Should I speculate in currency?

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Topic Author
deepvalleys
Posts: 22
Joined: Sat Dec 06, 2014 7:38 am
Location: Norway

Should I speculate in currency?

Post by deepvalleys »

As a boglehead, should I do currency speculation?

Currency speculation is more risky than stock trading, so I think the answer is "no". But is it possible to avoid?

Here is my situation: I am a norwegian with a portfolio of index funds (25% tech fund, 75% world fund). This question should be relevant for investors from other countries as well. During the drop in oil prices in 2014-2015 the norwegian krone fell sharply. At that time I learned the value of investing in international funds. Those who had their savings in international funds kept the purchasing power while the USD rose 30-40% to the krone.

The krone is still exceptionally weak, but all the analysts have said for a year that they expect it to strengthen. So now I have swiched most of my portfolio to currency hedged funds. Does that make sense or is it just currency speculation? The problem is that if I stay in unhedged funds, that seems like betting on the krone to not strengthen. So either way I am a currency speculator.
pascal
Posts: 124
Joined: Sun Jun 19, 2016 5:05 pm

Re: Should I speculate in currency?

Post by pascal »

No. :|
"Never underestimate the ability of a bad situation to get worse...rapidly." Ninegrams
FunnelCakeBob
Posts: 97
Joined: Fri Jul 20, 2018 5:44 pm

Re: Should I speculate in currency?

Post by FunnelCakeBob »

Knock yourself out kiddo if your risk tolerance can withstand losing this bet and admit that it's speculation.

On the other hand, consider greater diversification out of Norway and oil in general, since your currency and economy is deeply intertwined with the oi industry. 8-)
Norwegian
Posts: 10
Joined: Tue Aug 07, 2018 4:47 am

Re: Should I speculate in currency?

Post by Norwegian »

Fellow Norwegian here! How much more expensive are the hedged funds? I know that some of the KLP funds have an extra .03 ER for the hedged versions of their index funds.

I don’t think it’s worth it if you’re in it for the long run though.
Topic Author
deepvalleys
Posts: 22
Joined: Sat Dec 06, 2014 7:38 am
Location: Norway

Re: Should I speculate in currency?

Post by deepvalleys »

I guess the 2 first repliers only read the headline, a headline that was intended to grab the attention. Better topic title would be: currency hedged index fund?

The expense ration is 0.3 vs 0.2 percent.
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jimb_fromATL
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Location: Atlanta area & Piedmont Triad NC and Interstate 85 in between.

Re: Should I speculate in currency?

Post by jimb_fromATL »

deepvalleys wrote: Wed Aug 15, 2018 12:27 pm As a boglehead, should I do currency speculation?
no
Currency speculation is more risky than stock trading,
yes
so I think the answer is "no".
yes
But is it possible to avoid?
no
Here is my situation: I am a norwegian with a portfolio of index funds (25% tech fund, 75% world fund). This question should be relevant for investors from other countries as well. During the drop in oil prices in 2014-2015 the norwegian krone fell sharply. At that time I learned the value of investing in international funds. Those who had their savings in international funds kept the purchasing power while the USD rose 30-40% to the krone.

The krone is still exceptionally weak, but all the analysts have said for a year that they expect it to strengthen. So now I have swiched most of my portfolio to currency hedged funds. Does that make sense
not to me
or is it just currency speculation?
yes
The problem is that if I stay in unhedged funds, that seems like betting on the krone to not strengthen. So either way I am a currency speculator.
That's as good as any other excuse to rationalize doing whatever you plan to do anyway. 8-)

Good luck.



jimb
Norwegian
Posts: 10
Joined: Tue Aug 07, 2018 4:47 am

Re: Should I speculate in currency?

Post by Norwegian »

deepvalleys wrote: Wed Aug 15, 2018 2:11 pm The expense ration is 0.3 vs 0.2 percent.
That’s an extra 50 % cost. I wouldn’t do it.

How long do you plan on holding these funds?

Edit: would you mind sharing which funds you currently have? Not relevant for most members, but I’m interested.
Topic Author
deepvalleys
Posts: 22
Joined: Sat Dec 06, 2014 7:38 am
Location: Norway

Re: Should I speculate in currency?

Post by deepvalleys »

One year later: The answer is hedging the currency did not pay off. I am not a good currency speculator.
I now have about half in a currency hedged world fund, and the rest is not currency hedged. My plan is to eventually move everything to funds that are not currency hedged, since it would be safer to not have my savings tied to the NOK. I just have to figure out how and when to do that. The funds I hold are KLP AksjeGlobal Indeks IV A, KLP AksjeGlobal Indeks V , and Xtrackers MSCI World Information Technology.
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tre3sori
Posts: 189
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Re: Should I speculate in currency?

Post by tre3sori »

deepvalleys wrote: Wed Aug 14, 2019 12:26 pm One year later: The answer is hedging the currency did not pay off. I am not a good currency speculator.
I now have about half in a currency hedged world fund, and the rest is not currency hedged. My plan is to eventually move everything to funds that are not currency hedged, since it would be safer to not have my savings tied to the NOK. I just have to figure out how and when to do that. The funds I hold are KLP AksjeGlobal Indeks IV A, KLP AksjeGlobal Indeks V , and Xtrackers MSCI World Information Technology.
Maybe you just have to wait until tomorrow for it to pay off :mrgreen:
Let every man divide his money into three parts, and invest a third in land, a third in business, a third let him keep by him in reserve. Talmud | 35% Real Estate, 45% Stocks, 15% Bonds, 4% Gold, 1% Cash
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