Tldr: how much does a CHF based investor need to account for CHF strength in the future wrt the SWR rate (sorry if this is a repeat question, in which case I much appreciate a quick faq/link).
IIUC the original Trinity Study has been done based on assets in the US, so US stocks and US bonds - as well as it took the inflation rates in the US. And the result of which is the well known Safe-Withdrawal-Rate of 4% (or any other, safer, figure you prefer).
My question now is, how does this famous 4% rule translate to other currencies.
Let’s take CHF as an example:
- CHF has historically been a very strong currency - along side low inflation
- a “CHF-based” investor has to multiply the performance of VT with USDCHF to get the CHF performance (and let’s leave hedging out of the picture, ie assume we do not hedge stock currencies)
- if the performance of USDCHF matches the US-CH inflation difference, we’re all good. But I doubt it’s that simple and assume there’s a “premium” based on currency
Currencies fluctuate not only based on inflation differentials but on strengths of economies, function of the currency (eg safe haven), speculation, rate differentials (which are a result of various other factors including inflation difference) etc. Overall, I assume a currency can, mid-/long-term, divert from pure inflation (PPP) difference.
In which case this would have to be factored into the SWR.
How are you accounting for this?