He's a FOREIGN EXCHANGE student. (Which will make sense in a minute.)
Once a week or so, we get solicited by someone offering to write us a guest post. The offer usually comes as a template, and about 15% of them get the name of the blog wrong (“I really love your work here at Consumerism Commentary .”) Even when they get our name right, the introductory email almost always tells us all we need to know about the submitter’s writing style (it’s abysmal.)
Last week the folks at something called Forex Traders hit us up. Their point lady was very polite and she followed through when we grilled her on our standards.
The Forex Traders post follows, verbatim. While we don’t like to bother cleaning up other people’s stilted writing (which is far more work than writing a post of our own), we do love to editorialize. So here’s the one-of-a-kind Control Your Cash treatment in a whole new written form: literary criticism (Forex’s gold in this color.) Enjoy.
“Buy-and-Hold” Investing Strategies May Be Extinct Down the Road
Almost everything’s extinct down the road. Just ask trilobites. Not sure what the author’s getting at with the headline. Clearly he thinks something will supplant buy-and-hold investing, but doesn’t think that that replacement is important enough to warrant top billing.
One never-ending “paradox” in the investment community is that, while the investment advisor on the consumer retail front is pushing a “buy-and-hold” strategy for his clients, the back-office traders for the same firm are plying their helter-skelter quantitative trading strategies for all they are worth, and that has translated into millions of dollars of profits for the investment banking community alone.
Wow, way to introduce your topic. Seriously, what are you saying? Here’s a Control Your Cash translation, for our anglophone readers:
Investment advisors encourage you to buy-and-hold. But they make money on commissions, so shouldn’t they preach the opposite?
See what we did there? We went from 66 words to 20 and crystallized your argument. Glad to help.
The back office abhors competition or even the notion of sharing these gains with the general public at large.
“General public at large.” Because “public” wouldn’t have made it clear, so we expanded it to “general public”, and apparently we still don’t think you’d understand what that means, so we went with “general public at large.”
The internet is officially too democratized.
If an investor truly wants above average returns, then he must pick and choose the hot sectors at will.
Write in the second person, you pompously verbose tool. (See? Like that.) You’re not writing to “an investor”. You’re writing to the person reading. Who will appreciate being thought of as a person and not a designation.
Prudent investing may still involve research, locating a value equation that suits your tolerance for risk, making sure that your selections are well diversified, and then pruning and fine tuning your portfolio as time goes by. What has changed is the process for achieving each of these objectives. The era of globalization is upon us.
Oh, for Christ’s sake. “The era of globalization is upon us”? Thanks for that. It’s true, you know. Computers and the internet and jet travel have made it easy to talk to people in London and Paris like they’re just down the street. Dude, the transatlantic cable was laid 150 YEARS AGO.
Sorry, can’t take this anymore. From here on in, we’re going strikethrough on the rest of this bile. Our rewrite will follow. Damn; remember what we said about editing guest posts being more work than writing originals? Maybe one day we’ll learn.
Investing cannot thrive on mere domestic issues alone. Every full-service broker can connect you with any exchange around the globe, but the safest avenue may be to utilize the plethora of Exchange-Traded Funds (“ETF”) that have sprung onto the investing scene in the past decade.
Emerging markets have been the success story over the past decade, and the best way to invest in this space is through an ETF designed for the purpose. Offerings can focus on a specific country or region, like Asia, but when you invest overseas, you must accept some currency trading risk along with the ride. As long as the U.S. Dollar weakens during your holding period, currency appreciation can actually work to your benefit.
Hedging your forex risk is not recommended for the inexperienced, but, by keeping an eye on the Dollar’s general value, you can opt in or out at the most opportune times.
The world has also gone crazy over forex trading during the past decade as well. This popularity has more to do with flexibility and the advance of technical trading platforms, but you need not jump into that market for the short term. If expectations are for a weaker Dollar, and they will continue to be as long as the Fed pursues its quantitative easing program agenda, then there are ETF’s for currency, too. In a weakening situation, the Swiss France (sic) could be a potential bet. If you want a position in the “Swissie”, the “FXF” ETF is invested in the “USD CHF” currency pair and is there for the taking.
ETF’s have the additional benefit of providing instant diversification. No more having to follow twenty-five stocks in your portfolio. Invest in sectors by choosing from a variety of ETF’s. Domestic companies, emerging markets, precious metals, and commodities can now coexist in the same portfolio. As for reviews, check the performance of the few funds that you hold, prune and fine tune as you like, and buy and sell on the exchange as with any other security. Investing in emerging markets was never so accessible.
Translated, he said:
Buy an exchange-traded fund; a mutual fund that, you guessed it, trades on a public exchange. There are ETFs that focus on particular sectors of the economy, or on particular securities (commodities, precious metals, etc.) You can buy ETFs that concentrate on a particular region of the world. That means you’ll have to pay attention to exchange rates. And that means you can hedge a weak U.S. dollar.
Which brings us to trading currencies themselves. But rather than invest directly in baht or rubles, you can buy a currency ETF. For instance, the Rydex CurrencyShares Swiss Franc Trust, which trades on NYSEArca, a division of the New York Stock Exchange.
Why would I buy that instead of just buying francs?
You shouldn’t. The only advantage to a currency ETF is that if you’ve already got a mutual fund through a place that offers currency ETFs, you can have both accounts in one place.
The end.
Addendum:
The headline, which didn’t make much sense when we read it blindly, makes even less sense now.
We’re not above shilling here at Control Your Cash (we’ve been fellating the Amazon Kindle for months now, and even the small version is a chore to wrap one’s lips around), but it’s got to be a product or service we believe in. Which currency ETFs aren’t.
And if you don’t want your clumsy, long-winded, misspelled guest post goofed on and dismembered, send it to someone else.
