Hoping to get some of the brains on this forum to give their thoughts on my situation. I am struggling to get my head round how best to mitigate currency risk, or if I should even be concerned about it.
I’m in my late 30s, originally from the UK and have been living in Switzerland for eight years. I’m settled here and have no plans to leave but equally could easily end up moving elsewhere in Europe in the next few years. I would say it’s at most a 50/50 chance that I will ever live in the UK again.
I recently sold a property I owned in the UK as it was becoming too difficult and expensive to maintain. I have the proceeds from the sale in GBP that I want to invest. I also have some savings in CHF, and some money already invested in funds, but having sold my property around 60% of my portfolio is now in GBP cash.
Having read a lot over the past few weeks, I’ve decided that I want to invest the majority in ETFs. I’ve set up an account on IB and have already converted some of my GBP into USD and bought into the VT fund, and also bought shares in the iShares Core FTSE 100 ETF (in GBP).
I am thinking that in order to minimize the risk of FX rate changes, my best approach is to a) convert the majority into USD and buy more VT shares b) leave some in GBP and invest that into UK ETFs or into a different world fund (eg. VWRL) and c) convert some into CHF and invest in a Swiss fund (eg. iShares Core SPI).
I’m not sure if that makes sense, or if I am overcomplicating it by thinking I need to invest in two world funds (one traded in USD and one in GBP) in order to spread the risk. I’m also struggling to figure out whether it’s a risk to convert the majority of the GBP into USD in order to invest more into the VT fund. I’ve read that the currency used to buy and sell the fund is less important than the underlying currencies in the fund. However there still seems to be a risk in having the majority invested in funds traded in USD dollar is very weak when I come to sell.
I’m also reluctant to convert GBP into CHF at the moment given how poor the exchange rate is, however I’ve read that I should invest in my ‘home currency’.
I think it is most likely that I will still be in Switzerland when I come to sell so would probably need convert back into CHF, however it could also be that I am living in the Eurozone or even in the UK.
Would love any thoughts on how best to manage the risk. I have read about currency hedged ETFs but I’m not sure if they make the most sense.