Currencies are included in the portfolio only as a separate investment. Pesto will get our attention.
They are, by their nature, always speculative. When investing, it does not give the investor a regular amount, just like you, a year for a bond or a dividend for a share. At the same time, they do not tend to grow continuously in the long run, as do stocks, commodities and real estate. Their development has long been very predictable.
Just look at the most watched EUR / USD exchange rate. If you asked any financial analyst five years ago, no one would dare to guess that the exchange rate will be 50% in five years.
This is the longest exchange rate for a normal passive investor. The first development of the US dollar against the euro caused to a large extent that the Czech investor holding the investment in the dollar in recent years has delayed the percentage points only on the exchange rate of the koruna against the dollar. Often, even with the interesting entry of the American market, the Czech investor ended up turning the crown to zero or even in the red hearing.
In most ways, the investor in the portfolio includes me, and wants to or not. In the first, according to this series, I even recommended splitting long-term investments between the koruna, the dollar and the euro. Not so much for the sake of better diversification, but rather from a practical point of view, because the interest of baldness is hard to find in Czech crowns.
Where your profits are lost
By taking the risk of currency, we speculate in a way about the development of a certain exchange rate. Some speculators don’t even pay attention to anyone else and only trade currencies on Forex. But we will not deal with this here now, because it is not about speculation, but about long-term investments.
Currencies do not have a material correlation with other asset classes. Therefore, it makes sense to include them in the portfolio as a separate component. Now, after this year’s growth, stocks, commodities, real estate and bonds. If you want a separate stanza, you must grind between structured products. There are some certificates available on the market that focus on me.
In practice, there are two options for a new investment. The first use of the purchase of one currency and the current short sale type of currency. This is how Forex (at least I hope I have no personal experience) or CFDs contracts actually works. The second, slightly indirect variant is the investment in the money market in the given currency. Term short-term term deposits, sometimes also bonds. In this way, in addition to exchange rate movements, it is possible to profit from the previous year.
The first option is often used in developed markets, where years of differences are often not significant and there is high liquidity in the markets with these currencies. The type of variant is usually chosen in emerging markets, where two and double-digit rates and no liquidity for the purchase of a new currency.
Overall, this is an interesting addition to the portfolio. The bag cannot be covered with double-digit gains. In particular, the returns on currency-oriented investments can fluctuate between bond and share returns, ie around 5-7% pa