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MAIL ON SUNDAY - INVESTING / POUND

Journalist: Sarah Davidson, Freelance

ended 28. September 2022

The pound plunged on Monday in response to Kwarteng's budget - what does it mean for investors?

  • what should they do with existing investments
  • which investments are particularly affected
  • is the damage permanent
  • should people stop investing into their pension
  • how to invest to protect against currency swings /  take advantage of currency swings
  • any investments that look good now because of the pound dropping

Doesn’t need to be super long, just some punchy quotes?

DEADLINE: 4pm WEDNESDAY

7 responses from the Newspage community

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Editor
Samuel Mather-Holgate
Independent Financial Adviser at Mather and Murray Financial
If you’re invested in a broad range of asset classes, you will have noticed anything invested in fixed income (corporate bonds or government lending) will have taken a big hit. That is because we borrow more money than we can on internal markets, and international investors think we are a big risk. They didn’t like the look of the budget, so they want a better return if they lend us their money. Unfortunately, the risk is now priced into the investment. It’s fallen, and we must hope that Kwarteng reverses some of the absurd decisions from last week. The good news, and it’s brief, is that a weak pound does make profits seem unusually high for companies that make their money in dollars. Think of Shell and BP. Their profits will be extra high this year when they convert them back to sterling. The pound is in the bin at the moment, but the dollar is strong against most other currencies. You have to look at sterling against a range of currencies and it has fallen, but not as much as against the greenback.
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Philip Dragoumis
Director and Owner at Thera Wealth Management
We would always recommend a fully globally diversified portfolio as far as investments in stocks and shares are concerned. The UK is less than 4% of the global index so this means that 96% of an equity portfolio is automatically invested in other currencies, and therefore benefits from any fall in sterling. We would not recommend any changes however to the bond portion of portfolios despite significant falls this year. The bond markets are very volatile and fast moving right now so this is not the time to make hasty timing decisions Any investments should generally be for the long term for at least five years, if not longer. Investors should concentrate on their long term financial plans , their risk profile , speak to their financial planner and invest accordingly. The biggest risk to our investment returns is our own rash behaviour at times like these.
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Alex Shairp
Director at Blackmount Private Wealth Limited
Historically, a devaluation in Sterling of this magnitude should have sounded the death knell for the government. This, however, seems to have been a deliberate act by Kwarteng, despite the market’s bewilderment. It is the latest in a string of events that’s understandably causing the public concern amid growing uncertainty. As with any investment decision, though, we all need to keep an eye on the long-term. Government gilts and fixed income assets like bonds are taking a hit now but that’s no reason for investors to stop diversifying. The average person needs to keep calm and stick to their financial plans. Now isn’t a time to stop investing into a pension if you can afford to.
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James Thompson
Director at Becketts FS Ltd
In light of the current market position, investors are advised to 'stay invested, stay diversified' and find an active investment manager. If in doubt, seek professional advice from a Chartered Financial Planner.
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Fanny Snaith
Owner at Fanny Snaith - Certified Money Coach
So the markets are down, which probably means your investments have dropped in value. Before you do anything rash, consider this. You don't lose any money until you sell. If you can avoid selling, don't as investments historically have risen again. If you can afford to buy, then great, the sale season begins. If you are investing passively, keep it global and keep it as diverse as you can.
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Joshua Gerstler
Chartered Financial Planner at The Orchard Practice
"Those invested in bonds are likely to be impacted the most in the short-term. If you are investing for the long-term then do not rush to make any changes to your portfolio. You should have a well diversified portfolio and although it may be down today, it will be set up for the long-term. If you are investing on a monthly basis then any dips in the market are to be welcomed as it allows you to buy more and at a lower price. Volatility should be embraced and not feared."
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Daniel Jones
Lifestyle Financial Planner at DGS Chartered Financial Planners
If you have existing investments then they should have been taken with a medium to long term view. The best advice, particularly in a falling market, is to do nothing. Hold your nerve. Stick to your plan. It's time in the market that gives you positive long term returns, not timing the market. It's human nature to feel nervous when the value of your investments is falling but behavioural mistakes, your emotional response, is what can cost you the most. Falls in investment markets are a perfectly normal part of investing. But the declines are always temporary, a feature of investing that we all have to suffer from time to time to enjoy the permanent advance and long term returns the markets will give you.