I bought OMX on April 11 at 149 kroners which worked out, at the time, to $19.60 per share. I sold it on Friday at SEK 131.75 which looks like an 11% loss but when factoring in the currency move the loss shrinks considerably. In dollars I sold at $19.25, a loss of $0.35 or 2%. Along the way I took in a $0.34 dividend so I just about broke even.
As the chart shows via the blue line; the dollar depreciated by about 10% against the Swedish kroner during the time I held the stock. Visibility for a strong kroner, which I wrote about several times on the blog, contributed to my decision to buy the stock and it was the currency that bailed out a bad stock trade.
If you compare a chart of any locally traded shares with that of the shares in US dollars along with the currency you will see that any difference between the two will be attributable to movement in the currency.
The point here is that owning foreign stocks can help your portfolio if the dollar decline continues. If you can pick a stock or an indexed product that doesn't drop 11% in local terms, well, all the better.
4 comments:
Can you get this effect by buying stock in foreign companies on an American exchange, or do you need to buy them on a foreign exchange?
the OMGPF I owned was bot on a US exchange of sorts, over the counter.
Any stock you buy in a US brokerage account will be from some sort of US market; NYSE, Nasdaq or Pinks.
So the answer to your question is yes.
That is pretty interesting..
Have you seen any brokers that has made this into a product of some kind, usable for less experienced people like myself..?
i'm sorry i am not aware of a product that explores this specific effect.
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