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Sugar Ray
Posted: 01 March 2025 17:20:28(UTC)
#1

Joined: 29/01/2019(UTC)
Posts: 250
So I've consolidated all of my holdings into the Nasdaq ETF Hedged GBP (EQGB), however what I've noticed is that, presumably due to the hedging costs, the return is almost 10% less than the Nasdaq 100 index. While the USD version (CNDX) and GBP version (CNX1) have all performed c.20% better than the hedged version and 5-10% better than the index itself (not sure how that would have happened unless Google is inaccurate).

So my question is, would it make sense to sell my entire hedged holding and purchase two equal portions of USD and GBP? That way they track much closer to the index performance, while cancelling out any FX changes? and then any monthly investment I could decide which one to purchase based on which currency is currently stronger in the GBP/USD range that's been ongoing for quite some time, i.e. if the USD/GBP is closer to 1.40 buy more of the USD version and if its closer to 1.15 buy more of the GBP version?

Does this sound like a good approach?
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ben ski
Posted: 01 March 2025 17:28:18(UTC)
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Joined: 15/01/2016(UTC)
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I don't think it necessarily makes sense, because it's an element of currency trading, and no one makes money currency trading (there could be mean reversion, could be momentum). It's just zero-sum minus costs. So I'd always be unhedged because it's more efficient, and the fact you're being paid and buying in GBP gives you that diversification.

If all your holdings are in the Nasdaq, I think that's the thing to have a think about. Tech is technically the worst performing S&P sector since the 1960s. It has a habit of rallying strongly, and attracting hedge funds and retail investors, but it also has a habit of overshooting and mean reverting – whereas more stable sectors (Staples, Healthcare) have done much better over longer periods because they're more consistent.

Not a prediction, but going all-in on Nasdaq may just be performance chasing – and there is a long history of that among retail investors. Tech's underperformed much less exciting sectors, even through the development of the CPU, microprocessor, internet, smartphone..
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9 users thanked ben ski for this post.
NPH on 01/03/2025(UTC), Sara G on 01/03/2025(UTC), john brace on 01/03/2025(UTC), Taltunes on 01/03/2025(UTC), Peanuts on 01/03/2025(UTC), Guest on 02/03/2025(UTC), smg8 on 02/03/2025(UTC), RT7 on 02/03/2025(UTC), Jonathan7 on 04/03/2025(UTC)
Sugar Ray
Posted: 02 March 2025 09:23:34(UTC)
#3

Joined: 29/01/2019(UTC)
Posts: 250
Thanks, the aim wasn't necessarily to make money trading on currency, but just limit the impact of a 10% swing in either direction as it's happened to me before where I bought USD versions of an index fund when the rate was 1.16 and it ended up eating into the gains as when I sought to sell the rate was 1.32.

I take your point though about diversification and sticking to USD in that if the USD strengthens against the pound, your investment is greater, and if the GBP strengthens against the dollar, your monthly investment or whatever buys you more of it.
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MarkSp
Posted: 02 March 2025 09:36:16(UTC)
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I remember KL continually posting this "zero sum game" twaddle. Trying to apply the characteristics of the market with an individual actor is completely misleading and KL knew it was.

If you took part in a duel at 10 paces, one lives, one dies, that isn't a zero sum game for either participant.

" and no one makes money currency trading"

Really? Are you sure about that?

I am not "no-one" and I have made money trading currency.
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1 user thanked MarkSp for this post.
Jay P on 02/03/2025(UTC)
ben ski
Posted: 02 March 2025 18:11:56(UTC)
#5

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MarkSp;336220 wrote:
I remember KL continually posting this "zero sum game" twaddle. Trying to apply the characteristics of the market with an individual actor is completely misleading and KL knew it was.

If you took part in a duel at 10 paces, one lives, one dies, that isn't a zero sum game for either participant.

" and no one makes money currency trading"

Really? Are you sure about that?

I am not "no-one" and I have made money trading currency.


Zero-sum means every time you trade GBP for USD, someone else is trading USD for GBP. And you can't both be right. So one of you will make money, and the other will lose. The sum is zero. Then you both pay trading costs. It's why every forex trading platform will say: 80% of investors on the app lose money.

Retail investors are stupid, monkey-brained gamblers. So of course you could bet on USD, and be right for the past 10 years. But it was luck. And the longer you play, the more inevitable the result becomes.
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1 user thanked ben ski for this post.
Guest on 03/03/2025(UTC)
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