International investments are a sensible way to combat inflation and protect purchasing power. International investments can be leveraged with loans with low interest rates.
This series looks at how to buy international investments the Czech koruna loans as this is a currency to borrow at this time. International investments financed with koruna loans make sense because the koruna has risen to a very high level versus the euro which is the benchmark currency of that region. The interest rate of the koruna is low and there are many economic fundamentals in the Czech Republic that suggest that it will fall versus the euro.
This message looks at an international investments portfolio based on a Czech koruna loan invested into a highly diversified basket of equity mutual funds denominated in mixed currencies.
This Czech international investments in this financed multi-currency portfolio has greater capital appreciation potential but increased risk of capital loss so we will use less leverage (2 times) than the previous bond portfolios used (4 times). This portfolio assumes that we invest $100,000, borrow $200,000 in Czech koruna and invest $50,000 in each of the six equity mutual funds below.
Fund Increase Last Year
Jyske Invest German Equity Fund
Jyske Invest European Equity Fund
Jyske Invest Eastern European Fund
Jyske Invest Danish Equity Fund
Jyske Invest Swedish Equity Fund
Jyske Invest International Mutual Fund
There is no way we can predict how much this international investments portfolio will grow, if it will at all. Past performance is no guarantee of future growth but all we really can do is see what would have happened had we held this portfolio last year.
This international investments portfolio has an average return of 28.18% less the 3.875% on the $200,000 loan. With the leverage, this portfolio would have grown $74,540 last year. The loan cost would have been $7,500. The growth left after the loan cost would have been $67,040 or 67.04% appreciation of the original $100,000 investment.
This international investments portfolio would have suffered some reduction in appreciation last year due to the rise in the parity of the Czech koruna. However now that the koruna is at an all time high versus the euro, the chances of a forex profit from a koruna dip are enhanced.
Each of the koruna financed international investments portfolios we have reviewed in this series is based on an idea.
The idea behind this international investments portfolio is that if the global economy continues to grow, so too will equity markets. This international investments portfolio is heavily weight in European currencies to reduce the likelihood of forex fluctuations. Tomorrow’s message will look at using emerging markets instead.
This is a well diversified international investments portfolio with some chance of a forex and capital gain or loss. There are risks in every type of portfolio. The big risk in this portfolio is that global markets are overheated and that there could be a reduction in share prices in Europe and around the world. A drop in Equity markets would increase the chances that the price of these mutual funds would fall and create a capital loss. Never leverage more than you can afford to lose.
You can gain more details from Thomas Fischer at fischer@JBPB.com
Our Borrow Low-Deposit High Multi-Currency Sandwich Educational Service tracks five multi-currency portfolios so we can learn from their rises and falls. The emerging markets portfolio we track is leveraged in Czech koruna. You get a free 16 page report on economic conditions for 2007 when you enroll in our Borrow Low-Deposit High Multi-Currency Sandwich Educational Service. Subscription is $149 for a year. Details are at https://www.garyascott.com/catalog/bldh/
You can finish this message about terrible Ecuador politics and good Ecuadorian food at https://www.garyascott.com/international_investments/175.html
Until next message may all your international investments be good.
P.S. Join us in the Ecuador sun this winter. Here is a schedule of the courses Merri and I will sponsor and or conduct.
Jan. 22 – 26, Mon.- Fri. Self-Fulfilled: How to Be a Writer & Publisher.
Feb. 20 – 25, Tues.-Sun. Import-Export Course.
Mar. 9 – 15, Fri.-Thurs. Expanded Super Thinking + Spanish.
Mar. 16 -18, Fri.-Sun. International Business and Investing Made EZ.
Mar. 19 – 21, Mon.-Wed. Andes Extension & Real Estate Tour.