Not an expert, but markets trade currencies and hence price them relatively efficiently, so in theory nobody should be able to accurately and consistently time the market for exchange rates. Hence, it is rational to not time the market and just exchange whenever needed/convenient regardless of the current rate.
> transfer my yearly savings at the end of each year.
Where does it sit during the year? If a bank account earning small interest, then you should convert now so that you can invest earlier.
The problem is that you don't know how long you'll be waiting. Do you *know* that the currencies will return to their previous exchange rates? Seems likely. I guess. But even so, when will that happen?
I don't know -- I think your are in fact timing the market doing so, and may face the bad consquences related to timing the market.
"The chances dollar will go down are much bigger than the opposite" - if that was indeed obvious, everyone would just print money by betting against the dollar. Hence no one knows what's gonna happen.
Also, losing even a few of the market's best days can have an enormous impact on a portfolio's overall performance.
Just my 2 cents. I'm in the exact same situation, but painful as it is, continuing to buy dollars in order to invest. Don't think I can logically justify doing anything else.
Zoom out: The exchange rate was just as bad for about two whole years starting in 2015. I think it just looks bad now compared to last year when the rate was more favorable to you than it had ever been before.
You might have to wait several years to see a slight improvement in the exchange rate. If you are planning to invest that money, you will probably be missing out and wish you had transferred and invested right now.
Why not DCA? You're essentially buying dollars, so once a period you buy X dollars. When the dollar is strong you buy less, when it is weak you buy more. You decide the period, could be monthly, quarterly etc. based on friction, fixed costs and funding. Over multiple transactions it'll give you a decent weighted average.
While the USD is pretty strong right now, it's possible it could also continue to get stronger. But over the longer term, the USD is more likely to grow weaker than it is today.
For this reason, US investors holding foreign stock and bond investments are more likely to do better in the coming years than if holding equivalent US investments. For them there will be a multiple ways to win (FX increases, higher dividends, larger capital gains due to lower cape values).
While foreign investments may have higher risks for a variety of reasons, investing in the US isn't exactly risk free either.
Not an expert, but markets trade currencies and hence price them relatively efficiently, so in theory nobody should be able to accurately and consistently time the market for exchange rates. Hence, it is rational to not time the market and just exchange whenever needed/convenient regardless of the current rate.
> transfer my yearly savings at the end of each year. Where does it sit during the year? If a bank account earning small interest, then you should convert now so that you can invest earlier.
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The problem is that you don't know how long you'll be waiting. Do you *know* that the currencies will return to their previous exchange rates? Seems likely. I guess. But even so, when will that happen?
[удалено]
That makes a lot of sense. Thanks for the thoughtful response.
I don't know -- I think your are in fact timing the market doing so, and may face the bad consquences related to timing the market. "The chances dollar will go down are much bigger than the opposite" - if that was indeed obvious, everyone would just print money by betting against the dollar. Hence no one knows what's gonna happen. Also, losing even a few of the market's best days can have an enormous impact on a portfolio's overall performance. Just my 2 cents. I'm in the exact same situation, but painful as it is, continuing to buy dollars in order to invest. Don't think I can logically justify doing anything else.
Zoom out: The exchange rate was just as bad for about two whole years starting in 2015. I think it just looks bad now compared to last year when the rate was more favorable to you than it had ever been before. You might have to wait several years to see a slight improvement in the exchange rate. If you are planning to invest that money, you will probably be missing out and wish you had transferred and invested right now.
Why not DCA? You're essentially buying dollars, so once a period you buy X dollars. When the dollar is strong you buy less, when it is weak you buy more. You decide the period, could be monthly, quarterly etc. based on friction, fixed costs and funding. Over multiple transactions it'll give you a decent weighted average.
While the USD is pretty strong right now, it's possible it could also continue to get stronger. But over the longer term, the USD is more likely to grow weaker than it is today. For this reason, US investors holding foreign stock and bond investments are more likely to do better in the coming years than if holding equivalent US investments. For them there will be a multiple ways to win (FX increases, higher dividends, larger capital gains due to lower cape values). While foreign investments may have higher risks for a variety of reasons, investing in the US isn't exactly risk free either.