Is the fall in the £ going to change your investment plans?
Many things can impact on the UK’s currency rise and fall, Brexit being an unknown quantity. Which means a continued slow decline for sterling over the coming years, while far from certain is something investors should consider.
A British fund that invests in global stock markets will see its value rise if sterling falls. Although it’s crucial now more than ever to plan for volatility, don’t just have an international element to your portfolio as a short-term tactic, think about the long term.
You may want to consider a professionally managed solution. A diversified portfolio is key.
How can investors minimise the impact of sterling's fall?
Buying shares in British firms that earn money overseas is one way to protect your dividend income from Brexit-induced weakness in the pound.
House hunters looking to buy in the UK with foreign currency have seen their purchasing power soar in past months, with the effect being accentuated by falling prices at the top end of the London's housing market.
Investors could consider investing in British exporters, lower exchange rate with the pound makes their goods more attractive overseas. Investing in companies that declare dividends in dollars could also be beneficial due to the strength of the American currency against sterling.
For investors who are reluctant to take the step of investing abroad, there are still opportunities in the UK to benefit from the weak pound. Over two thirds of profits in the FTSE 100 come from overseas, and a weak pound could make the FTSE 100 attractive to overseas investors, potentially supporting higher equity prices in the UK.
Who's happy with a weak pound?
UK-based companies who export goods abroad fair better with a weaker pound. This is because foreign customers will need less of their own currency to buy UK exports, making lower priced UK exports a more appealing prospect.
Investors in globally diversified portfolios may also reap benefits if they have holdings in the FTSE 100 and the S&P 500 (US) stock markets, which are made up of primarily non UK-focused businesses who derive much of their income overseas.
Will the pound stay weak?
Sterling's fall has already impacted equities, and it has also made a difference to the cost of borrowing. And no one knows how much further the pound might fall.
It's very hard to know what will happen next. Many financial experts think it's likely that the value of sterling may fall further but no-one knows by how much or for how long.