USD/CHF Currency loss

Investing / Portfolios
1

Hello,

I live in Switzerland and I have been investing in the stock market for some time.

I am writing this today because since USD/CHF has been going down pretty much forever my investments have been affected by some significant currency losses.

If my home currency was EUR I could simply wait for the currency to go back up, but because I use CHF I really need a hedging against currency losses.

I already lost a lot of money because of this so any advice or ideas would be super helpful!

Thank you all in advance!

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2

Search the forum for currency hedging, there’s quite a few posts explaining why it’s not an issue and you didn’t “lose” anything (just stop comparing to USD returns).

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3

The subject’s been done to death. You didn’t lose anything, you just got more USD which are worth fewer CHF, when you convert you’ll get the exact right amount of CHF, just don’t linger holding USD if you don’t intend to use USD as it may go further down and then you will lose in real terms.

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4

Not sure where exactly are you investing but it seems you might be heaving exposed to US market

looking at last 1Y return where USD/CHF dropped significantly, the returns are positive for most markets except US and India. All numbers are expressed on CHF basis

my recommendation would be to always measure returns in CHF terms and also have diversification in terms of markets.

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5

You can say “VT earned +22% in USD last year, but I only got +11% in CHF - that sucks”.
Or you can say “VT lost -5% in RUB last year, but I instead got +11% in CHF - that’s amazing!”

VT also did +72% in Argentinian pesos and -25% in terms of gold coins. One may argue that you should’ve instead hedged in pesos instead of CHF :slight_smile:

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The question is: what exactly is OP invested in. He only says ‘stock market’ which ist somehow good news because most probably return in CHF will be positive.
Let’s not forget there ARE indeed shitty USD investments. The best example is high yield debt as mentioned in another thread a few days ago.

7

Thank you for the reply.

I intend to invest quite long term so what should I do? Unlike EUR I can’t wait for USD/CHF to recover since that historically is unlikely to happen.

What would you recommend?

8

Lower your expectations of investment returns (in %).

At least as long as the CHF keeps appreciating against the USD.

9

Thanks for the reply.

The return are positive, but I still lost 10%+ due to currency losses.

Do you have any hedging strategies to recommend?

10

Tech stocks (data centers, 
) so the returns are positive, but I still lost 10%+ because of currency losses.

Do you have any hedging strategies to recommend?

11

Think of it differently: Returns in USD would not be so high, if the USD hadn’t depreciated so much.

Long term, there is pretty much none.

https://www.msci.com/documents/10199/006fd42a-bc92-4074-8cf6-453b6afa9996

You can hedge against the USD losing depreciating compared to CHF more than anticipated by market participants in the short-term. But not long term.

Long-term currency depreciation (or market’ participant’s expectations thereof) is priced into interest rates and valuations.

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12

I think if you measure your returns in depreciating currency then you will always have currency losses.

but hedging is also not free. So long term it wouldn’t change much.

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13

Some day, your portfolio will go down 50% and in that very case, (and usdchf might even go up in that case).

Market crashes. It happens.

Assess your risk, risk tolerance, and adapt your allocation to the corresponding profile.

Currency risk is one risk among others.

Hedging everything and winning all the time exist: run a casino (and not in CH).

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14

I was told Futures contracts were great what do you think?

15

Even if not free, what hedging strategies do you know?

16

I am trying to hedge everything, just currency losses. If you know any strategies it would be helpful.

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Again: If you could just buy Futures contracts on currencies to profitably offset the negative effect on your USD-denominated equity, everybody in Switzerland would have done it already.

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If investing in ETFs, you can buy hedged ETFs. for example WRDUSY is unhedged, WRDUSW is currency hedged.

If you invest in individual stocks then you need to deploy your own strategy by buying currency contracts. I am not familiar with details in that case.

19

Did you check the existing threads on currency hedging?

Because again you didn’t lose 10%, the USD lost 10% but you didn’t buy USD, you bought company shares. If you had bought gold with your CHF, you wouldn’t compare the return with the USD price, right?

(And if anyway you wanted to compare you should take into account the interest rate differential, and then the difference is much smaller than 10%)

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For currency contracts for individual stocks do you know just the names of these strategies? (futures, forward maybe?)