{"id":652179,"date":"2018-03-24T12:00:08","date_gmt":"2018-03-24T12:00:08","guid":{"rendered":"http:\/\/juniorminingnews.com\/?p=652179"},"modified":"2018-03-24T12:00:08","modified_gmt":"2018-03-24T12:00:08","slug":"how-currency-appreciation-can-juice-your-returns-2","status":"publish","type":"post","link":"https:\/\/juniorminingnews.com\/?p=652179","title":{"rendered":"How Currency Appreciation Can Juice Your Returns"},"content":{"rendered":"
\"currency<\/a><\/div>\n

By Eric Fry<\/a><\/span> <\/p>\n

<\/div>\n

When foreign economies recover from a bust, their stock markets usually boom. But that’s not all\u2026 Their currencies also boom. They soar in value against the U.S. dollar.<\/p>\n

This phenomenon is not simply a curiosity; it can be a big-time moneymaker. The combination of rising stock prices and a rising currency can produce supercharged gains for a dollar-based investor.<\/p>\n

The past is full of many such examples. This week’s chart shows just a few of the most memorable ones\u2026<\/p>\n

In each example, a foreign stock market delivered gains of about 500% in U.S. dollar terms. And in each instance, a large percentage of the gains came from the local currency’s appreciation against the value of the dollar.<\/p>\n

One truly remarkable aspect of this effect is that it does not simply add currency gains to stock market gains; it compounds the combination of the two to produce an even larger total return.<\/p>\n

As powerful as this phenomenon can be, it often confuses investors. So let me simplify it with an example I’ve used in the past\u2026<\/p>\n

[iu-adbox]<\/p>\n

For illustrative purposes, let’s say $100 would buy 100 Indian rupees on the day you decided to invest in the Indian stock market. So you exchange your $100 for 100 rupees and invest those funds.<\/p>\n

After one year, the Indian stock market has doubled and the rupee’s value against that of the dollar has doubled, such that each rupee is now worth $2, rather than $1.<\/p>\n

In this scenario, your gain is not the sum of your 100% stock market gain and your 100% currency gain \u2013 i.e., 200%. Instead, your gain is 300%!<\/p>\n

Here’s why\u2026 The 100 rupees worth of stock you purchased would be worth 200\u2026 and 200 rupees would now be worth $400 \u2013 or a 300% return on the original $100 you invested.<\/p>\n

The chart below shows a real-world example of a currency’s power to supercharge returns\u2026<\/p>\n

Between May 2004 and May 2008, the Brazilian stock market gained 810% in U.S. dollar terms.<\/p>\n

Less than half of that gain (358%) came from the stock market’s performance in local currency terms. The rest came from compounding appreciation of the Brazilian real against the value of the U.S. dollar.<\/p>\n

A repeat performance is underway in Brazil right now.<\/p>\n

Over the last two years, the iShares MSCI Brazil Index ETF (NYSE: EWZ) has produced a total return of more than 180% in U.S. dollar terms. A big chunk of that gain has come from the appreciation of the Brazilian real against the value of the U.S. dollar.<\/p>\n

The MSCI Brazil Index is trading 40% below its highs of one decade ago. If the index simply returned to that level, it would deliver a gain of 150%.<\/p>\n

I’d call that a good start.<\/p>\n

Good investing,<\/p>\n

Eric
\nThoughts on this article? Leave a comment below. \u2026read more<\/a> <\/p>\n

Source:: Investment You<\/a><\/p>\n

The post How Currency Appreciation Can Juice Your Returns<\/a><\/a> appeared first on Junior Mining Analyst<\/a>.<\/p>\n","protected":false},"excerpt":{"rendered":"

By Eric Fry When foreign economies recover from a bust, their stock markets usually boom. But that’s not all\u2026 Their currencies also boom. They soar in value against the U.S. dollar. This phenomenon is not simply a curiosity; it can be a big-time moneymaker. The combination of rising stock prices and a rising currency can […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"site-sidebar-layout":"default","site-content-layout":"","ast-site-content-layout":"","site-content-style":"default","site-sidebar-style":"default","ast-global-header-display":"","ast-banner-title-visibility":"","ast-main-header-display":"","ast-hfb-above-header-display":"","ast-hfb-below-header-display":"","ast-hfb-mobile-header-display":"","site-post-title":"","ast-breadcrumbs-content":"","ast-featured-img":"","footer-sml-layout":"","theme-transparent-header-meta":"","adv-header-id-meta":"","stick-header-meta":"","header-above-stick-meta":"","header-main-stick-meta":"","header-below-stick-meta":"","astra-migrate-meta-layouts":"default","ast-page-background-enabled":"default","ast-page-background-meta":{"desktop":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-gradient":""},"tablet":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-gradient":""},"mobile":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-gradient":""}},"ast-content-background-meta":{"desktop":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-gradient":""},"tablet":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-gradient":""},"mobile":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-gradient":""}},"footnotes":""},"categories":[4],"tags":[],"_links":{"self":[{"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=\/wp\/v2\/posts\/652179"}],"collection":[{"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=652179"}],"version-history":[{"count":0,"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=\/wp\/v2\/posts\/652179\/revisions"}],"wp:attachment":[{"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=652179"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=652179"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=652179"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}