Given the inflation rate in the UK and the fact that the pound is falling against the dollar it seems like a good idea to convert my £40k premium bonds into a dollar bank account. How do I set about this?
Another Dave
Major banks like HSBC, Barclays and probably others offer currency accounts. However you won't get any interest, so they'll be nibbled away by inflation. Also, use a third party foreign exchange service to transfer into such an account (eg Wise, CurrencyFair) as the bank takes a nice bite of the exchange rate (typically about 3%). Some of the 'challenger' banks might also offer currency accounts - I don't know.
The other option is to buy US investments - eg treasury bonds - which pay interest. But they're your taking risk (that the US government will honour its commitments, and the market value of bonds depends on changes in interest rates). Shorter dated bonds (ie closer to redemption) have less market price fluctuation.
(either way, you're taking risk that one currency will move in a particular way against the other - maybe we're at the bottom and the pound will strengthen in future?)
Theo
You would do better to put it into a fund that specialises in either US or global stocks.
Pissing around with currencies is for experts only.
Right now my top performing fund is guinness global energy fund.
I am a risk taker, and move money around every 6 months, but I seem to average 10-30% annual growth.
If you never move money at all, the best you will see is 3%. If you - as you are considering now - move it every few years, you can expect to net around 7%
Opening an account with an online trading firm like Interactive Investor is very simple. Then transfer your savings in - they are protected by financial regulator - they still belong to you, - and make a selection of investments
With 40lk in the offing i'd personally split that over 4 different areas - say energy, tech, maybe an old steady earner like British American Tobacco, and an index linked fund.
To hedge against currency fluctuations, pick global funds, or US based funds.
If that's all a bit too complicated get a financial advisor to pick your investments for you. They wont make nearly as much, but they wont lose nearly as much either.
You are TOO LATE. Should have done that last November when the rate was $1.37 to the pound.
If you are trying to take advantage of higher deposit rates for the USD then you probably want to buy units in a fund that targets US bank rates and Treasuries (US version of gilts).
IF all you want to do is hold cash in dollars then be prepared for sudden movements in the wrong direction which will lose you money.
As above, if you had opened a dealing account with someone like Interactive Investor and paid your cash into your account with them then you could have switched your pounds into any currency and benefited from the significant increase in the value of the USD since last November, but it is too late now.
The same applies to investing in any fund or investment trust that targets US assets. When the USD finally loses some of its appeal (as it will) then your investments will have to give a better return just to keep still in Sterling terms, so think carefully before you make a decision.
In fact I'm idly thinking of turning some of my dollars into sterling.
(And idly thinking of finding a decent IFA. Right now I have enough. A few years of 20% inflation could change that :( )
Andy
Liz the minor has said she is going to load her energy subsidies onto the national debt, which might push the pound/dollar rate even lower.
Apparently USD 1.05/pound was the record low in 1985.
when we holidaysed in the SA in 2007, it was $2 to the £1
No, she said that she will cut income tax.
May still get that result.
I thought that the energy companies were planning to borrow the money themselves, on the commercial markets, to be paid back over 15 to 20 years and, in order for them to get a low interest rate, the government was going to guarantee the loans?
AIUI after WW2 it was USD5 = GBP1.
Andy
By the 60s it was just under $3 to £1
I was in the US for most of 1970 and the pound was 2.40 USD. Convenient, as 1 penny was 1 cent.
Until "darling Harold" devalued the pound from $2.80 to $2.40 in November 1967. He told us, "The pound in your pocket has not been devalued". Even at the tender age of 16, I recognised that as a lie.
HomeOwnersHub website is not affiliated with any of the manufacturers or service providers discussed here. All logos and trade names are the property of their respective owners.