Perhaps many investors do not know that investment funds can formalize them in other currencies other than the euro. These operations take place above all in the US dollar, but not only. Because indeed, they are admitted in Swiss francs, Norwegian crowns or even Japanese yen. But it is very prudent to analyze whether these kinds of movements in financial markets can be profitable in their results. With the aim of increasing the profitability of this financial product, whatever the financial asset on which they are based.
Investment funds based on currencies other than the euro are an alternative available to small and medium investors. Depending on how the evolution of these financial assets at any time of the year. Although it is an investment strategy with greater risks in its hiring. To the point that it can happen that they are less profitable than those linked to the euro. In any case, it is a decision that the investors themselves must make. So that in the end you can see serious differences between some models and others.
On the other hand, they are present in all modalities in investment funds. From those based on equity markets to fixed income or even from monetary options or even alternatives. In this sense, it is worth highlighting the fact that these very special investment funds are not initially penalized with more demanding commissions than from traditional or conventional models. Because it is an aspect that does not influence the structure of this class of investment products. In what is a hallmark of this class of very special funds.
Currency funds: their advantages
First of all, we are going to analyze some of the benefits generated by contracting these investment funds. Where it can allow the profitability received by its holders to be higher as a consequence of the better performance with respect to the single European currency. In this way, it is available to improve intermediation margins they can be enlarged, although by no means in a spectacular way. If not, on the contrary, it can materialize in up to one or two percentage points. Another aspect to take into account is that this evolution is not always permanent, but on a specific basis.
While on the other hand, investment funds based on currencies other than the euro are characterized above all by their greater availability for monetize savings from these precise moments. In what is constituted as a savings exchange in the medium and especially long term and unlike the purchase and sale of shares in the stock market that is governed by a significantly different mechanism. In what is revealed as a strategy that small and medium investors can choose from now on.
Risks in these operations
This investment strategy, on the other hand, maintains constant less favorable for the interests of the holders of this financial product. It should be noted that in this sense that funds of these characteristics are distinguished by their greater risk in the operations taken. Because they can, for the same reasons, lose margins on their initial profitability and that can lead to these investment funds being less interesting to be hired from now on. With an equation between profitability and risk greater than in funds considered as traditional in their structure. Likewise, everything will depend on the currency in which they are subscribed since it can affect their future remuneration. Because one of these products contracted in US dollars is not the same as in Norwegian crowns.
While on the other hand, they are not very likely to be long-term subscribers since you can lead to more than one negative surprise that can lead you to diminish the real value of them. Likewise, it is necessary to emphasize the fact that the operations must be finalized in the shortest period of time. To avoid very unwanted situations on the part of small and medium savers that may emerge in unfavorable scenarios for the financial markets, both from equities and fixed income. With a very important decrease on the valuation of the securities and that in the end can cause you some other liquidity problem.
Currency protection
In any case, there is a strategy to correct these possible problems of funds and investments of these characteristics and that is none other than to subscribe them with a currency protection clause. So that in this way you are in a position to protect yourself from the swings so frequent in the currency markets. On the other hand, it is also necessary to take into account from now on that it is necessary for these movements to be controlled from their formalization to avoid situations that may result in various problems in the income statement of your investments.
On the other hand, and in relation to the treatment of currency markets, it should be noted that the treatment of currency orders entered through the services that operate with these financial assets is not different from that received by any other order, applying in the calculation of capital gains from sales is the so-called “FIFO” method, that is, it is considered that the currency whose acquisition date It is older regardless of the current account and entity in which the client has the currency deposited. Fundamentally, this method is based on the fact that the first thing in is the first thing out, hence its assessment is more adapted to the reality of the market, since it uses a valuation based on more recent costs.
While on the other hand, they will give rise to the collection of special management commissions in the specific case that the financial institution is forced to act on behalf of the client to close the positions that remain open at the end of each session, which is usually from the around 20 to 40 euros plus a certain percentage on the amount invested. Likewise, they can be temporarily suspended if the market situation or the open global position so recommends financial intermediaries. Just as they require constant monitoring of their open position and diligent action to collect profits or, where appropriate, limit losses by closing the position.
How to develop the movements?
Depending on the expected fluctuation of a certain currency, it can be bought or sold to later carry out the reverse operation at a lower or higher price respectively, due to which through this operation large profits can be obtained, although an unfavorable evolution may also carry heavy losses. At the risk that even lose money in operations carried out under this investment strategy so characteristic.
Some entities allow to operate in this market in real time, depositing between 1% and 5% of guarantee, which adds even more flexibility and speed to the investment. As with the equity market, orders can also be applied here stop to stop losses or collect profits, which is an excellent tool for the interests of the small investor.
Fund profitability
The optimism present in the financial markets has made it possible to maintain the upward trend of previous months in general in the different world markets. The Ibex grew 1,0% and the rest of the European markets registered higher increases. The American stock market stood out, whose benchmark index S & P500 appreciated 3,4%. In the fixed income markets, the IRRs of long-term public debt recover the levels of June, and thus, for example, the IRR of the Spanish 10-year bond reaches 0,39% from 0,23% the previous month, while the profitability of the German Bund for the same term closes at -0,37% compared to -0,40%, according to the Association of Collective Investment Institutions and Pension Funds (Inverco).
The risk premium in Spain rises to 78 bps (64 bps in September). The exchange rate of the euro against the dollar closed at 1,10, which represents an appreciation of the dollar against the euro of more than 1%. In this context, the Investment Funds registered a positive profitability of 2019% in November 0,77, for which they accumulate a profitability of 6,5% in the first eleven months of the year, the historical maximum in the accumulated until now. Once again, the categories of Investment Funds that present greater exposure to stocks experienced positive returns of greater or lesser magnitude, although in November the US International Equities stood out, with yields around 4%, with which they already accumulate to the whole of 2019 a profitability of more than 24% in just eleven months. Just as they require constant monitoring of their open position and diligent action to collect profits or, where appropriate, limit losses by closing the position.