Any idea how to offset the weak dollar effect on portfolio

Anyone else also seeing adverse affect of weak dollar agaist Sterling causing the portfolio value actually go down? I am seeing my shares investment losing around 4-5% of value. Is there anyway to hedge the portfolio against the FX flactuations?

1 Like

I believe you mean weak dollar?

Best way to do it is to either buy any of the hedged ETFs (i.e. IWDG). Otherwise there is limited to scope for hedging currency movements on Freetrade, or indeed on any retail platform.

Alternatively you can buy holdings which are negatively correlated to a weak USD (i.e. gold) to offset some of those losses but it only acts as an offset feather than reducing the loss itself.

Indeed. Corrected. Thanks.

I mostly own the individual shares. It’s really annoying to see that stocks value has gone up a little but the investment value is down.

The thing to remember is no one knows where the currency will be in 5-10 years so things may iron out.

2 Likes

Or even after November’s election!

1 Like

I find it interesting that you call this a weak dollar. before the Brexit vote Sterling was way higher than it is now. The pound isn’t that far off the lowest it’s ever been against the dollar

1 Like

The difference here is that post the Brexit vote the pound fell against almost all currencies and so was the weak half of the pair. Now the pound is largely steady and the dollar is the declining partner. We do not know where this will stop (I am personally not very bearish as people still need to buy USD to buy US shares).

1 Like

I think the fact that you need Dollars to buy Oil has traditionally held the dollar up. possibly weak Oil demand is having an effect here

1 Like

It’s more that you need USD to buy anything denominated in USD and as every tradable commodity fits that description then that provides a need for the currency.

1 Like

Well… the thing is the time frame is relative. I bought a few stocks not a long ago and suddenly the Pound zoomed up and I feel the pinch now. I need to take out some money but I am stuck because of the sudden weakning of Dollar.

Quite an interesting thread and I have definitely been thinking about this a lot recently as I always aim to hold long term. Given that in 2014 when I visited the US £100 gave me around $160 compared to where it is now I am seriously concerned about US stocks long term as this is another uncontrollable variable which can have a devastating (or on the flip side positive) effect on the portfolio. How do other long term investors view this?

1 Like

Luke Gromen on Twitter has done quite a lot of interesting comments and podcasts about dollar. Worth listening to him, been on Investor’s podcast a few times with Stig and Preston Pysh.

2 Likes

Its distressing in the short term. Brexit will soon also be “reopening” which might stabilise GBP to USD. I cant see it rallying much after ~1.31 but anything is possible. My advice is you should always Hold stocks you believe in for the long term.

A good piece of advice you will see throughout this forum is that it is inadvisable to invest money that you need access to in the short term. You never know what will happen to your investment, especially in the short term (as evidenced here). While not helpful now after the fact, perhaps something to bear in mind going forward. Personally, I’m delighted with a weakening dollar as my wife’s US student loans become cheaper, leaving more money for investing!

1 Like

Isn’t a weaker dollar a good thing? Our £ will go further to accumulating more stocks? Sorry but my understanding of this is quite limited.

1 Like

I think it’s all relative to the baseline, I.e. when you have invested. Say you invested £100 at an exchange rate of 1.25 giving you $125 of a stock without fees. If now the dollar weakens and the exchange rate becomes 1.50 (I know, dramatic but just to illustrate) then your £100 investment now only yields $125/1.5=£83.33. If you invested when the dollar is weak then you are correct, a strengthening dollar would benefit you.

1 Like

Weaker dollar is great if thats the point you buy. If you buy when the dollar was stronger and it weakens then it’s a blow to your P/L
Example:
I bought 1 share of ABC at $100 when GBPUSD was 1.20 for ~£83
I want to now sell 1 share of ABC which has grown to $108.33USD but the exchange rate is now 1.30
I will receive ~£83

With your dollar lens on this is fantastic as it looks like 8% gains
When putting on your sterling specs it’s less rosy @ 0%

Buy Gold

1 Like

Cool, so good to buy shares when pound is stronger and good to sell when pound is weak against the dollar? Is this where different currency account helps?

But hedged gold. Otherwise the value of your gold drops in line with the dollar.

1 Like