Btw still not sure how that reconciles with the paper clearly saying it’s not worth it:
Maybe that’s because the public of those videos is US investors who tend to not have any international exposure, in which case hedged international is better than no exposure?
Just checked my report for 2023. CHF increased against USD, EUR and JPY.
For +100 gains in stocks there are -50 in FX losses. It’s part of the game. Overall a decent return with 11.5%.
Generally I stick to my asset allocation and don’t consider FX rates directly.
No Scott’s newest study has everyone as audience. They analyzed all kinds of countries.
You have to see this in the context of the study. It’s probably especially relevant in the context of the 100% stocks lifecycle strategy, as it smoothes the ups and downs of currency fluctuations, which should help with a smooth withdrawal rate and reduce ruin probability.
Ben also talks about the Paper of John Campbell that he foudn partial hedging might be optimal.
The model portfolios from PWL also partial hedge for example: Capital Team – Dimensional Global Portfolios – November, 2023 - PWL Capital
of course we need to look at our specific situations and anaylze if the available funds make sense/ are cheap enough etc.
I will put a 10% part of my portfolio to ACWIS. To hedge my bets a bit. It will for sure not have a longterm negative impact at least. It’s still a cheap broadly diversified world fund, that has run well the last 5 years, and not that big part of my portfolio.
Yes I agree the paper is definitely international (and has nice coverage), but it advocates against hedging unless I missed something.
Can you quote the study which advocates for hedging? I watched the yt now and if anything when he talks about hedging, it’s just some hypothesizing (I guess because he knows their paper didn’t actually test this).
Quoting what he says: “it might be possible […] it may be the case […]” it doesn’t sound like something he’s confident about 
The international headlines are that the S&P500 returned 24% in 2023 and MSCI World 22%.
These are totally misleading for a swiss investor because they are quoted in USD. Measured in CHF terms the S&P 500 generated ~13% in 2023 and the MSCI World ~11% (*)
Returns have not been “lost to FX” and no amount of hedging will give you USD % returns in CHF. But if anyone does find a way, please let me know
(*)
If that’s also in response to my comment: I didn’t write return is lost to FX, but that I had FX losses in my CHF portfolio this year 
No it wasn’t…apologies to everyone for the know-it-all tone of my post
The fact I had to calculate the CHF return data illustrates how confusing it is. Impossible to find it published online…
Too see this in action just look at an accumulating etf hedged and unhedged:
Unhedged CHF:
Hedged to CHF:
This year the returns on the hedged ETF where better, over 5 years the unhedged one performed better.
I know 5 years isn’t that long. I just wanted to illustrate that hedging Stocks long term will not result in better performance, hedging costs money and can never be done perfectly
No need to calculate it yourself:
https://www.msci.com/documents/10199/5e1a3133-0c18-45d7-8804-57d0c2079525
MSCI USA (in USD): 20.84%
MSCI USA (in CHF): 13.58% (massive USD FX Loss)
MSCI USA CHF Hedged: 15.35% (USD FX Loss was larger than the interest rate differential)
This all by end of Nov‘23.
I’ve read the two recent papers from Cederburg a few times now, and personally I wouldn’t draw any drastic conclusions from the lifecycle one.
I’ve noted a few things in particular.
They’re leveraging the impressive dataset from “Long-Horizon Losses in Stocks, Bonds, and Bills”, but I’m not quite sure about the way they build the return series: basically for each “block” (which is on average 10y) they pick a random developed country and use the data for this country (using this country definition of domestic and international with real returns value). The argument they give is that picking a single country has too sparse data.
Given that US over performed the rest of the world historically, it seems a given that an international exposure will perform better (because on average, the US stock market will be in the international split).
(I think here they try to counter the classic argument in US circles that international exposure isn’t needed, which historically has been true, but indeed from an “average developed country” perspective isn’t)
I’m not quite sure how valid it is to pick countries at random, given how different they can be (from behemoth US to small but with global exposure Switzerland, etc.), I can imagine the home bias decision should not be based on some kind of average but on some macroeconomical decision (how global are the companies on the stock market). Or even that there shouldn’t be any kind of home bias.
In the end the paper doesn’t say anything about domestic/international split vs. global market weighted (which is what most people on this forum do, no or little home bias). So I wouldn’t use this paper to deviate from a pure VT strategy (if you do, you’ll need different arguments).
I really wish it explored it, but given the methodology in drawing the returns, I’m not sure it’s doable.
I calculated CHF returns for full year 2023, S&P500 and MSCI World because these are the USD data points that have been in the headlines. It is not easy to find these data points online yet
I am repeating myself but I think it is misleading at best for a Swiss investor to measure the % return in USD and then call the difference vs. the % return measured in CHF a loss. In CHF terms the additional “gain” never existed, it can’t be lost
Valid points definitely.
What also makes me think a home bias is good idea is that Vanguard does it for many of their local all world funds.
Like VEQT has 30% Canada 70% world ex-Canada.
Vanguard Australia has 35% Australian stocks AND partially hedges, see: https://www.vanguard.com.au/adviser/invest/etf?subAssetClass=diversified&portId=8221&tab=portfolio-data
Im 100% convinced there is merit here.
I still wouldn’t use this as an argument: https://www.vanguard.ca/content/dam/intl/americas/canada/en/documents/CHBP_062023_V8_secure.pdf
My understanding of vanguard is that they have a bias to please investors who expect it (because many investors only invest domestically), not because it makes sense. (The case where it might make sense is if there’s some kind of tax advantage, don’t think it’s the case here, and definitely not the case in CH)
Other vanguard papers:
In addition, some countries have a preferential treatment of shares of companies from their own country, such as lower dividend taxation. Ben Felix mentions it for Canada a few times. Here increasing the home bias is also justified.
I have holdings in USD and their gains existed. How else should it be displayed on this level?
ITOT for example went from 85 to 105 USD, up 24%. USD/CHF went from 0.92 to 0.84.
My report only shows the CHF value on account level since I set it as my currency.
On account level, I do of course care about the total return in CHF. Yet it’s relevant to me to understand how it got there.
On IB you can set everything to be displayed in base currency in the app.
I’m not using an app 
And I like to see returns before and after FX effects.
I made these petty comments for the fun of it, no offense. Bottom-line there’s no disagreement, I guess.
I also like to look at my portfolio in different currencies and compare. 
My perspective is that the enormous stock gains when looking in USD are a pure FX/inflation effect, and that the value of US stocks in a more stable currency (CHF) gives a better idea of the real performance of the markets. ATH headlines don’t make much sense to me after so much inflation. USD had been overvalued for many years because it remained mostly flat around 0.9 to 1 CHF in spite of the inflation difference, and the correction was overdue (and we are still not there yet, anything above 0.80 for USDCHF is still overvalued to me).
Regarding stocks, insofar that the US dollar is one of the most predominantly used currency in the world, there might be some risk, in that the companies we buy shares of are exposed to the USD as many/most of them have liabilities and/or revenues in USD (and other currencies).
The hedging required to reduce that risk should happen on the company level and the only things we can do about it is choosing companies with a hedging policy we like or less exposure to the currencies we want to protect ourselves against (not an easy task for a Swiss investor) and/or voting for it when we do have voting rights (we don’t with ETFs and our vote would be utterly negligible anyway).
The kind of hedging we can do is mostly a gamble on forex variations. As @Barto exposed, the value of the companies we buy can be expressed in different currencies, but the value we can actually cash out is the one expressed in our own currency.
Currency hedging makes a lot of sense with bonds, though. Bonds (of a selected duration and quality) are also what I would use to reduce my exposure to a wide variety of risks during the withdrawal phase.
I may be wrong but these discussions about hedging stock funds seem to me to come from the assumption that we are invested 100% in stocks (and potentially other risk assets). If I were worried about the behavior of my stocks in regards to FX variations, 100% stocks isn’t the place where I would want to be (as, if I can’t take the risk of FX variations, I should also not be able to take the risk coming from the higher variations that come with stocks). That is to say, I would first question my allocation before considering the usefulness for me to hedge my stocks.
