Should I speculate in currency?

[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]

No.

[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.

[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.

[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.

[jimb_fromATL]

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.

Good luck.



jimb

[Norwegian]

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.

[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.

[tre3sori]

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