How To Protect Your Portfolio From The Hidden ‘Currency Killer’ Effect

Written by John Stuart on January 15th, 2018

Currencies impact your portfolio whether you invest in Forex or not! Here’s how to protect yourself

As you read this, international currencies are wreaking havoc on your portfolio!

I know what you’re thinking, “But I avoid Forex like the plague, how is this possible?

The problem is that whether you invest in Forex or not, currency fluctuations impact your portfolio.

How is this even possible?

Well a lot of the portfolio’s & funds investors put their money into have exposure to stocks in other countries. This means that fluctuations in the exchange rate can have quite a serious effect on your investment, and how they perform in rands.

But is this really a big deal, and are the effects big enough to hurt your performance?

According to Fidelity Investments Canada, they are!

You see, they analyzed the impact of currency fluctuations on the S&P 500 over a 20-year period, from November 28th 1997 to November 30th 2017, and found that there was a difference in annualized returns of 0.5%.

That means that US Dollars invested in the S&P 500 had a 7.2% return, whilst Canadian Dollars invested in the exact same stocks returned 6.7% (after adjusting for exchange rates).

Compound this too-small-to-miss-it kind of loss over your full investment period and you’re talking about losing quite a bit of money!

It’s easy to miss things like this when there are a number of them and they’re small enough to pass most investors by, but is there anything you can actually do about this?

Of course there is, and in a second I’m going to show you two proven techniques you can use to protect your portfolio from the volatility of currencies!

But first let’s get back to our US Dollar Canadian Dollar example to show you exactly how this all works.

Simply read on for more…

 

How Currency Fluctuations Impact Your Portfolio (And What You Can Do About It!)

 

How Currency Fluctuations Impact Your Portfolio (And What You Can Do About It!)

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