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Re: Does it make sense to continue with the same strategy with this JPY/USD rate?
Posted: Fri Oct 27, 2023 12:33 am
by alberto
TBS wrote: ↑Fri Oct 27, 2023 12:21 am
alberto wrote: ↑Thu Oct 26, 2023 11:51 pm
just don't know what will happen with currencies... it may be worth losing the cost of hedging...
The default position for anyone who does not know what will happen with currencies, which is in fact everyone - because noone can predict what FX rates will do over the short or long term - should not be a more expensive, complicated, and tax inefficient strategy of using hedged ETFs.
Yes, since we don't know what will happen with currencies, if you're OK accepting that their behavior may prevail over the actual movements of the stocks themselves, then don't hedge. If you want the stocks to dictate most of the return instead of the currency at the cost of hedging, then hedge.
Re: Does it make sense to continue with the same strategy with this JPY/USD rate?
Posted: Fri Oct 27, 2023 1:33 am
by Tsumitate Wrestler
alberto wrote: ↑Fri Oct 27, 2023 12:33 am
TBS wrote: ↑Fri Oct 27, 2023 12:21 am
alberto wrote: ↑Thu Oct 26, 2023 11:51 pm
just don't know what will happen with currencies... it may be worth losing the cost of hedging...
The default position for anyone who does not know what will happen with currencies, which is in fact everyone - because noone can predict what FX rates will do over the short or long term - should not be a more expensive, complicated, and tax inefficient strategy of using hedged ETFs.
Yes, since we don't know what will happen with currencies, if you're OK accepting that their behavior may prevail over the actual movements of the stocks themselves, then don't hedge. If you want the stocks to dictate most of the return instead of the currency at the cost of hedging, then hedge.
Your thesis is provably incorrect. "Hedged funds allow the underlying stocks to dictate returns", rather they open you up for losses by betting on a rising domestic currency.
This is just a 5-year span....look at that divergence.
Re: Does it make sense to continue with the same strategy with this JPY/USD rate?
Posted: Fri Oct 27, 2023 4:14 am
by alberto
They don't even have the same starting point, not so easy to compare, although I see the currency hedging is not very good in that case. In this chart below, of the ETF I'm buying with a longer history, it can be seen clearly that the return when the currency volatility is high is totally dictated by the exchange rate rather than the stocks you are supossed to be investing on. If I had to start investing on MSCI World, I would be very scared of the unhedged behavior. It can go very well, but it can go very bad, and the JPY/USD will determine that, rather than the index. I think we are repeating the same ideas again and again...
Re: Does it make sense to continue with the same strategy with this JPY/USD rate?
Posted: Fri Oct 27, 2023 4:20 am
by Deep Blue
You should not invest in equities if short term volatility is an issue. Equities are a long term investment. It’s pointless and counterproductive to worry about month to month or even year to year swings.
Re: Does it make sense to continue with the same strategy with this JPY/USD rate?
Posted: Fri Oct 27, 2023 4:28 am
by alberto
MSCI World is a very conservative and very diversified investment. A 50% deviation in less than 2 years from the original index dictated by a very specific component (JPY/USD) is not just some short-term volatility that you are forced to live with, especially when there's an easy way to avoid it. But I will not tell you what you should invest or not, the point is to understand what you're doing and accept the costs and the risks. I think many people who are investing in this very conservative investment are not aware of this huge currency effect.
Re: Does it make sense to continue with the same strategy with this JPY/USD rate?
Posted: Fri Oct 27, 2023 4:29 am
by Deep Blue
Equities are a high risk investment over any two year period. Less so over ten years plus.
Re: Does it make sense to continue with the same strategy with this JPY/USD rate?
Posted: Fri Oct 27, 2023 4:34 am
by alberto
MSCI World is a conservative investment. It is ultra diversified to avoid risk, but adding the potentially-huge effect of the currency because we live in a country with a lot of fluctuation simply goes against the philosophy of this type of investing. If you can tolerate high volatility, there are other strategies with bigger potential returns rather than just surfing a currency without any control.
Re: Does it make sense to continue with the same strategy with this JPY/USD rate?
Posted: Fri Oct 27, 2023 4:50 am
by Tsumitate Wrestler
alberto wrote: ↑Fri Oct 27, 2023 4:14 am
In this chart below, of the ETF I'm buying with a longer history,
It is 6 years old.
設定来＝2017年12月7日以降
Setting date: December 7, 2017
https://www.nomura-am.co.jp/fund/monthly1/M1142514.pdf
Re: Does it make sense to continue with the same strategy with this JPY/USD rate?
Posted: Fri Oct 27, 2023 4:59 am
by alberto
2017 is not older than 2020?
Re: Does it make sense to continue with the same strategy with this JPY/USD rate?
Posted: Fri Oct 27, 2023 5:16 am
by Tsumitate Wrestler
After looking through your posts I think I see the use you are comparing 2513, 2514 and URTH. They track different indexes.
MSCI world is not the same as MSCI Kokusai
Ishares MSCI World ETF - Ticker URTH Benchmark Index - MSCI World Index
__________________________________________________
Nextfund 2514 外国株式・ＭＳＣＩ－ＫＯＫＵＳＡＩ指数（為替ヘッジなし)
Nextfund 2513 外国株式・ＭＳＣＩ－ＫＯＫＵＳＡＩ指数（為替ヘッジあり)
MSCI-KOKUSAI指数（円ベース・為替ヘッジあり）（対象指数）に連動する投資成果を目指しま
す。
We aim to achieve investment results that are linked to the MSCI-KOKUSAI index (yen base, currency hedged/{or unhedged}) (target index).
—-----------------------------------------------------------
The NYSE ETF is ticker -> TOK
https://www.ishares.com/us/products/239 ... okusai-etf
That tracks the same index (Kokusai) on a USD basis.