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I noticed this as well. I haven’t found a good cure for this other than diversifying globally.

by baxtr 10mo ago

hahahahhaah 10mo ago
Everyone wants to park some money and have other people work hard to increase the real value of said parked money. Not everyone can win big. Storing value is actually pretty amazing thing and that it can be profitable is magic. Of course the environment and poorest pays some of the free lunch.
- agobineau 10mo ago
  it really depends on whether or not there is a global capital shortage. this is very easy to do when the economy requires much more capital than is available. and in the inverse, it is self explanatory
- Mountain_Skies 10mo ago
  An investor friend once told me that the US needs to always be in debt because treasuries give investors a risk-free place to park their money between investments. The sense of entitlement was astounding.
  - lametti 10mo ago
    I don't think this is necessarily entitlement. There are heteredox but popular economic theories (such as MMT) that view public debt issuance at least in part as a method to satisfy the demand for private savings.
  - positr0n 10mo ago
    That sounds like just describing the way the current global system works, not entitlement. Transitioning to another system would work (and seems inevitable at some point in the next hundred years??) but oof it would be chaotic.
dottjt 10mo ago
I could be misunderstanding this, but you know that you can buy ETFs that are currency hedged? Taking Vanguard for example, VGS is global equities, but VGAD is global equities that are AUD-hedged (my home country). The only downside is that you pay more in fees (and they're less tax efficient). People generally don't bother with it though, because on a long enough time-line currencies usually revert to their long-term average, so if you're holding for retirement there's generally little point.
- rsynnott 10mo ago
  > The only downside is that you pay more in fees This is a _huge_ downside for index funds, though. Even quite a small fee difference has a huge compounding impact over time; people often miss just how much. AIUI, assuming you're investing in a global equity fund, currency hedging is almost never worth it. It _may_ be worth it in some cases if you're investing in a foreign index (eg S&P for Europeans), but even then not usually.
  - dottjt 10mo ago
    It depends if you forsee potentially having to sell before retirement. Or if it may just happen out of your own circumstances. Hedging is all about diversification at the end of the day. So it makes sense to hedge if you're coming close to retirement age.
- aswegs8 10mo ago
  TIL: currency moves have zero expected return
  - dottjt 10mo ago
    You also can't predict when you might need to sell you stake, so that's ultimately the value of hedging. If you're forced to sell in 5-10 years, then hedging would be valuable.
- AnimalMuppet 10mo ago
  Let's say I'm close to retirement. And let's say I'm in US dollars, and the dollar isn't doing well right now, and might continue to not do well for a long enough time frame to matter to me. On the other hand, my expenses will also be in US dollars. To what degree should I hedge against the dollar?
dgb23 10mo ago
Many global indexes are also traded in USD. Ironically last year has been good for those who held EUR based or CHF based indexes.
- baxtr 10mo ago
  Still not helpful if you need to pay your bills in EUR?
Rastonbury 10mo ago
There is no 'cure' per se as a non-US investor currency risk is just something to accept (or swap return for a hedge but then it ends up being a wash mostly), for example if you invest in a World equities ETF, it's a bit pointless to be hedging exposure to all the currencies. Even if you decide to slant away from the US, it's likely a majority of non-US large caps have USD exposures. It's more a psychological thing, you see absolute USD return and think you could've made that but there's not the actual return, your actual return is post conversion, if you'd have hedged you wouldn't have that abosulte return either, so you've never had it. Additionally, if you're like most people and investing regularly or DCA-ing from now on you can buy at lower USD
- ambicapter 10mo ago
  Is absolute USD return being lower than “actual return” (not sure what that is measured in) an issue if you stay in USD your whole life?
  - baxtr 10mo ago
    No but your USD return gap should in theory be eaten away by inflation.
  - Rastonbury 10mo ago
    Actual return is for non-US investors having to convert back to say Euros for retirement, after having the dollar weaken, you get less Euros for example

I noticed this as well. I haven’t found a good cure for this other than diversifying globally.

by baxtr 10mo ago

I noticed this as well. I haven’t found a good cure for this other than diversifying globally.

Everyone wants to park some money and have other people work hard to increase the real value of said parked money. Not everyone can win big. Storing value is actually pretty amazing thing and that it can be profitable is magic. Of course the environment and poorest pays some of the free lunch.

agobineau 10mo ago
it really depends on whether or not there is a global capital shortage. this is very easy to do when the economy requires much more capital than is available. and in the inverse, it is self explanatory
Mountain_Skies 10mo ago
An investor friend once told me that the US needs to always be in debt because treasuries give investors a risk-free place to park their money between investments. The sense of entitlement was astounding.
- lametti 10mo ago
  I don't think this is necessarily entitlement. There are heteredox but popular economic theories (such as MMT) that view public debt issuance at least in part as a method to satisfy the demand for private savings.
- positr0n 10mo ago
  That sounds like just describing the way the current global system works, not entitlement. Transitioning to another system would work (and seems inevitable at some point in the next hundred years??) but oof it would be chaotic.

dottjt 10mo ago

I could be misunderstanding this, but you know that you can buy ETFs that are currency hedged? Taking Vanguard for example, VGS is global equities, but VGAD is global equities that are AUD-hedged (my home country). The only downside is that you pay more in fees (and they're less tax efficient). People generally don't bother with it though, because on a long enough time-line currencies usually revert to their long-term average, so if you're holding for retirement there's generally little point.

rsynnott 10mo ago
> The only downside is that you pay more in fees This is a _huge_ downside for index funds, though. Even quite a small fee difference has a huge compounding impact over time; people often miss just how much. AIUI, assuming you're investing in a global equity fund, currency hedging is almost never worth it. It _may_ be worth it in some cases if you're investing in a foreign index (eg S&P for Europeans), but even then not usually.
- dottjt 10mo ago
  It depends if you forsee potentially having to sell before retirement. Or if it may just happen out of your own circumstances. Hedging is all about diversification at the end of the day. So it makes sense to hedge if you're coming close to retirement age.
aswegs8 10mo ago
TIL: currency moves have zero expected return
- dottjt 10mo ago
  You also can't predict when you might need to sell you stake, so that's ultimately the value of hedging. If you're forced to sell in 5-10 years, then hedging would be valuable.
AnimalMuppet 10mo ago
Let's say I'm close to retirement. And let's say I'm in US dollars, and the dollar isn't doing well right now, and might continue to not do well for a long enough time frame to matter to me. On the other hand, my expenses will also be in US dollars. To what degree should I hedge against the dollar?

dgb23 10mo ago

Many global indexes are also traded in USD. Ironically last year has been good for those who held EUR based or CHF based indexes.

baxtr 10mo ago
Still not helpful if you need to pay your bills in EUR?

Rastonbury 10mo ago

There is no 'cure' per se as a non-US investor currency risk is just something to accept (or swap return for a hedge but then it ends up being a wash mostly), for example if you invest in a World equities ETF, it's a bit pointless to be hedging exposure to all the currencies. Even if you decide to slant away from the US, it's likely a majority of non-US large caps have USD exposures. It's more a psychological thing, you see absolute USD return and think you could've made that but there's not the actual return, your actual return is post conversion, if you'd have hedged you wouldn't have that abosulte return either, so you've never had it. Additionally, if you're like most people and investing regularly or DCA-ing from now on you can buy at lower USD

ambicapter 10mo ago
Is absolute USD return being lower than “actual return” (not sure what that is measured in) an issue if you stay in USD your whole life?
- baxtr 10mo ago
  No but your USD return gap should in theory be eaten away by inflation.
- Rastonbury 10mo ago
  Actual return is for non-US investors having to convert back to say Euros for retirement, after having the dollar weaken, you get less Euros for example