Hi everyone,
I have a portfolio with positions on MO, VT, SCHD, BATS, MAIN and O, which means 95% is exchanged and valued in USD. Looking at 5 year predictions for USD/CHF I see rates below 0.8. Yield on cost of my portfolio is 5.79% which means I am heavily penalized for the exchange rate. My question: are you having the same issue? Do you DCA the more CHF gets stronger? How did you shape your investment decisions based on USD/CHF rate expectations?
Many thanks and good afternoon
Typically USD stocks respond to movements in USD so there’s a natural balance. I normally buy USD when it is weak and then sell them when USD is strong. Most recently sold around the 1.08 mark but would exchange a lot more if it strengthened to 1.04 or parity.
I also sell USD stocks when USD is weak and buy T-bills. Conversely, when USD is strong, I might sell T-bills and buy stocks.
Overall, I try to work with the volatility. Though long term, I would want to reduce my USD exposure and eye a potential recession or USD/collateral shortage in 2024/2025 as an opportunity to sell USD.
The US dollar has lost about 80% of its value since 1971 against the swiss francs (or about 3% annually on average). For diverse economic reasons, I don’t see this changing soon (twin deficits and higher rates in the US).
You need to factor that 3% loss per year, as there’s not much you can do to mitigate it. You can hedge short term, but not long term. You can try to time the market, but it’s not a reliable solution.
Oh, and @PhilMongoose, the traditional way the exchange is quoted is for 1 USD = xxx foreign currency. You quoted the other way around, which doesn’t make much sense.
Thanks @PhilMongoose and @SwissDan for your comments. I totally agree that the 3% loss should be factored in. It has been 2 years since I created my portfolio, started with taking some notes from Reddit groups and forums like this one, spent some time to investigate those I noted down and finally started transfer some cash to Degiro and IBKR but have been penalized by the USD depreciation over the last 24 months. I am spending considerable time to review my portfolio in Snowball Analytics, PortfoliosLab and lately Trading Central at IBKR , using those to rebalance my portfolio but at the end of 2 years I feel that USD depreciation takes away a considerable proportion… Another example: I had some cash available and I transferred to IBKR and bought USD at 0.9150 USD/CHF a few weeks ago, and now down to 0.89 USD/CHF.
Please apologize my lack of knowledge, are there any T-Bills in CHF or EUR similar to SGOV ( iShares 0-3 Month Treasury Bond ETF) in Eur or CHF?
Anyways, many thanks a lot for your comments.
As a CHF buyer, I’m looking to see how many USD I can buy per CHF. Not sure why it doesn’t make sense, it is simply the reciprocal value.
The other thing I used to do was simply buy US stocks on margin and have negative USD balances. That way you are hedged on the dollar and benefit when USD weakens.
Of course, now with US interest rates much higher, the carry cost of this approach is brutal.
You’re right of course. But look at how the OP quoted it. Since values are so close to 1, it’s difficult to understand if you quoted direct or indirect. That’s why there is a norm.
You can also drive on the left side of the road, but if most people drive on the right, it makes life more difficult 
Keep in mind that VT is only nominated in USD. You have 60% exposure to the US which companies are globally active. So you have exposure in every currency of the world.
@PhilMongoose In another thread you said you are rather bullish for USD in short term. Are you still convinced?
I wouldn’t say convinced, but that’s what I am expecting.
By short term, I really mean in the next recessionary cycle which I’m expecting, say, in 12 months time.
For those interested FT had an article on the Swiss Franc:
Would it be wrong to assume that (for a conservative person not looking at making alpha or even being active in the stock market but just being invested to protect his savings’ purchase power) it would be a better strategy to be invested in CHF instead of USD?
I am surprised this is called a loss in many posts, the evolution of USD/CHF is just a consequence in the long term of the difference in inflation between the two currencies. It is also compensated in the long term by higher nominal rates in USD than in CHF.
In the long term, it makes no difference which one of the main currencies one holds, except maybe for the taxes on the interests. In the medium term, it is better to be exposed to the same currency as one’s planned expenses, which is the argument for retirement assets to be exposed to CHF if one plans to retire in Switzerland.
Let me add two blogposts from Devin LaSarre
Cigarettes volumes have been in perpetual decline (1% annually if not more) for a while now, but the oligopoly structure with most cigarettes produced by Philip Morris, Altria, Imperial Brands, British-American Tobacco and Japan Tobacco (I hold them equally-weighted) leads to a pricing power outpacing that decline.
British-American Tobacco is near-enough dominating the Swiss market in the oral (Snus) category through Velo, especially when compared to Zyn ($PM, more dominant in the US). And so a lot of the new revenue generated comes not in USD but in CHF itself, EUR & SEK. That’s another type of risk to USDCHF but I remain optimistic we’ll see even ever more of this.
Anecdata: I smoke a lot less since discovering snus.
Have a look at LU0335044896. Not identical to SHV/SGOV but spiritually similar enough.
Could you clarify what you have in mind ?
If your spending is in CHF and you only want a savings account, you should get a CHF savings account. You may reduce but not eliminate losses to inflation.
If your plan is to buy stocks and you want to reduce FX risk, owning companies like Roche or Nestlé doesn’t eliminate FX exposure because most of their income comes from outside Switzerland. The currency of the stock market where a share is listed doesn’t protect you. If CHF goes up against USD, the share price of Nestle denominated in CHF will go down.
An alternative view is buy shares in companies with worldwide sales. This way you get exposure to a global basket of currencies and not any one currency. Example: Microsoft , Coca cola, Apple, as well as Nestle, Roche,…
BAT is my biggest position, but I worry about faster than expected declines in combustible volumes as population becomes healthier.
Pay attention to the counter arguments in the comments section below that article!
If I read the folllowing page correctly USDCHF futures currently predict USDCHF 0.82 in Dec 2025 (rate today 0.89)
Note that the futures value is essentially an application of interest rate parity (and largely derives from a prediction on interest rates)
