 Thanks
    dunstonh
    • #9
    • 10th Feb 18, 12:57 PM
    • #9
    • 10th Feb 18, 12:57 PM
    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??
    Originally posted by funnymonkey
    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.
    I am an Independent Financial Adviser (IFA). Comments are for discussion purposes only. They are not financial advice. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
    • funnymonkey
    • By funnymonkey 10th Feb 18, 1:11 PM
    • 109 Posts
    • 15 Thanks
    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
    • By Voyager2002 10th Feb 18, 1:21 PM
    • 12,137 Posts
    • 8,256 Thanks
    Voyager2002
    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
    Originally posted by funnymonkey
    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.
    • Linton
    • By Linton 10th Feb 18, 1:33 PM
    • 9,392 Posts
    • 9,526 Thanks
    Linton
    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??
    Originally posted by funnymonkey
    Focus on investing in everything rather than trying to cherry pick a few things that will do well in the future. Unless you are blessed with the powers of Mystic Meg or Russell Grant the latter policy will probably fail.

    The best way for a small investor to invest in everything is to buy a single multi-asset fund that will do the job for you. There are many such funds,one example...

    https://www.trustnet.com/factsheets/o/g1hd/hsbc-global-strategy-balanced-portfolio-c-acc

    For more look on http://www.trustnet.com in the "mixed investment 40%-85%" sector, for funds that describe themselves as fund of funds.
    • rathernot
    • By rathernot 10th Feb 18, 1:44 PM
    • 256 Posts
    • 73 Thanks
    rathernot
    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
    Originally posted by funnymonkey
    I'd be looking at things like:

    My age
    My timeline (linked to age)
    My risk tolerance for some or all of the money

    For example it would be very easy suggest stick the lot in Fundsmith but if you wake up in two weeks time and your 50k is now worth 40k should you cash out, how would you feel?

    if you say the 50k is your life savings and you're retiring in 3 years and it's all you've got to live off the answer will be massively different to if you say it's 50k you found down the back of the sofa and so on.
    • funnymonkey
    • By funnymonkey 10th Feb 18, 2:08 PM
    • 109 Posts
    • 15 Thanks
    funnymonkey
    My age of 51 and will retire at 58 (Have other sources of income from rental property which will give me a comfortable life)
    I would say medium risk.
    I used 50k as an example but closer to 90k and this is my private pension fund currently in a sipp.
    Thank you
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