Investing in Dollar ETF

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SLD121
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Joined: Wed May 20, 2015 1:06 pm

Investing in Dollar ETF

Post by SLD121 » Wed May 27, 2015 4:16 pm

Hi everyone,

I have been on this forum for a long time but this is my first time posting. I am thinking about putting some money in a dollar ETF (Most likely WisdomTree Dollar Bullish Fund) because I think the dollar will keep on rising and the WisdomTree ETF is commission free for me.

What do the Bogleheads community think about investing in a dollar ETF?

Thank you for your input! :D

am
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Joined: Sun Sep 30, 2007 9:55 am

Re: Investing in Dollar ETF

Post by am » Wed May 27, 2015 5:36 pm

Here at bogleheads we set an allocation based on our risk profile and goals and then rebalance to maintain it. Typically this is some percentage of stocks and bonds. We do not invest because we think something will keep going up. We typically do not invest in dollar etfs because this is speculative and we get exposure through other broad based index funds.

lack_ey
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Re: Investing in Dollar ETF

Post by lack_ey » Wed May 27, 2015 5:54 pm

I won't say "never" but if you've been here a while, you should probably expect some resistance to tactical allocations, especially of this kind.

Here are some questions you should at least answer to yourself, if not here:
1. What does this fund invest in, exaclty? Do you know the costs and its operating principles?
2. How does the fund earn or lose money, and by how much, conditioned on what?
3. The fund has lost money since March. How do you know you're not late on the bandwagon?
4. If you buy in, how much would it be? What is the signal that would tell you to sell? For example, what happens if you never make money in the fund? When do you bail out? What happens if you earn 10%? Keep going for 20%? Sell?
5. Over the long run, this fund should lose money (slightly). Presumably, your other investments generally make money over the long run. Do you have an asset allocation you like? If so, you are taking money out of good assets to allocate to this more speculative venture. Are the potential gains worth sacrificing the positions in investments elsewhere?

Karamatsu
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Re: Investing in Dollar ETF

Post by Karamatsu » Wed May 27, 2015 5:58 pm

We do not invest because we think something will keep going up.
Well, that's probably putting it a bit too strongly even though I agree that there is no way of knowing. But there's still plenty of "stocks for the long run" sentiment around, otherwise I doubt that any sane person (except those doing it for reasons of control or participation) would invest in equities at all!

But on the OP question of currency, unless you have a particular reason, like an expatriate who needs to hedge exchange rates, it seems like a better way would just be to purchase safe, liquid dollar-based assets like treasury notes. Then if the dollar goes up, you're good. If it goes down, well, you lose nothing in dollar terms, and even have a slight gain. With the ETF there's just no way to know what will happen, and the ER is a drag on returns even if the dollar remains stable, but with a T-Note you know exactly what it will return, and when, with no ER at all. So, lacking a specific reason, I'd avoid the ETF.

But of course, that's just me!

pkcrafter
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Re: Investing in Dollar ETF

Post by pkcrafter » Wed May 27, 2015 6:09 pm

Are you referring to USDU, the currently hot EFF that uses shorts? Are you falling for recency bias? The herd is already in, time to get out.

http://www.etf.com/sections/blog/23822- ... nopaging=1


Paul
When times are good, investors tend to forget about risk and focus on opportunity. When times are bad, investors tend to forget about opportunity and focus on risk.

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nisiprius
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Re: Investing in Dollar ETF

Post by nisiprius » Wed May 27, 2015 7:07 pm

SLD121 wrote:...I am thinking about putting some money in a dollar ETF (Most likely WisdomTree Dollar Bullish Fund) because I think the dollar will keep on rising...
I have no idea what the dollar will do, other than that it will fluctuate.

I am surprised to hear you saying this, because in the forum back around the end of the 2000-2009 decade, a "lost decade" for U.S. stocks but mildly positive for international stocks, I commented that this was mostly due to currency fluctuations and the dollar weakening, and that there was no assurance this would continue. Many people felt that it was ludicrous to think the dollar could possibly strengthen.

So now the buzz is that the dollar is all but certain to keep strenghening?

Why, exactly, do you think that?
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.

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Archie Sinclair
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Re: Investing in Dollar ETF

Post by Archie Sinclair » Wed May 27, 2015 7:26 pm

SLD121 wrote:Hi everyone,

I have been on this forum for a long time but this is my first time posting. I am thinking about putting some money in a dollar ETF (Most likely WisdomTree Dollar Bullish Fund) because I think the dollar will keep on rising and the WisdomTree ETF is commission free for me.

What do the Bogleheads community think about investing in a dollar ETF?

Thank you for your input! :D
I feel like you've entered a meeting of teetotalers and asked us for our recommendations about what tequila to buy. :)

Or perhaps more accurately, you've entered a meeting of non-gamblers and asked us whether it makes sense to bet on red.

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