Moving Currency Can Affect Your Investments

With the triggering of Article 50, following the Brexit referendum, the pound fell in value and is going to have many ups and downs, in the near future. A weak pound hits everyone hard, especially if they want to travel, or do business, outside of the UK. The imported goods in the stores are seeing higher prices for consumers in the UK, making their sterling stretched to maintain their lifestyle.

Of course, the weakening of the pound is going to affect purchases as well as travel plans. That might be good news for some businesses in the UK, as they see more people staying home for their vacations and, perhaps, buying locally-sourced goods in the shops.

Shopping and travelling outside of the UK, with the weakened pound, impacts people immediately. It is something that is noticed right away. When it comes to investments, people should also be aware of where their money is. Many investments have currency exposure in other countries and the movement of that currency can cost one a lot of money if they are not proactive in their investments.

Companies and people who have businesses with overseas operations can benefit when converting or moving earnings back to the UK. They will most likely see an increase in profits due to the conversion rate. However, investments that are solely in the UK will see their importing costs, along with fuel and other commodities, rise.

There are mixed views regarding the outlook for the pound and it is best to have a diversified portfolio for your investments. A diverse portfolio can spread your money across a variety of investments and goegraphies. This will help to achieve the best balance between return and risk. Reviewing your investments regularly is a good practice to have, if you do not already do so.

Finding a fund manager is a good idea if you do not have the time to research or manage your investments. A strategy called ‘hedging’ is seen in some funds and it helps to reduce the impact of currency movements. This strategy is usually best left to the professionals.

Yes, turbulent times are upon us and many of our investments are going to be influenced by Brexit and elections in France and Germany, among other things. Hedge your investments, talk to professionals and do some research. It will pay off in the end.