You can thank Gordon Brown for that "slightly above normal inflation" over your lifetime. If you knew how bad it really has been then you'd know to ignore the Government figures you are using.
Recent comments
would love a video on where you see the pound going. It seems it’s going down and there’s no stopping the dive
Nice to know I'm on the right track - recently retired, and nearly all my expenses are in GBP - rebalanced to hold more UK shares (maybe a little late for the dollar sink, but helps me sleep better!), and moved some foreign stuff into hedged funds
great video. massively insightful. everyone needs to start focusing on buying things and paying for services where the companies are actually paying tax here in the UK
A word NOT from your sponsor: Atlantic Money are much cheaper than Wise in most cases.
Rofl Cathy Woods, hear her then do 100% opposite shes got no idea, she got lucky once been horrific since
i love these tax breakdown videos they're really eye opening, thank you
Be great to know how exchange rates are set. Never managed to work out who is pulling the strings and where that market place is. Are there "market makers" of some kind involved?
You want to try transacting on US stocks in an HL account, they charge you 1.5% FX fee, its utterly disgusting in this day and age, they always quote prices several hundred pips away from the current exchange rate too! 🤬
When you buy Turkish stocks or Argentinian stocks, local currency devaluation is mostly irrelevant. Assets in those countries, the discounted future cash flows or Turkish or Argentinian businesses, go up measured in local currency as do eggs or milk. Local currency devaluing may hurt some businesses, it may benefit some other businesses or be neutral. In the end, as long as there are no confiscations or strong capital controls, just local currency devaluing is not good, bar or anything for any long term investor. If you are trading Turkish stocks for 3 months, maybe, but stock prices are far more relevant than currency in that case.
Wow.. that example with the Turkish Lira also makes me think of Mohnish Pabrai.. so assuming his Turkish stock bets play out, he'll be battling FX a lot..
Damien doing clickbait, never thought I'd see the day 😢😅
When the Pound falls, your portfolio goes up!
There used to be an old Lee Mack joke about how Brits stuck two fingers up to swear and the Americans only stuck one up and how he thought it was something to do with the exchange rate. GBP has lost so much of its value to the dollar since then that the joke literally doesn't make sense anymore!
I read every book on making money and nothing come close as “Rise Beyond Riches” by Arlen Viorra . It’s one book everyone should read at least once.
In the long term the institution providing the hedge to the the fund has to make a profit. This extra cost builds in a long term underperformance.
This is a good video but missing a big important aspect. Hedging is much more common with global bonds than equities and it's where it's actually worth considering. Maybe you can do a separate video about that.
To compound wealth in a multipolar, financially repressed regime, a UK investor must pivot away from the “US Tech and Bonds” playbook of the 2010s. Oversold extreme Price to Earnings, credit and bond stress means the previous 17 years of easy wealth generation is coming to an end. Gold is an anchor Real Assets is the new compounders as the world scrambles for resources and the global monetary expansion sees that liquidity injection finding a new home.
5:20 right ok, so this whole video was to push a sponsor. Great, thanks bud 👍🏽
Great video! I found this a really difficult to research topic when I was a newer investor. This video makes it really easy to help make an informed decision!
As a retired global fund manager it used to really annoy me that most global/overseas fund fact sheets never mention whether the fund is or is not currency hedged. This is mad because currencies are far more volatile than stocks and bonds. Sterling us currently weak by historical standards so if it recovers over time that can be a drag on overseas investment returns measured in sterling. This is a big reason why I have only modest overseas exposure. Also, just by owning UK listed companies about half the returns (I forget the precise number for the FTSE) are generated by overseas activity anyway though ironically that fact often means many UK companies benfit from sterling falling as when they repatriate thier profits those profits can buy more sterling. I find that to save my head from exploding it’s best not to think about it too much 😂
Fantastic video, thank you. This should be compulsory viewing for every UK adult. I have already shared it with my friends.
Can you please do a video on Elon musks opinion that investing for retirement is a total waste of time now due to Ai?
You should make it more clear that the sponsor 'Wise' is not FSCS protected. Use it to transfer money but pull it out immediately, don't keep it in their current accounts!
You should mention also that hedging costs money. The currency hedged funds have higher cost.
13:11 I have a few of those crazy pengő denominations from my grandma. She told us that they had used to distinguish notes by colour on the local market. Nobody could comprehend those astronomical numbers. 😅
As a wise many people once said: You will never see a backtest you don't like. They always support whatever their report is trying to prove, ignoring all other time windows.
Hungarian multi-billionaire, here... too bad that those billions are in a pengő note.
So true about empty suitcases to the USA in the 1990s and 2000s. Now I take clothes to sell there. 😂
@DamienTalksMoney what was the international investment?
The parallel between hedging currency risk near retirement and shifting from stocks to bonds near retirement is a consistent framework. Both moves sacrifice long-term return potential in exchange for reduced short-term volatility. Neither is a mistake at the right time. Both are mistakes at the wrong time. How many years away from retirement are you and is your current strategy matched to that timeline?
im reading so many books on north korea at the moment - id love to take you up on that offer of a holiday to kim jong funland please bro hahahha
Thanks for a great video and explanation of currencies. In my opinion the US dollar should be stronger than it is currently but think it is maintained weak because it makes trading with the US a better deal. The UK having the GBP will pay off in the future once the government changes and that investors will feel more confident in the government. As for the Euro, Germany holds all the cards and it has left the smaller/poorer EU countries vulnerable to being able to trade with other countries due to the strength of the Euro, if they had their own currency their trading market would make them grow better. As you mentioned in the example with Greece. If you look at Poland and its growth and the strength of their currency has grown beyond expectations. Poland 15 years ago was 10 years behind Spain and 25 years behind the UK as a country, it has surpassed Spain and if it continues on this path will probably surpass the big European 4. As you mention a country needs to manage its currency in order to manage its own financial future. The US dollar will always be strong as it is the biggest internationally used currency in the world, China tried to beat it, but has failed so far.
Omg its so funny they only show the end of the nine month trend when the pound and the gilt market sold off and only then it was a problem. Litrally show the blow of top as if history only started when lizz truss woke up that morning. Sunak is definitely the bigfest charleton chancellor after odbourne. Both absolute liers that never met any of the fiscal commitments.
the weaker the dollar gets the weaker the value in my dollar investment account, and the dollar looks like it will continue to weaken
I generally like your videos, but this was one of the poorer ones (IMHO). YouTube comment not an ideal place for a full breakdown of why, but a couple of points: 1 - probably my biggest frustration. You have used some data to show that "basically the longer time period you choose the better unheged does". Your data doesn't show this at all. It shows "basically the longer time period you choose back from today, the worse sterling has done vs. the currencies that dominate a global index (mostly USD)". Sure - since the early 2000's GBP has worsened significantly vs USD (and EUR). You might even have a thesis that GBP will continue to weaken. But your data doesn't prove that at all. A really poor use of a chart (and your disclaimer wording doesn't undo the damage of using it as such). 2 - when undertaking hedging there are a few factors that impact the results. Obviously the spot rates (which the video is about), the charges (and underlying transaction costs) of hedged funds vs. unheged funds (which you mention briefly in the video). But totally not mentioned is also the interest differential between the two countries which can often be a far bigger factor than costs. Other factors missing too. 3 - more generally, you are coming at the whole topic more from a perspective of value. But if you genuinely have a view of the value of a forward currency contract, then the place to implement it is via currency trading, not hedged vs unhedged equity investments. (e.g. if you really think - like you seem to - that GPB naturally deprecites over time vs major currencies; then are you suggesting that a sell GBP, buy USD / EUR / JPY is a sensible long term investment strategy. Do you think this? Your video essentially implies that gou do). I think a far better approach to the whole issue is more from the perspective of "which of these approaches is the "true" passive approach? You're investing in all world for a particular reason - to get the market cap weigted index. Why? And does that why gel more with hedged or unhedged?
The other thing to watch out for if buying non-GBP funds is the platform FX conversion fees. You can easily loose a small % each way if you're not careful, which can soon add up. Also the income Vs accumulation versions
Dear Damien, this is an amazing video. Thank you!
That’s it, I’m going to Kim-Jong fun land 🤣
Real og remember when this video used to be called your biggest loss on stocks and it's not the fees.
This is why I only focus on UK stuff. FX can work for or against you
So what you're say ing is....now is the time to go on holiday to Turkey ?! 😁
Very happy to see my favourite finance youtuber partnering with Wise, well done mate! 🚀
at 12:38 he sounds like a mafia boss asking that question
You see Damo, being finance youtuber like yourself must be hard because after some time it’s difficult to be creative. After 100 or so videos saying “just buy the world and chill” you kinda get tired of it. I’ve seen a few YouTubers get stuck in it. But you always come up with something genuinely interesting and new. Props to that ❤
There is also a risk of a margin call inside hedged funds. When Russia invaded Ukraine there were several hedged index funds which lost all their value due to margin calls.
That was an absolutely seamless insert for a Wise ad.... Really impressed....
Just to further push the idea, the best possible service for a country to nationalise would be the payment systems i.e. Visa and Mastercard primarily. The percentage they receive from every transaction is essentially a form of taxation, or at least it could be positioned as such. If you consider the total potential income a government could gain, it makes things like wealth tax look like a nothing !!
One thing you mentioned towards the end always bugs me when I hear it. You said that someone nearing retirement may shift from shares to bonds to protect their retirement fund and that's common advice. However, most retirees remain alive for 15 to 20 years after retirement age so leaving a significant proportion in equities is itself a de-risking strategy.
One thing to mention is the cost of hedging, it’s not free — they use rolling forward contracts (bit like a swap) and it has an ongoing impact. The trading and management costs to roll the contracts are wrapped up into a higher TER/OCF. If, over decades, hedging between two major currencies and the ebbs and flows of carry costs effectively offset each other you are left with the extra trading and management fees eroding returns. The cost of carry is often a bigger % impact than the implementation cost though, and like EUR/USD cost of carry shows, it can stay in one direction for a long time. In most cases these implementation costs make negative carry worse and positive carry less good. I would consider equity and bond hedged securities differently though. The impacts are quite different, and can affect returns very differently.
Excellent overview, and not just for investment purposes. I’ve managed a number of pretty large projects where the funding/reporting currency was £ or US$, but buying significant equipment in another currency € or SFr, and installation in yet another location US$ or Mexico/Canada. Understanding currency movements over the project lifetime, which fortunately tends to be relatively short (1-3 years), and whether/when to move funds and/or hedge against currency movements was a challenge for the project finances. Really worthwhile understanding.
I think this ranks as one of the more informative finfluencer pieces I’ve watched - this is a complex issue and Damien nails it for clarity. So I’ll be avoiding currency hedged funds from here on. Thank you!
Kim Jong Fun-land holey sheet 😂😂😂😂🤣🤣💀
Can I ask why VWRL over VWRP? I'm in the process of transferring my cash ISA to a stocks and shares ISA and was planning to put it all in VWRP for the long term. I plan to invest my full yearly ISA allowance, in both ISA and LISA, each year as a lump sum.
I disagree with your conclusion that with longer horizon it's better not to hedge. I think the example you picked just shows how GBP has weakened since 2011. The result could be the opposite for a different currency or different time period. Think how that chart would look like if you lived in Switzerland and hedged in Francs.
So today’s financial advice is to invest in Disney dollars?
As much as I’ll always mostly be invested in global ETFs, videos like this remind me that I need to own some gold.
I follow the usd/GBP rate and look at the future predicted trend for the exchange rate. Last year I bought EQGB instead of EQQQ because the dollar rate was declining. Inside an ISA you can easily sell and switch with no tax worries.
If you believe that Sterling is going to decline significantly, you want your fund to be unhedged. That way you get a significant currency uplift in addition to any return from the actual investment.
Thank you Damien for explaining things so well that a Nurse like me went from not even knowing exactly what inflation was to finally decide to start investing. Your Chanel is like “investing for dummies”, giving confidence to people who were never taught about finance and economy. Really well done to you!!
It’s important to note that the stock market is a GREAT inflation hedge once you look over a year horizon (short term it suffers), remember companies up prices to reflect inflation changs. A beautiful example is actually Damien’s Turkish one, needing to go up 8x to keep up with inflation, and it did far better, the Bist 100 went from under 1000 to over 14,000 not including dividends.
Plenty of Mickey Mouse currencies at the moment
i find it interesting when investing in ADRs, in foreign companies, you're then exposed to drift in 3 separate currencies. £ to $ to whatever you're investing in... so you gotta be sure that your betting on a currency that's appreciating against both...
Cumulative growth charts are misleading here because the lines diverge based on historical anchoring, even if recent relative performance has shifted. A better visual would be a quarterly spread (delta) chart. Plotting the one portfolio against the other, with outperformance/underperformance as discrete bars (positive vs. negative). This would more clearly show the actual value shifts, magnitude, and duration of when the hedge actually added value. This could be plotted alongside a GBPUSD FX rate line chart for even better understanding.
Damian can we have some advice on children savings and investments please 🙏
You can kinda do this for free buy doing spread bets on futures as long as there is a futures market for the index you want to invest in
Damien would you still say VUSA ETF is OK?
Really should have talked about bond funds - different effects of hedging there.
When £1 bought $2.40. I remember watching a news report on either bbc1 or Itv in the '70s (there were only three channels then). Planes full of weekend shoppers to New York
Hi Damien. Thanks for the video. You always hint that you invest in several different global index funds? Can I ask why? They by and large all seem to have significant overlap in terms of companies.
I love this channel more because you mentioned the Rand a few times XD
But what about hedging emerging markets for long term? Would it not be performing better?
I’m not happy to talk about politics online but I find unbelievable that in uk often they blame labours for the overall decline after 15 years of tories + brexit ran by reform people🤷🏻♂️
Argentine here. Our pre-Milei inflation was a nightmare, and is still pretty high. That's why I'm invested in a well-diversified set of ETFs.
Irony of course with Greece being a brilliant right leaning financially literate government has come in, restructured and now has less debt and a glowing outlook better than most of the EU combined.
Concerns me that MPs have a 1.3%-3% investment into UK equities in their pension. They’re not betting on themselves or our currency.
Therte is avery sad reason why the unhedged outperforms over time and why the last couple of years is probably an anomaly. The Uk is is structural decline and has been for a very long time. Under any left wing or centre left government this will continue because theor ideology prevents them from understanding what is actuaklly happening. If a Reform of Tory Reform coalition was elected it might perhaps be worth looking at hedged funds. It would be something of a gamble because they could just as equally wreak total havoc and collapese the currency.
Damien are you still investing with FWRG? Love your videos
4:32 the UK 🇬🇧 economy has been mismanaged for decades now. Brexit was the final nail in the coffin ⚰️
Watching this video wondering, if only there was a form of money that wasn't controlled by any one central bank...
Time for me to switch my short-term portfolio to hedged ETFs. Thanks for the info Damo! I keep learning from your vids 🤯👏
Wait until Japan liquidates $1 trillion of US treasuries
@damian hmu to collab on ai agents to increase financial literacy
Check out Wise for a current account which is good for home and abroad https://bit.ly/48H2wVb To learn more about the 75% saving, please visit: http://wi.se/uk-comparison
Ainsdale mentioned! Great choice with MeCycle
It really does feel like for all the talk of "efficiencies of scale" by free market proponents, the only competitive advantage huge conglomerates have are found in their tax set-up
YES. This is the content we need. Go hard on this path 🙏
Just think if these corporations paid tax, the UK could afford to fill in potholes in the road surface, afford an effective police force, afford better schools, afford to have enough Doctors and Dentists, afford to have navy ships.
Reminder that consumer drones are available quite cheaply and to buy industrial chemicals with cash from multiple remote locations.
Damien, your work is increasingly brilliant. The way you explain things and the honesty behind it is worth its weight in gold. Please continue with the brilliant work.
Killing the city would be like another Brexit
Pillar two is also now enforced and designed to ensure tax is paid in the correct jurisdiction removing the benefits of profit shifting
The word 'awkward' is doing so much work here I'm giving it a raise.
The quality of these videos have shot up! You and the team are doing ana amazing job!
We don't have a tax issue, we have a government spending issue.
Great explanation Damo! At the heart of this problem are our corrupt government.
Really liking this new video style mate. I’ve been subscribed a for a few years now and haven’t watched your YouTube videos as much recently, instead listening to your podcast. The production quality has really gone up (not that it was poor before). Great video Damian.
Great video and content. The general public need to be more aware of this. The tax increases over the last few years could have been quite largely reduced (over simplification I know...)
Your videos are always informative and challenging. Always worth a watch. This is one of your best. 👏
Excellent and thought provoking content piece.
You can thank Gordon Brown for that "slightly above normal inflation" over your lifetime. If you knew how bad it really has been then you'd know to ignore the Government figures you are using.
would love a video on where you see the pound going. It seems it’s going down and there’s no stopping the dive
Nice to know I'm on the right track - recently retired, and nearly all my expenses are in GBP - rebalanced to hold more UK shares (maybe a little late for the dollar sink, but helps me sleep better!), and moved some foreign stuff into hedged funds
great video. massively insightful. everyone needs to start focusing on buying things and paying for services where the companies are actually paying tax here in the UK
A word NOT from your sponsor: Atlantic Money are much cheaper than Wise in most cases.
Rofl Cathy Woods, hear her then do 100% opposite shes got no idea, she got lucky once been horrific since
i love these tax breakdown videos they're really eye opening, thank you
Be great to know how exchange rates are set. Never managed to work out who is pulling the strings and where that market place is. Are there "market makers" of some kind involved?
You want to try transacting on US stocks in an HL account, they charge you 1.5% FX fee, its utterly disgusting in this day and age, they always quote prices several hundred pips away from the current exchange rate too! 🤬
When you buy Turkish stocks or Argentinian stocks, local currency devaluation is mostly irrelevant. Assets in those countries, the discounted future cash flows or Turkish or Argentinian businesses, go up measured in local currency as do eggs or milk. Local currency devaluing may hurt some businesses, it may benefit some other businesses or be neutral. In the end, as long as there are no confiscations or strong capital controls, just local currency devaluing is not good, bar or anything for any long term investor. If you are trading Turkish stocks for 3 months, maybe, but stock prices are far more relevant than currency in that case.
Wow.. that example with the Turkish Lira also makes me think of Mohnish Pabrai.. so assuming his Turkish stock bets play out, he'll be battling FX a lot..
Damien doing clickbait, never thought I'd see the day 😢😅
When the Pound falls, your portfolio goes up!
There used to be an old Lee Mack joke about how Brits stuck two fingers up to swear and the Americans only stuck one up and how he thought it was something to do with the exchange rate. GBP has lost so much of its value to the dollar since then that the joke literally doesn't make sense anymore!
I read every book on making money and nothing come close as “Rise Beyond Riches” by Arlen Viorra . It’s one book everyone should read at least once.
In the long term the institution providing the hedge to the the fund has to make a profit. This extra cost builds in a long term underperformance.
This is a good video but missing a big important aspect. Hedging is much more common with global bonds than equities and it's where it's actually worth considering. Maybe you can do a separate video about that.
To compound wealth in a multipolar, financially repressed regime, a UK investor must pivot away from the “US Tech and Bonds” playbook of the 2010s. Oversold extreme Price to Earnings, credit and bond stress means the previous 17 years of easy wealth generation is coming to an end. Gold is an anchor Real Assets is the new compounders as the world scrambles for resources and the global monetary expansion sees that liquidity injection finding a new home.
5:20 right ok, so this whole video was to push a sponsor. Great, thanks bud 👍🏽
Great video! I found this a really difficult to research topic when I was a newer investor. This video makes it really easy to help make an informed decision!
As a retired global fund manager it used to really annoy me that most global/overseas fund fact sheets never mention whether the fund is or is not currency hedged. This is mad because currencies are far more volatile than stocks and bonds. Sterling us currently weak by historical standards so if it recovers over time that can be a drag on overseas investment returns measured in sterling. This is a big reason why I have only modest overseas exposure. Also, just by owning UK listed companies about half the returns (I forget the precise number for the FTSE) are generated by overseas activity anyway though ironically that fact often means many UK companies benfit from sterling falling as when they repatriate thier profits those profits can buy more sterling. I find that to save my head from exploding it’s best not to think about it too much 😂
Fantastic video, thank you. This should be compulsory viewing for every UK adult. I have already shared it with my friends.
Can you please do a video on Elon musks opinion that investing for retirement is a total waste of time now due to Ai?
You should make it more clear that the sponsor 'Wise' is not FSCS protected. Use it to transfer money but pull it out immediately, don't keep it in their current accounts!
You should mention also that hedging costs money. The currency hedged funds have higher cost.
13:11 I have a few of those crazy pengő denominations from my grandma. She told us that they had used to distinguish notes by colour on the local market. Nobody could comprehend those astronomical numbers. 😅
As a wise many people once said: You will never see a backtest you don't like. They always support whatever their report is trying to prove, ignoring all other time windows.
Hungarian multi-billionaire, here... too bad that those billions are in a pengő note.
So true about empty suitcases to the USA in the 1990s and 2000s. Now I take clothes to sell there. 😂
@DamienTalksMoney what was the international investment?
The parallel between hedging currency risk near retirement and shifting from stocks to bonds near retirement is a consistent framework. Both moves sacrifice long-term return potential in exchange for reduced short-term volatility. Neither is a mistake at the right time. Both are mistakes at the wrong time. How many years away from retirement are you and is your current strategy matched to that timeline?
im reading so many books on north korea at the moment - id love to take you up on that offer of a holiday to kim jong funland please bro hahahha
Thanks for a great video and explanation of currencies. In my opinion the US dollar should be stronger than it is currently but think it is maintained weak because it makes trading with the US a better deal. The UK having the GBP will pay off in the future once the government changes and that investors will feel more confident in the government. As for the Euro, Germany holds all the cards and it has left the smaller/poorer EU countries vulnerable to being able to trade with other countries due to the strength of the Euro, if they had their own currency their trading market would make them grow better. As you mentioned in the example with Greece. If you look at Poland and its growth and the strength of their currency has grown beyond expectations. Poland 15 years ago was 10 years behind Spain and 25 years behind the UK as a country, it has surpassed Spain and if it continues on this path will probably surpass the big European 4. As you mention a country needs to manage its currency in order to manage its own financial future. The US dollar will always be strong as it is the biggest internationally used currency in the world, China tried to beat it, but has failed so far.
Omg its so funny they only show the end of the nine month trend when the pound and the gilt market sold off and only then it was a problem. Litrally show the blow of top as if history only started when lizz truss woke up that morning. Sunak is definitely the bigfest charleton chancellor after odbourne. Both absolute liers that never met any of the fiscal commitments.
the weaker the dollar gets the weaker the value in my dollar investment account, and the dollar looks like it will continue to weaken
I generally like your videos, but this was one of the poorer ones (IMHO). YouTube comment not an ideal place for a full breakdown of why, but a couple of points: 1 - probably my biggest frustration. You have used some data to show that "basically the longer time period you choose the better unheged does". Your data doesn't show this at all. It shows "basically the longer time period you choose back from today, the worse sterling has done vs. the currencies that dominate a global index (mostly USD)". Sure - since the early 2000's GBP has worsened significantly vs USD (and EUR). You might even have a thesis that GBP will continue to weaken. But your data doesn't prove that at all. A really poor use of a chart (and your disclaimer wording doesn't undo the damage of using it as such). 2 - when undertaking hedging there are a few factors that impact the results. Obviously the spot rates (which the video is about), the charges (and underlying transaction costs) of hedged funds vs. unheged funds (which you mention briefly in the video). But totally not mentioned is also the interest differential between the two countries which can often be a far bigger factor than costs. Other factors missing too. 3 - more generally, you are coming at the whole topic more from a perspective of value. But if you genuinely have a view of the value of a forward currency contract, then the place to implement it is via currency trading, not hedged vs unhedged equity investments. (e.g. if you really think - like you seem to - that GPB naturally deprecites over time vs major currencies; then are you suggesting that a sell GBP, buy USD / EUR / JPY is a sensible long term investment strategy. Do you think this? Your video essentially implies that gou do). I think a far better approach to the whole issue is more from the perspective of "which of these approaches is the "true" passive approach? You're investing in all world for a particular reason - to get the market cap weigted index. Why? And does that why gel more with hedged or unhedged?
The other thing to watch out for if buying non-GBP funds is the platform FX conversion fees. You can easily loose a small % each way if you're not careful, which can soon add up. Also the income Vs accumulation versions
Dear Damien, this is an amazing video. Thank you!
That’s it, I’m going to Kim-Jong fun land 🤣
Real og remember when this video used to be called your biggest loss on stocks and it's not the fees.
This is why I only focus on UK stuff. FX can work for or against you
So what you're say ing is....now is the time to go on holiday to Turkey ?! 😁
Very happy to see my favourite finance youtuber partnering with Wise, well done mate! 🚀
at 12:38 he sounds like a mafia boss asking that question
You see Damo, being finance youtuber like yourself must be hard because after some time it’s difficult to be creative. After 100 or so videos saying “just buy the world and chill” you kinda get tired of it. I’ve seen a few YouTubers get stuck in it. But you always come up with something genuinely interesting and new. Props to that ❤
There is also a risk of a margin call inside hedged funds. When Russia invaded Ukraine there were several hedged index funds which lost all their value due to margin calls.
That was an absolutely seamless insert for a Wise ad.... Really impressed....
Just to further push the idea, the best possible service for a country to nationalise would be the payment systems i.e. Visa and Mastercard primarily. The percentage they receive from every transaction is essentially a form of taxation, or at least it could be positioned as such. If you consider the total potential income a government could gain, it makes things like wealth tax look like a nothing !!
One thing you mentioned towards the end always bugs me when I hear it. You said that someone nearing retirement may shift from shares to bonds to protect their retirement fund and that's common advice. However, most retirees remain alive for 15 to 20 years after retirement age so leaving a significant proportion in equities is itself a de-risking strategy.
One thing to mention is the cost of hedging, it’s not free — they use rolling forward contracts (bit like a swap) and it has an ongoing impact. The trading and management costs to roll the contracts are wrapped up into a higher TER/OCF. If, over decades, hedging between two major currencies and the ebbs and flows of carry costs effectively offset each other you are left with the extra trading and management fees eroding returns. The cost of carry is often a bigger % impact than the implementation cost though, and like EUR/USD cost of carry shows, it can stay in one direction for a long time. In most cases these implementation costs make negative carry worse and positive carry less good. I would consider equity and bond hedged securities differently though. The impacts are quite different, and can affect returns very differently.
Excellent overview, and not just for investment purposes. I’ve managed a number of pretty large projects where the funding/reporting currency was £ or US$, but buying significant equipment in another currency € or SFr, and installation in yet another location US$ or Mexico/Canada. Understanding currency movements over the project lifetime, which fortunately tends to be relatively short (1-3 years), and whether/when to move funds and/or hedge against currency movements was a challenge for the project finances. Really worthwhile understanding.
I think this ranks as one of the more informative finfluencer pieces I’ve watched - this is a complex issue and Damien nails it for clarity. So I’ll be avoiding currency hedged funds from here on. Thank you!
Kim Jong Fun-land holey sheet 😂😂😂😂🤣🤣💀
Can I ask why VWRL over VWRP? I'm in the process of transferring my cash ISA to a stocks and shares ISA and was planning to put it all in VWRP for the long term. I plan to invest my full yearly ISA allowance, in both ISA and LISA, each year as a lump sum.
I disagree with your conclusion that with longer horizon it's better not to hedge. I think the example you picked just shows how GBP has weakened since 2011. The result could be the opposite for a different currency or different time period. Think how that chart would look like if you lived in Switzerland and hedged in Francs.
So today’s financial advice is to invest in Disney dollars?
As much as I’ll always mostly be invested in global ETFs, videos like this remind me that I need to own some gold.
I follow the usd/GBP rate and look at the future predicted trend for the exchange rate. Last year I bought EQGB instead of EQQQ because the dollar rate was declining. Inside an ISA you can easily sell and switch with no tax worries.
If you believe that Sterling is going to decline significantly, you want your fund to be unhedged. That way you get a significant currency uplift in addition to any return from the actual investment.
Thank you Damien for explaining things so well that a Nurse like me went from not even knowing exactly what inflation was to finally decide to start investing. Your Chanel is like “investing for dummies”, giving confidence to people who were never taught about finance and economy. Really well done to you!!
It’s important to note that the stock market is a GREAT inflation hedge once you look over a year horizon (short term it suffers), remember companies up prices to reflect inflation changs. A beautiful example is actually Damien’s Turkish one, needing to go up 8x to keep up with inflation, and it did far better, the Bist 100 went from under 1000 to over 14,000 not including dividends.
Plenty of Mickey Mouse currencies at the moment
i find it interesting when investing in ADRs, in foreign companies, you're then exposed to drift in 3 separate currencies. £ to $ to whatever you're investing in... so you gotta be sure that your betting on a currency that's appreciating against both...
Cumulative growth charts are misleading here because the lines diverge based on historical anchoring, even if recent relative performance has shifted. A better visual would be a quarterly spread (delta) chart. Plotting the one portfolio against the other, with outperformance/underperformance as discrete bars (positive vs. negative). This would more clearly show the actual value shifts, magnitude, and duration of when the hedge actually added value. This could be plotted alongside a GBPUSD FX rate line chart for even better understanding.
Damian can we have some advice on children savings and investments please 🙏
You can kinda do this for free buy doing spread bets on futures as long as there is a futures market for the index you want to invest in
Damien would you still say VUSA ETF is OK?
Really should have talked about bond funds - different effects of hedging there.
When £1 bought $2.40. I remember watching a news report on either bbc1 or Itv in the '70s (there were only three channels then). Planes full of weekend shoppers to New York
Hi Damien. Thanks for the video. You always hint that you invest in several different global index funds? Can I ask why? They by and large all seem to have significant overlap in terms of companies.
I love this channel more because you mentioned the Rand a few times XD
But what about hedging emerging markets for long term? Would it not be performing better?
I’m not happy to talk about politics online but I find unbelievable that in uk often they blame labours for the overall decline after 15 years of tories + brexit ran by reform people🤷🏻♂️
Argentine here. Our pre-Milei inflation was a nightmare, and is still pretty high. That's why I'm invested in a well-diversified set of ETFs.
Irony of course with Greece being a brilliant right leaning financially literate government has come in, restructured and now has less debt and a glowing outlook better than most of the EU combined.
Concerns me that MPs have a 1.3%-3% investment into UK equities in their pension. They’re not betting on themselves or our currency.
Therte is avery sad reason why the unhedged outperforms over time and why the last couple of years is probably an anomaly. The Uk is is structural decline and has been for a very long time. Under any left wing or centre left government this will continue because theor ideology prevents them from understanding what is actuaklly happening. If a Reform of Tory Reform coalition was elected it might perhaps be worth looking at hedged funds. It would be something of a gamble because they could just as equally wreak total havoc and collapese the currency.
Damien are you still investing with FWRG? Love your videos
4:32 the UK 🇬🇧 economy has been mismanaged for decades now. Brexit was the final nail in the coffin ⚰️
Watching this video wondering, if only there was a form of money that wasn't controlled by any one central bank...
Time for me to switch my short-term portfolio to hedged ETFs. Thanks for the info Damo! I keep learning from your vids 🤯👏
Wait until Japan liquidates $1 trillion of US treasuries
@damian hmu to collab on ai agents to increase financial literacy
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Ainsdale mentioned! Great choice with MeCycle
It really does feel like for all the talk of "efficiencies of scale" by free market proponents, the only competitive advantage huge conglomerates have are found in their tax set-up
YES. This is the content we need. Go hard on this path 🙏
Just think if these corporations paid tax, the UK could afford to fill in potholes in the road surface, afford an effective police force, afford better schools, afford to have enough Doctors and Dentists, afford to have navy ships.
Reminder that consumer drones are available quite cheaply and to buy industrial chemicals with cash from multiple remote locations.
Damien, your work is increasingly brilliant. The way you explain things and the honesty behind it is worth its weight in gold. Please continue with the brilliant work.
Killing the city would be like another Brexit
Pillar two is also now enforced and designed to ensure tax is paid in the correct jurisdiction removing the benefits of profit shifting
The word 'awkward' is doing so much work here I'm giving it a raise.
The quality of these videos have shot up! You and the team are doing ana amazing job!
We don't have a tax issue, we have a government spending issue.
Great explanation Damo! At the heart of this problem are our corrupt government.
Really liking this new video style mate. I’ve been subscribed a for a few years now and haven’t watched your YouTube videos as much recently, instead listening to your podcast. The production quality has really gone up (not that it was poor before). Great video Damian.
Great video and content. The general public need to be more aware of this. The tax increases over the last few years could have been quite largely reduced (over simplification I know...)
Your videos are always informative and challenging. Always worth a watch. This is one of your best. 👏
Excellent and thought provoking content piece.