buying ETFs in sterling

ALBERT*

Registered User
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Because of the fact that most of the brokers here offer most of their etfs from the London SE and there are extra costs involved ( with the broker I use anyway) incurred through the likes of "Overseas brokers fees" and "Foreign transaction custody charge" when using exchanges other than Dublin or London it means I'm basically stuck buying etfs traded in stirling.

I'm ignorant whether this is to my advantage or not and what are the factors involved. I'd appreciate any advice on
1) should I incur the extra charges and diversify and buy some ETFS in Euro from foreign exchanges?
2) what is the general outlook on stirling v euro?
3) any links articles so that I can learn a little of how the currency issue related to holding investments?

Thx.
 
Re: buying ETFs in stirling

interesting outlook for sterling in 2009 before greece crisis, sentiment seems to be leaning towards sterling strengthening
telegraph.co.uk/finance/financetopics/recession/5495663/Sterling-whats-the-outlook-now.html

Graph showing currency performance against euro
transfermate.com/en/exchange_rates_table.asp?currency=EUR&curr_lim=GBP
 
Because of the fact that most of the brokers here offer most of their etfs from the London SE and there are extra costs involved ( with the broker I use anyway) incurred through the likes of "Overseas brokers fees" and "Foreign transaction custody charge" when using exchanges other than Dublin or London it means I'm basically stuck buying etfs traded in stirling.

I'm ignorant whether this is to my advantage or not and what are the factors involved. I'd appreciate any advice on
1) should I incur the extra charges and diversify and buy some ETFS in Euro from foreign exchanges?
2) what is the general outlook on stirling v euro?
3) any links articles so that I can learn a little of how the currency issue related to holding investments?

Thx.

If you are buying ETFs, the currency is of no concern as the price is adjusted according to the exchange rate. For instance, your ETF is in Euros and tracking S&P and S&P went up 10% but Euro vs Dollar went up 5% in this time. Then your ETF price in Euros goes up only 10%-5% (more precisely the ETF price is multiplied by 1.10/1.05). Suppose you now you bought the same ETF in Pounds instead and Pound vs Dollar wend down 5%. Then you ETF price is multiplied by 1.10 x 1.05, roughly 15%. So, even though it looks like a bigger gain, it is precisely the same.

What is of major concern, however, is the commission you pay for the currency exchange. I made a mistake of buying ETF in London and payed 1.75% commission when changing Euros in Pounds with TD Waterhouse. Later I found I could have bought better ETFs (Lyxor) instead in Paris exchange in Euros without any commission other than the flat 20 Euros. There is no other fees for any international market incl. US with that broker. So, unless ETFs similar to yours are not available in Euros, I would not see a reason to buy them in other currency.
 
I have bought an etf recently japan small cap euro changed to sterling denominated in dollars and then you have yen have i got 4 currency risks giong on here.
 
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