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This is a factor that many investors fail to account for but that has a huge impact of their investing results. Most people may not be aware of it, and thankfully, I fully grasped the depth of those implications the easy way.
Back in September, as I was adding companies to my portfolio, the Canadian dollar was at par with the US dollar. Which made buying American companies at the then current prices a bargain, and I have luckily been proved to be right! From September 17th, when I made my first trades acquisitions of American stocks, to now, the US dollar went from 1.07 Canadian dollars to 1.29 Canadian dollars. That is a 20% jump, and it was mostly due to the financial meltdown in the last quarter of 2008.
Being an investor living in Canada, and that applies to any investor; it is in my advantage to invest mostly in companies that trade in the local currency because I would be in a very uncomfortable position if currency rates had moved the other way. Since currency exchange rates are influenced by macroeconomic factors, I think it is a thing that value investors tend to minimize by not investing much in foreign countries.
That is in fact the main reason I do want to avoid those particular types of fluctuations. I am aware of my limitations in reading macroeconomic trends, so for someone like me, trading with currencies is a double edged blade. That is a factor that can work for me or against me. As a value investor I guess it is probably better for me to stick with local currencies.
Back in September, as I was adding companies to my portfolio, the Canadian dollar was at par with the US dollar. Which made buying American companies at the then current prices a bargain, and I have luckily been proved to be right! From September 17th, when I made my first trades acquisitions of American stocks, to now, the US dollar went from 1.07 Canadian dollars to 1.29 Canadian dollars. That is a 20% jump, and it was mostly due to the financial meltdown in the last quarter of 2008.
Being an investor living in Canada, and that applies to any investor; it is in my advantage to invest mostly in companies that trade in the local currency because I would be in a very uncomfortable position if currency rates had moved the other way. Since currency exchange rates are influenced by macroeconomic factors, I think it is a thing that value investors tend to minimize by not investing much in foreign countries.
That is in fact the main reason I do want to avoid those particular types of fluctuations. I am aware of my limitations in reading macroeconomic trends, so for someone like me, trading with currencies is a double edged blade. That is a factor that can work for me or against me. As a value investor I guess it is probably better for me to stick with local currencies.
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