Author Topic: currency risk  (Read 1195 times)

Kilbim

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currency risk
« on: June 19, 2016, 10:41:11 AM »
Hi, it's me again :D

As this is my first investment, but a strategy I want to follow in the long run, I am trying to do it right and choose the best option.
(it also seems there isn't a good option [like in the USA where you just drop everything in vanguard], you just have to choose between the least bad)
I know I won't be investing large sums, it's likely to be 1.5k each year (apart at the beginning where it is around 8-9k). I also want to keep investing what I can overtime, and I also want to apply dollar-cost-averaging (if possible).
As it is now, I have researched around and I found that I have 2 major options for investing, truewealth.ch and swissquote.

Swissquote: in order to invest in the portfolio of ETF I want, I would need to pay around 20 CHF for each transaction. Then also 0.025% quarterly of fees, in addition to the cost of the ETFs themselves (but these are very low). This mean that I would need to invest at least 4k to make the 20CHF for each transaction worth it. But I have a lot more options for ETFs, including hedged ones.

truewealth: for a little bit more of TER (it's 0.5% p.a.) with truewealth I can invest even small sums, applying DCA. I don't pay any fee for investing, only the 0.5% p.a. So I can invest 100-200 each month, every month, which is great DCA. But, with truewealth I have a smaller choice of ETFs, but the biggest problem is that to have domestic stocks (us) and international stocks, I would need to invest in USD, they do not offer CHF-hedged versions of the investment.

So my options are:
- invest without using DCA, only 1 time every 3-4 year, but have currency-hedged ETFs.
- invest by applying DCA (which I know is crucial for me, it helps me confront market crashes without pulling everything out), but incur in currency risk.
My investment horizon (planned) is ~15 years.

What is the best options, or even better, are there any other options, given what I said above (investing 100-200 each month)?

Thanks a lot again :)
Cheers
« Last Edit: June 19, 2016, 10:44:04 AM by Kilbim »

hodor

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Re: currency risk
« Reply #1 on: June 19, 2016, 05:07:40 PM »
0.5% of 10,000 is 50 a year
the quarterly fees is 0.1% a year or 10 a year - gives two trades a year at 20

Hence I would be inclined to go with the Swiss quote option an invest once or twice a year as it is the same cost now, cheaper going forwards. You also have the full range of ETFs you are interested in.

(I have left out the currency as it is not always clear if you are speaking about USD or CHF)

I am Australian and don't bother with hedging for currency. There could be many arguments for and against, it does add cost however which long term will reduce performance guaranteed; you don't know what Macroeconomic factors will cause currency fluctuations - no one does.

Heckler

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Re: currency risk
« Reply #2 on: June 19, 2016, 11:26:03 PM »
http://canadiancouchpotato.com/?s=Hedge&submit=Search

Here is the trusted Canadian opinion on hedging.  Start with "to hedge or not to hedge" and go as deep as you like into a great resource.  Full disclosure: no hedging for me and I buy in CAD.  I see more fluctuations in my international holdings due to forex than due to the stock market.

« Last Edit: June 19, 2016, 11:28:27 PM by Heckler »