Can you share your feedback, advise how do stop FX loss when purchasing US stock and your account is in GBP
My view is that 1) you can do this, but 2) is it a waste of time and money.
A possible way to hedge against USD weakening is with currency CFDs. But this will be expensive in overnight interest.
The GBP/USD exchange rate is where it is because there is equal weight of opinion amongst currency traders that it will move either way. If you hedge then you are placing a bet that has a 50% chance of being correct. It will cost you to place this bet and so the expected return is negative. It is wiser not to bet.
How to endure currency losses and keep a calm mind? I recommend considering a wider view. Suppose you buy a share of AAPL and then the dollar weakens. You still have a share of AAPL. Of course it may be worth less GBP but your GBP will go further when you travel and purchase goods. That share of AAPL may have lost no value at all when viewed in terms of the airline flights that it will buy. The weak dollar will enable Apple to earn more money from it products that it sells abroad and so in the long run this will cause the price of AAPL to rise. Probably this is a great time to buy more AAPL shares when the GBP is strong.
You can also diversify worldwide. Own some UK companies that are not much exposed to the USD and more just to the UK economy. Own a tracker funds for Japan, Eurozone and Emerging markets. The world tracker funds which invest according to capitalisation, like SWDA and VWRL, are typically about 60% US and 40% rest of the world. I suspect some investors here are 100% US.
I’m up 3 percent on my stock but down 6 percent on Forex
This update cannot come any quicker! Multi currency. Puhhlleaaase??!!
How do you imagine a multi currency account would enable you to eliminate losses due to fx? The only way I can see this working is if you can reliably intuit a better time to convert USD to your local currency than at the time of the trade. Can you do that profitably on a regular basis? If so, why not make money trading currency CFDs?
Converting at times different than when the trade actually occurs can make a nightmare of record keeping in a taxable account as you have to keep track of what your profit would have been if you had converted to or from local currency at the time of the trade.
Once you exchange your currency to USD then you deal with what you have. It won’t fluctuate will it? Doesn’t matter what rate you get at the time.
Buy and Hold - FX Impact doesn’t really matter (could fluctuate either way)
Swing/Day Trade on ISA/Invest - I look at range enough to offset the fx impact on the trade. If the potential range is 10% or more and the forex impact is, say 1%, I will be more than happy to execute the trade. If the potential reward is only 5-7%, I won’t bother.
for tax purposes you would need it to record what the FX rate is at the time of the sale, however not having to convert it allows you to just put it straight into another US stock without having to do any more conversions, which is the point of having multiple currencies.
for tax the only FX rate that matters is the rate at the time of the order being made or filled.
this would be Invest account only because ISAs must be in GBP.
I couldn’t jump out of this stock cos my forex impact was higher than my profit.
Now I’m screwed even more lol
technically you could have, you just didn’t want to eat the loss. However, had you taken the loss and reinvested into another stock in that market, when the FX adjusts later you would have gained it back.
2% isn’t bad, half my portfolio had been held over 7month in the red and the FX shot up for USD/GBP in the last month so I was stuck at -3.2% to about £100 in the FX alone. when the share went up 20%+ I just ate the FX loss to move the funds to a UK listed stock so I didn’t have so much of my portfolio affected by the conversion.
Its an odd one this right. If you have a GBP account, and invest in non GBP shares, you can choose a GDR in GBP if one exists, or purchase the local line, and trading212 would convert your funds at the spot rate plus 0.5% spread I believe. Fairly normal practice that.
If you want to avoid the currency fluctuations, you can hedge the currency, but this would be at an additional cost, and you have to consider things like market liquidity, which in say EUR/GBP/USD is not an issue, spread and interest rate differentials.
Its not typically something I worry about, but if you are concerned, you could look into currency ETFs. Not sure if 212 have these.
It is only for CFD. There is not fx conversion fee for Invest/ISA.
Make sure you pick stocks that give so great returns the FX doesnt matter
Yeah I think I’ve misread some articles - here’s a recent one, but yes on checking source, there is none for stocks.