Author Topic: is a poor home country economy better for international investing?  (Read 1380 times)

mohawkbrah

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is a poor home country economy better for international investing?
« on: September 07, 2016, 07:26:34 AM »
Say i live in lala-land the country of the crazy people. their currency is the Lala

If i invest all my lala pounds into the USA market. then suddenly my lala pound weakens to the US dollar. Will my investments shoot up in value because of the currency difference?. And does this mean assuming Lala land doesn't have massive inflation im now way better off for living in a poor GDP economy but having my money invested abroad.

Heckler

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Re: is a poor home country economy better for international investing?
« Reply #1 on: September 07, 2016, 07:58:32 AM »
May 2016 was the better time to ask this question.  You can't time exchange rates the same as you can't time the market.

http://www.xe.com/currencycharts/?from=GBP&to=USD&view=1Y

But, yes, when GBP goes down, your US investments will go up in value after you convert to GBP.  If you buy a S&P500 in USD fund, you wont see it in your account statement unless you do the conversion.  If you buy S&P fund in GBP, your value will fluctuate with exchange rates.

I see it all the time with my VUN, allcap US index sold in $CAD. 

Heckler

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Re: is a poor home country economy better for international investing?
« Reply #2 on: September 07, 2016, 08:01:29 AM »
Some light reading for you. Youd need to decide what of these articles apply to you.

http://canadiancouchpotato.com/category/foreign-currency/


daverobev

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Re: is a poor home country economy better for international investing?
« Reply #3 on: September 07, 2016, 04:31:33 PM »
Diversification and rebalancing is a major plus. Currency fluctuations are normal and helpful. Note that, when the pound fell, the FTSE 100 went up - because the 100 is quite global in composition.

Also, if you happen to look back to 2010, the pound was as weak or weaker. I came to Canada in 2010, and in the next couple of years it hit sub 1.5 CAD to the GBP. Now it's at 1.72, after topping out just over 2:1.

Yes, being on the "thank fuck my money isn't all in x" is nice; but, if you're American and internationally diversified, it's probably "hurting" a little now - in USD. When the GBP was high, my net worth - *in GBP* - was much lower than it is now. Doesn't help me now, living in Canada (still tracking mine in GBP not CAD... shouldn't have started in pounds but oh well. When I did it, my major asset was one house in the UK, so it made sense I guess).

In short: over time, it shouldn't matter if you rebalance every so often, assuming your economy "reverts to mean".