"Heads We Win, Tails We Win"
Faced with some scurrilous comments about "missing the boat" in an upward trending market recently, I am going to stretch your grey cells a bit today, - if I may?!
Firstly, exiting equities early September and staying out of the markets since then was a tactical move to stave off any negative impact in light of deteriorating fundamentals and a slue of technical indicators.
Secondly, switching back into equity - during the second week of September - was an option:
Thirdly, using our investment tools (unit trusts, traded on platforms), we would struggle to switch in time and - so we presume still - switch back out in the space of - what? - 3 weeks! That is why we did not follow the signal.
Now, there are some who say, actual results prove me wrong.
Let's see:
Here is the chart for the DJIA in the US, showing the progress YTD. The blue line is the USD/SGD graph, which, as we know highlights the continuing weakness of the greenback. Note the acceleration of the downward slope from the start of the rally in July!
As of October 12, the DJIA shows a gain of +6% YTD, in - USD terms.
Let's turn the tables and show how the SGD fared against the USD. =>The loss in the greenback turns into a "gain" for the Sing-Dollar, (blue line in the 3-month chart on the right).
The quarterly rise from 0.725 to 0.773 indicates a gain of 6.6%! If that is the handicap, how does the rally in US stocks look like when measured in SGD? To show you the outcome, I needed to apply some trickery...
I have tilted the above DJIA chart. The blue line graph (bottom) again depicts a strenthening SGD versus the USD, the same as in the small chart above. I then connected the starting point with the end of the blue graph with a green horizontal line, marking the SGD in January and in October.
The argument is that S$1.00 was principally the same S$1.00 for me at the start of the year, as it is now. Fair?
I then record the gain in April and draw a FAT BLUE horizontal line to highlight the risk-free level for my SGD gain - extended to NOW, October 12th. The rest is kind of obvious: despite the recent run-up in US stocks, in SGD terns our account would record a loss of about half the gain recorded in April.
Considering the effect of currency volatility in your investment strategy is of paramount importance. Especially, as the trend in Asian currencies is poised to rise for a long while yet. But it also takes patience to recognise a profitable trade from one that is hardly worth getting out of bed for.
By the way, you get a similar picture for € and AUD investors. It's been a sucker's rally for most of us, - if you are honest enough to admit it.
Firstly, exiting equities early September and staying out of the markets since then was a tactical move to stave off any negative impact in light of deteriorating fundamentals and a slue of technical indicators.
Secondly, switching back into equity - during the second week of September - was an option:
- based on weak trends (low volumes, overflowing liquidity)
- against a negative cycle,
- but supported by reasonably strong technicals, especially for Asia.
Thirdly, using our investment tools (unit trusts, traded on platforms), we would struggle to switch in time and - so we presume still - switch back out in the space of - what? - 3 weeks! That is why we did not follow the signal.
Let's see:
Here is the chart for the DJIA in the US, showing the progress YTD. The blue line is the USD/SGD graph, which, as we know highlights the continuing weakness of the greenback. Note the acceleration of the downward slope from the start of the rally in July!
As of October 12, the DJIA shows a gain of +6% YTD, in - USD terms. Let's turn the tables and show how the SGD fared against the USD. =>The loss in the greenback turns into a "gain" for the Sing-Dollar, (blue line in the 3-month chart on the right).
The quarterly rise from 0.725 to 0.773 indicates a gain of 6.6%! If that is the handicap, how does the rally in US stocks look like when measured in SGD? To show you the outcome, I needed to apply some trickery...
The argument is that S$1.00 was principally the same S$1.00 for me at the start of the year, as it is now. Fair?
I then record the gain in April and draw a FAT BLUE horizontal line to highlight the risk-free level for my SGD gain - extended to NOW, October 12th. The rest is kind of obvious: despite the recent run-up in US stocks, in SGD terns our account would record a loss of about half the gain recorded in April.
Considering the effect of currency volatility in your investment strategy is of paramount importance. Especially, as the trend in Asian currencies is poised to rise for a long while yet. But it also takes patience to recognise a profitable trade from one that is hardly worth getting out of bed for.
In short, for a SingDollar Investor, the title of the blog is only apt:If we invest SGD - wisely, we make money in a bullish market, but we also make money just sitting on the sidelines waiting for the SGD to appreciate. Hence any effective strategy must have both options in play, minimising the portfolio's volatility and limiting the risk, when more risk does not offer greater reward.
By the way, you get a similar picture for € and AUD investors. It's been a sucker's rally for most of us, - if you are honest enough to admit it.
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