Want to Maximise Your Foreign Investments?
Make Sure Currency Fluctuations Don’t Slash Your Profits


Foreign securities like stocks and bonds can be a savvy choice for an investor seeking a truly diverse portfolio. And yet there’s one important element that even switched-on investors sometimes overlook – how fluctuations in the currency market impact your investment returns. After all, if your local currency suddenly rises or falls in value it can drastically change the amount you receive from your foreign stocks, bonds or share dividends.

 

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Sometimes this can work in your favour. But as the experts know, currency markets are impossible to second-guess and all-too-often you could see your investment gains severely slashed, or even wiped out.

This is where we can help.

Professional currency brokers can help you develop hedging strategies to guard against the effects of currency fluctuation. They also offer better exchange rates and lower transfer fees than the banks, plus a safe, secure and stress-free service. At currencytoday.co.uk our experts have scoured the web and utilised industry expertise to bring you trusted currency brokers who can save you time and money. Which means choosing one of them to take on your international transfers is your smartest low-cost investment yet.

Better than the banks

Banks have become the High Street ‘jack of all trades’ – serving the needs of a diverse range of customers. But while they might be great at selling you a mortgage – are they truly focused on the needs of professional investors?

Investors often feel they receive a bad service from the banks since they can be slow and frustrating to deal with. Plus they’re often expensive, with high transfer fees and poor exchange rates to boot.

Expert insights

This is where experienced currency brokers can help give you the edge. They can offer excellent insights into how the currency market affects your investments – and practical ways to try and ensure fluctuations go in your favour. For example, they may suggest a ‘currency option’ or a ‘forward contract’. These are two smart ways to ‘manage’ exchange rate risk of any given transfer so there are no nasty surprises if the rate fluctuates.

The benefits of using a currency broker include:

1. Expert advice. Because currency brokers understand the market they can offer clever hedging strategies to ensure you keep more of your investments – such as forward contracts which allow you to set an exchange rate up to three years ahead.

2. Easy and speedy payments. In most circumstances they can receive funds on your behalf from an investment company based overseas. Note you may need to provide evidence on the source of funds to satisfy anti-money laundering regulations. Transfers back to your UK bank account will often be done the same day your broker receives the foreign currency. Payments sent out to investment companies overseas will be received same day in some cases.

3. Low foreign exchange margins. While your bank charges up to 5% to transfer your money – you can expect to be charged only 1% of the amount and this is reduced further as the transfer amount increases.

4. Easy online transactions. Managing transactions online is secure and simple with a wide range of services including rate alerts and the freedom to fix the exchange rate before or after your money reaches the broker account. Also, it’s easy to save your bank details for future use.

5. 24/7 transactions. Because the money market never sleeps, currency brokers offer round the clock transactions.

6. Personal service. Currency brokers aren’t faceless online outfits – they can give you dedicated one-to-one service and advice by phone and online.

Look at our case study to see how you could save:

Case study: How we helped Paul find a simple hedging solution

Faced with dire savings returns from his ISA, five years ago IT manager Paul Willits decided to take matters into his own hands. Having read about some exciting investment opportunities in Europe he put £10,000 into a European stock market tracker fund to try and maximise his money. His careful stock picks did well, but he soon learned how changes in the exchange rate between the pound and Euro could play havoc with his portfolio.

For example, if his tracker increased by 20%, the effect of this ‘currency risk’ could mean that:
  • If the pound versus the Euro stayed at the same exchange rate after 12 months as when he first made the investment, Paul’s holding would now be worth £12,000 (20% increase = £2,000).
  • If the pound appreciated by 15% versus the Euro over 12 months the investment would now be worth £10,200 (£12,000 – 15%). So the Euros buy fewer pounds because the pound has increased in value.
  • If the pound depreciated by 15% versus the Euro over 12 months the investment would now be worth £13,800 (£12,000 + 15%). So the Euro position now buys more pounds because of the increase in the Euro’s value.
This example highlights a difference of £3,600 due to losses and gains made in exchange rate.

An expert choice

Paul found this an incredibly complex state of affairs – so he decided to talk to the experts. After finding currencytoday.co.uk online he discovered he could compare the UK’s top currency brokers at the swipe of the screen on his iPad. He chose to contact one of our brokers through the site, who told him all about ‘forward contracts’ – a smart hedging solution where he could fix the exchange rate on currency transfers for up to three years. This might not take all the risk out of investing – but it does mean that Paul’s found a safer, more secure way of ensuring currency fluctuations don’t come between him and his profits.

Want to follow Paul’s example? Fill out our contact form to find out how our experts can help you.

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