Foreign exchange pit fall


(Jozef) #1

Is buying U.S shares a really bad idea with the current value of the pound vs dollar?, I’m looking to buy my first lot of stocks and see Facebook currently as a good value stock to dump a decent amount of money into and leave for the next 15 years ( will be for my son when he turns 18).
My biggest fear is making a handsome profit only to have it removed by a stronger pound.
Will buying through Freetrade shelter is from this in anyway?
Look forward to any helpful info!


(Big Boss) #2

Depends on your time horizon mate. Long term time horizon of 5 to 10 years (in your case 15 years), you don’t have to worry about it at all.


(R) #3

It’s a great point. Definitely worth considering. The reversion of the exchange rate thesis does hold some merit, but how long will you wait? Especially when you consider that GBPUSD is among historical lows. An option is then to fully hedge your USD risk especially if you want to only be exposed to the stock price and not the currency fluctuations. How? CFDs, options, perhaps some other instruments. But the costs may be high for these. Institutions will just take out FX forward contracts to hedge.


(R) #4

I’ll also add that it is generally easier to get this done when it comes to major indices since many of these have investable hedged versions of the ETFs. Would love to see those make a debut on FreeTrade at some point.


(Rob N) #5

If the UK economy and Pound is to recover (in general) then you’d get upside by holding a FTSE 250 ETF as part of your portfolio. That could be a more simple way to balance, albeit less precise… :thinking:


(Harry) #6

I would just not worry about currency fluctuations. You can’t predict it, especially over such a long time frame, better to just leave it unhedged in my opinion.