Does it make sense to continue with the same strategy with this JPY/USD rate?

[alberto]

Two years is far too short a time frame to be investing in equities for, and hence no sensible conclusions can be drawn from looking at a two year period.

That's not the point. The point is to be aware of how different the behavior of your unhedged fund can be compared to the original index depending on your home currency behavior. A difference potentially way way bigger than the difference tracking the original index with hedging.

[TBS]

I have posted this many times already, have you even seen thi? What do you have to say about THIS?

Untitled (1).jpg

There is no inconsistency. Just because over that time window the hedged version did follow the base index closely, it doesn't mean it is guaranteed to for other (e.g. future) time windows. So when you insist that whatever happens with JPY/USD the hedged version will approximate the base index, you are simply wrong. The MSCI graphs comparing other hedged and local currency indexes prove that.

And as I pointed out previously, the graph you are posting makes an incorrect comparison anyway. The grey line should be showing the MSCI Kokusai denominated in the underlying equities local currencies, not USD, for a proper comparison.

Anyhow, it clear you are a troll - the most convincing and elaborate one we've had on the forum in recent years. You have had me and others suckered over the past few days. So well played - you got us

[Deep Blue]

Like I said before, two years is an irrelevant time frame for equity investment. Nobody should be buying equities on a two year view. Estimates differ but I advise my family if there is any chance they need their money back in less than a decade then equities may not be the best vehicle.

short term fluctuations in index levels and currencies are completely irrelevant for long term investors. That’s why it makes no sense whatsoever to pay to avoid it.

You can also limit your downside on equities by paying the fund manager to purchase index put options. However, just like currency hedging this costs money and eats into your long term returns. So long term investors don’t do it.

Why are you afraid of short term currency risk but not short term equity risk?

[alberto]

Why are you afraid of short term currency risk but not short term equity risk?

Here is the key. The answer: Because the long-term behavior of diversified equities is bullish, so even if the purchase timing is bad, that investment will recover just by waiting, but the long-term behavior of currency is absolutely unknown, and if the timing is bad, it may result in a permanent loss of capital.

[alberto]

There is no inconsistency. Just because over that time window the hedged version did follow the base index closely, it doesn't mean it is guaranteed to for other (e.g. future) time windows. So when you insist that whatever happens with JPY/USD the hedged version will approximate the base index, you are simply wrong. The MSCI graphs comparing other hedged and local currency indexes prove that.

And as I pointed out previously, the graph you are posting makes an incorrect comparison anyway. The grey line should be showing the MSCI Kokusai denominated in the underlying equities local currencies, not USD, for a proper comparison.

Anyhow, it clear you are a troll - the most convincing and elaborate one we've had on the forum in recent years. You have had me and others suckered over the past few days. So well played - you got us

When you picked the charts you shared, I think you missed this one...

[Deep Blue]

Why are you afraid of short term currency risk but not short term equity risk?

Here is the key. The answer: Because the long-term behavior of diversified equities is bullish, so even in the purchase timing is bad, that investment will recover just by waiting, but the long-term behavior of currency is absolutely unknown, and if the timing is bad, it results in a permanent loss of capital.

This is just patent nonsense. Currency hedging isn’t free and it will absolutely crush your returns if you pay for it over the long term. Did you read the links others helpfully provided on how the products work?

[Tsumitate Wrestler]

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[alberto]

Why are you afraid of short term currency risk but not short term equity risk?

Here is the key. The answer: Because the long-term behavior of diversified equities is bullish, so even if the purchase timing is bad, that investment will recover just by waiting, but the long-term behavior of currency is absolutely unknown, and if the timing is bad, it may result in a permanent loss of capital.

This is just patent nonsense. Currency hedging isn’t free and it will absolutely crush your returns if you pay for it over the long term. Did you read the links others helpfully provided on how the products work?

What you said is "nonsense" is pure common sense. Where exactly is the "nonsense" in my answer?

By the way, I never said to hedge currency over the long term.

[zeroshiki]

The nonsense is in thinking the currency hedge is free. How do you think this hedging works and why do you think you're getting equal performance to an index even after hedging?

[alberto]

The nonsense is in thinking the currency hedge is free. How do you think this hedging works and why do you think you're getting equal performance to an index even after hedging?

No, the "nonsense" did not refer to that, but to this:
QUESTION: "Why are you afraid of short term currency risk but not short term equity risk?"
ANSWER: "Because the long-term behavior of diversified equities is bullish, so even if the purchase timing is bad, that investment will recover just by waiting, but the long-term behavior of currency is absolutely unknown, and if the timing is bad, it may result in a permanent loss of capital."

About your "nonsense", I wouldn't say it's nonsense because I prefer not to offend other people in a discussion, but I agree it's not correct to think currency hedge is free. I never said such thing.