My super and investment portfolio is heavily exposed to unhedged US assets. While their performance has been really strong for the last few years, they have taken a mighty fall since the Covid-19 pandemic hit. I'm confident that the market will recover eventually, and I am a long-term self-investor. I notice that the US/Australian exchange rate is at near record lows so I was wondering whether a professional adviser thought this would be a good time to hedge my US portfolio? Should I also be putting more into that market at these depressed levels (investments and exchange rates)?
Scott in Hawthorn, Vic
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welcome to the rollercoaster that is the unhedged international asset class. The really low exchange rates you refer to have since somewhat corrected themselves, but it is still a very valid question you have. It is hard to know which countries are going to emerge out of the current pandemic quicker and stronger.
My thoughts would be if the market thinks the US economy is more likely to recover sooner than Australia, then the Greenback would strengthen as the demand for it compared to AUD would be higher. Likewise the inverse would happen if the Australian economy is poised to recover quicker. What is likely to play out over the next few years as the global economy recovers from the severe pounding this virus has given it, is anyone’s guess.
I would recommend having a chat with your adviser to decide a plan of action based on your own risk profile and investment preferences, but I have always believed in the merits of a well-diversified strategic asset allocation where “time-in the market” outperforms trying to “time the market”.
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