Hi everybody, economy newbie here.
I have ISA deposits and funds (worldwide mainly, only about 20-30% in UK).
My original plan for the funds was a long term plan (I’ve started 5-6 years ago), but for different reasons I foresee that I will possibly need to use part or most of the money I have in my funds in about 1-2 years time.
I am no economy expert, but a possible effect of a “no deal” is the pound going through …hardships…, that is why my current plan is to move most of my deposits from GDB account to an Euro account.
Because my funds are mainly international they should survive a possible “no deal” impact.
An additional element to take under consideration was a possible global recession which a friend of mine pointed out, suggesting that it is due for 2019-2020.
If I want to play safe, I think my best course of action is to sell funds and exchange everything into euros.
I know that “timing the market” is a risky work, but lately, possibly because of the news, I feel a bit push to protect the investments and wait this off.
Possibly even simply just wait to invest again during a possible recession.
The thing is, the pound/euro exchange rate is already adjusted for the possibility of hard brexit, so if you exchange now you are essentially locking in a poor exchange rate.
The way to cope with uncertainty in the long term is diversification. In the short term, have enough of your money in the currency you need it in.
Don’t you think the Pound could go even farther down with an hard or no deal Brexit?
…again… I know I shouldn’t time the market, but if there is going to be a no deal or hard brexit, I will be better off in exchanging Euros now than wait November confirming the decision.
Have you seen the problems with Italy at the moment and the Euro banks exposure to derivative costs through UK ? - I wouldn’t be to eager to change into Euros at the moment
I was actually thinking to simply split it in half (between Euro and GBP) and mitigate in this way possible lost in both directions.
…but yes, you are right.
I will think about it.
The problem with this is you are shifting all your investment into one asset class, ie the Euro. Whereas if you choose a fund with diverse assets you spread your risk.
You mention that in the event of a no deal Brexit the pound might take a hit. Firstly it could however investments should be long term and will likely recover over a medium term. Secondly the currency dropping makes UK shares cheaper to buy so you should see a rise in the markets. Also remember the FTSE100 companies earn mainly in dollars whereas the FTSE250 companies earn mainly in pounds.
Another point is that a weaker pound is good for the export market. I.e TRADE! We hear a lot of scare stories but a weaker pound should boost our export trade.
Final asset class to consider are government and corporate bonds. As one asset rises others will fall and potentially offset losses.
My advice for what it is worth is diversify, reduce risk and ignore scare stories.
I agree with you, but at the same time, I will need part or most of my money within 1-2 years.
This is why I am currently thinking of reducing my investments to just 20%.
If I could wait 4-5 years, I would leave everything as it is and actually invest during a possible crisis, but because in the short term I have liquidity needs I am shifting to a more protective view.
That was another suggestion I was taking under consideration, but I have to admit I have no experience and do not even know where to start from.
…again, I am not expert, but in the short term I have more trust in € than the £.
But the reality is that my idea of shifting more into Euros is not because I trust more the Euro, but as Dave commented:
For personal reasons, I will possibly need more Euros than Pounds in the short term (1-2 years) and that is why I am taking under consideration moving slowly to a more Euro deposits than Pounds.
Just maybe think about how future interest rate changes and QE might impact. Yes rates are rising but if there is to be a resession then the first response will be to drop rates and print money which will impact on currency. I personally can’t see this in the next couple of years.
Plus think politically. If Trump stands and is elected for a second term expect further strengthening of the USD. A Conservative government in the next election would see the pound stregnthen too whereas a Labour government
Anarchist
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No one can say for certain that this is wrong, or right.
As others have said, diversify. Something will be right, but anyone who tells you what that something is, is guessing.
The only issue with ‘investing’ short term (less than 5 years) is it can cost more than your intitial investment.
Cash for 1-4 years anything longer definitely stock market. The pound will take a hit in 2019 but I’m sure by 2021 it will be back to a good rate.
However I did make 50% in one year with my sons ISA but it was just a lucky gamble - my daughter lost 15% in sane period.
If I was investing I’d need to properly research it before I did put monies in short term. Who knows with brexit. I hope my Scottish mortgage trust investments are ok.
