Cos I'm Singaporeans and live in the US... So I tend to get mixed up about how I view returns.
And I realize that returns aren't really so clean cut, cos it depends on who's looking at the investment.
Imagine...
If I'm an American. I save in USD, I buy gold, at USD1,700 and now it is USD1,900.
Great! I have achieved around 11.8% return.
However, for a Singaporean, he saves in SGD, he buys gold at USD1,700 but the exchange rate was SGD1.43 per USD. Now the exchange rate is SGD1.38 per USD, when gold is at USD1,900. So for a Singaporean, the return would be around 7.9%.
Then for a European, he saves in EUR, he buys gold at USD1,700 the exchange rate was USD1.10 per €, and now it is USD1.17 per € when gold is USD1,900, resulting in a return of around 5.1%.
So depending on how the exchange rate moves with regards to the appreciation of gold, the Singaporean investor would have differing returns compared to the American and European.
The European guy could maybe have just bought some other EUR investments and achieved 5% return or more.
OR...
Assuming that the American expects the USD to drop against other currencies.
Well, he could do nothing, cos he spends in USD, a burger is still a burger.
Alternatively, he may want to buy gold, or change his money to € to take advantage of the expected depreciation of the USD.
Whereas as Singaporean, I could just hold SGD and I won't be particularly affected by fluctuation of the USD. Cos a plate of chicken rice is still a plate of chicken rice. The price wouldn't be affected by the depreciation of the USD.
For me, I'll likely return to SG eventually.
Although staying long term in US has crossed my mind.
And this has fuddled my mind and how I calculate and look at investments.
Cos... if I want to stay in US long term, then I need to take into account the FX (foreign exchange) fluctuation.
Whereas if I return to SG, then I should just convert to SGD and manage my investments in SGD, cos I'll need to be spending in SGD when I'm older.
Of course, the perfect way is to trade the SGD/USD if I know the direction of the currency pairs, but let's say I don't want to take that risk, so I'd just hold SGD as much as possible.
And since I always calculate in SGD, then when I want to make an investment in a US company, then I'll need to include the FX fluctuations in my expected returns, cos maybe I make money in the investment but in the end I lose money on the FX, and the return becomes a lot less than what I expected.
If I was born in America, I wouldn't even be bothered to think about another currency. Cos if I was brought up in the US, then I would think the USD is the best currency and live my life satisfied with the USD.
Then if you're a true investment professional, then you might want to try to maintain a portfolio with multiple currencies so that you can maintain purchasing power across currencies.
This isn't particularly difficult, cos when you buy large companies with global businesses, they usually sell stuff in local currencies, except that they may hedge away the currency risk. Whereas you might want the exposure to the different currencies. So it really depends on how the global companies handle their FX risk.
OR one could buy a Global Index tracker ETF. So that can help to get exposure to multiple currencies. Except that usually these ETFs are exceptionally heavy weighted on US equities, so the exposure will be around 50-60% US equities, 7-8% Japan, 4-5% UK, then the rest is a mix of the other countries.
So you'd still get a disproportionate amount of exposure to the USD.
Another perspective about returns being relative is market timing...
Think about those folks who bought private condos at the peak, vs people who were lucky and bought it at lower prices. Some people made money on their condos, some people lost money.
Some people faced higher interest rates, some had low interest rates.
People who bought HDBs using HDB loans at 2.6% vs someone else who got a bank loan at 1.5%.
Their returns would be significantly different.
Some people may share their experience getting 7% year on year returns, whereas other people would say property is not a good investment.
I have a friend who sold his HDB after 10 years and he did not make enough on the HDB to repay the additional 2.5% he owed his CPF account for utilizing the funds.
So the thing is, everyone looks at investments differently based on many different factors.
Our nationality, the currency we invest in, our past experience with it, how we executed the investment, our holding power, our skill and expertise on the particular asset class, transaction costs, taxes, etc.
It's easy to just look at historical averages and say... oh stocks provide 7% yoy return, or whatever return.
Whereas the reality of it is not so simple.
Cos average is just a single number, there's a large number of other possibilities based on the standard deviation.
What had worked for our parents, might not work for us, what works for me, might not work for you, etc...
I often hear people asking/talking about whether they should invest in property or stock market...
But I think... the answer isn't so simple, so many factors, leverage, mortgage, investment horizon, stress of stock market volatility vs stress of tenant, etc
In the end... as long as an investment suits your own risk profile and required return...
I suppose that's good enough.
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