International investments are a sensible way to combat inflation and protect purchasing power. Success in international investments can be enhanced with low interest rate loans.
This series looks at how increases investing success by borrowing the Czech koruna to reinvest. The koruna has risen to a very high level versus the euro, 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 dip versus the euro.
The last two messages have looked at two portfolios based on a Czech koruna loan invested into highly diversified baskets of equity mutual funds. The first focused on a portfolio of major market equity funds in euro or related currencies and returned 67.04% last year. The second was a riskier proposition investing in emerging market equity funds that was up over 131% last year.
This message looks at a portfolio that mixes both major and emerging market equity funds.
This Czech 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 $50,000 in each of the six equity mutual funds below.
Fund Increase Last Year
|Euro||Jyske Invest German Equity Fund|
|Euro||Jyske Invest Eastern European Fund|
|Danish kroner||Jyske Invest Danish Equity Fund|
|Euro||Jyske Invest European Equity Fund|
|US$||Jyske Invest Far East Equity Fund|
|US$||Jyske Invest Latin America Equity Fund|
There is no way we can predict how much this 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 portfolio has an average return of 31.59% less the 3.875% on the $200,000 loan. With the leverage, this portfolio would have grown $94,795 last year. The loan cost would have been $7,500. The growth left after the loan cost would have been $87,295 or 87.29% appreciation of the original $100,000 investment.
Each of the portfolios we have reviewed in this series is based on an idea.
The idea behind this portfolio is that if the global economy continues to grow, so too will equity markets. Emerging market equities have grown faster than major markets but have been more volatile so a mix of major and emerging markets reduces forex and capital loss risk.
This is a well diversified 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 continue this message and see how international business success is catching, plus how our North Carolina town and Ecuadorian village are catching one another. Go to https://www.garyascott.com/international_investments/179.html
Or until next message, may you catch all the success in the world.
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.
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.