Cashing in on Currencies

Definition of insanity:  Doing the same thing over and over again and expecting a different result.

At Rich Investments, Inc. (www.richinvest.com), we really try to go out of our way to get the very best returns possible with the least amount risk.  At the core of this philosophy, is a  proprietary quantitative, computer-driven, multi-strategy approach.  By combining relative return with absolute return strategies, we believe that an investor is able to really generate robust risk adjusted returns.  So in today’s blog, I’d like to introduce you to a terrific way to  break your dependence from the broad stock and bond markets while still being able to generate nice returns.  Certainly, it is very important to remember that all investing strategies carry risk and this strategy may not be appropriate for you.  You should seek the advice of a qualified financial advisor before implementing any investing strategy.  Please read our disclaimer page http://thestrategicmile.com/disclaimer/

A dynamic or tactical currency model that involves switching between a rising dollar and falling dollar mutual fund or ETF, can offer a distinct source of returns and can play a complementary role in a well diversified portfolio.  Why?  Because global currencies often move in cycles of higher and lower valuations.  A financial advisor or investor who understands this, can seek to enhance returns, manage risk, and add greater diversification beyond stocks, bonds and other asset classes.

Through the recent introduction of several mutual funds and ETFs, individual investors now have access to currency markets that were once only available to large institutional investors, banks, companies, and funds.  Considerations for adding a non-correlated, tactical currency model to your portfolio include:

• diversifier
• International risk management tool
• Source of incremental returns

I think it is of importance to note that adding an asset class that performs independently of other asset classes, such as stocks and bonds, is a great way to add diversity to your portfolio.  Specifically, we like to “play” the U.S. Dollar Index and expose a portion of our portfolios to either a rising dollar fund or a falling dollar fund, based, of course, on our proprietary model.  Although past performance does not guarantee future results, historically, the U.S Dollar Index has had a very low to negative correlation to stocks, bonds, and asset classes such as commodities.  What is the U.S. Dollar Index?  Great question, I’m glad you asked.  The U.S. Dollar Index is a market weighted basket of six foreign currencies that is commonly used to track price movements in foreign currencies.  Utilizing exchange rates expressed in units of foreign currency per U.S. Dollar, the six currencies include the Euro, British Pound Sterling, Japanese Yen, Canadian Dollar, Swedish Krona, and Swiss Franc.

So I hope that I have given you a strategic investment idea to discuss with your financial advisor.   Before I sign off, I just want to acknowledge Rydex for making available some of the information that I used in this blog.  You can learn more about Rydex at www.rydexfunds.com.  There is no expressed or implied endorsement from Rydex towards Rich Investments, nor from Rich Investments towards Rydex.  No investment strategy can guarantee returns in a declining market.  Diversification neither assures a profit, nor eliminates the risk of experiencing investment losses.  Exposure to foreign currencies may add to the risk that those currencieswill decline in value relative to the U.S. Dollar.

Best returns,

Matt