Timing the market

[RetireJapan]

But the UK is leaving the EU on 31 October, “do or die.”
This is profoundly important for anyone who has a financial connection with the UK or who is betting with or against the Pound.

Likely already priced into the market, or will be faster than we retail investors can react. I've decided to just ignore it (financially).

[Beaglehound]

After yesterday the odds on no deal actually happening have gone out from around 6-4 to 5-2. The bookies have never made no deal favourite and it’s a fair (ahem) bet that the markets are thinking similarly. So while uncertainty is priced in for sure, in the event of no deal actually happening there is further scope for the pound to fall, along with stocks with high UK exposure, though the FTSE 100 is so global that the impact on that will likely be limited, as it has been so far. The all share would likely suffer more.

I would only be worried from a personal financial point of view as a Japan resident if I needed to exchange a large sum of sterling for yen soon, and to a lesser extent if I relied on UK investments/pension for my income.

[ricardo]

I have money in GBP and I live in Japan.

The UK is leaving the EU next month.

[Beaglehound]

Yeah me too, and also 25 years of NI contributions. On the basis that I won’t need to send any of the cash to Japan anytime soon and am 17 years (under current rules) from collecting any pension, I am hoping that things will eventually settle down, whatever happens with Brexit. Fully appreciate that everyone’s circumstances are different though.

[ricardo]

Are you referring to the minimal UK state pension? Remember it’s frozen for Japan residents anyway so will reduce to an even smaller sum over the years because of inflation.

I refer to a big, index-linked company pension where the exchange rate makes a big difference.

The UK is leaving the EU on 31 October. I’m not sure how many people really understand this.

[Beaglehound]

Yes, am referring to the state pension. As I say, everyone’s circumstances are different, you have every right to be worried.

[RetireJapan]

The UK is leaving the EU on 31 October. I’m not sure how many people really understand this.

I'm going to wait until November 1st to call that one, personally

[adamu]

The UK is leaving the EU next month.

I was going to reply to this, but decided to leave it to avoid derailing the thread.

The UK is leaving the EU on 31 October. I’m not sure how many people really understand this.

But then you said it again, so I can't resist.

Both of these are predictions. Nothing in the future is guaranteed. I made a Facebook post back in 2016 pointing out that all of the news was quoting "two years" and that I didn't think it'd be done in time. I got shouted down at the time, but I was right. I'm not making a prediction this time, but I do know not to treat unknowns as knowns.

This thread is supposed to be about timing the market - I suppose the takeaway point would be to make sure you've managed exchange rate risk appropriately, especially if large portions of your investments are in a different currency to the one you use for daily life.

[eyeswideshut]

For tax reasons, I tend to buy Irish domiciled ETFs traded on the LSE. Some of them are denominated in GBP, some in USD. When I was checking my trading account the other day I was marveling at how well some of my funds were doing and congratulating myself on some savvy fund selections. Then I started converting the currencies back to JPY and my good cheer evaporated as I realized that the only reason they were up in value is because the pound had depreciated so significantly.

Anyway, what is the moral of the story? The key takeaway is that currency fluctuations do not impact the value of a globally diversified ETF. The value of the funds went up to compensate for the decline in the currency they were denominated in. So a globally diverse investor need not worry too much about currency fluctuations - it all balances out in the end.

The second takeaway is that investors should be very careful about single country or home country bias. Someone who is heavily invested in UK Financials or Gilts is probably having a really miserable year. I have a heavy home-country bias to Canada (about 40% of my net-worth). This is because I thought I would likely retire back in Canada. But this is stupid. Canada is not immune to disasters or political idiocy and there is a more than insignificant chance that something terrible could happen over the next 40 years to devalue the CAD or tank the economy. So I am re-thinking my asset allocation to reduce my exposure to the Canadian dollar. On a related note, I have friends who only invest in the U.S. To be sure a winning strategy over the last 20-30 years but can they be certain this will be the case over the next 40 years?

So I say thanks to the English for taking it on the shins and showing the rest of the world the folly of heavy home-country bias and the benefit of global diversification!

[OwenM]

As an Irish man myself I'm wondering how do you access those Irish domiciled ETFs from Japan? (I'm currently n SBI & Rakuten)