Foreign Exchange and your spare change - Raiz Invest

It seems like no matter if we are asleep or awake, global markets are active and moving. But its not just equities and bonds moving, currency markets are moving as well. When the Aussie Dollar moves against the global currencies, it can also influence your investment portfolio returns.


Raiz portfolios have global exposure

There are global stocks and/or bonds in every Raiz Portfolio of ETFs. That makes you an international investor! It also means that you have some degree of foreign exchange exposure. Because Raiz ETFs tracks the performance of these overseas products in terms of AUD, that means as the AUD moves, it can result in moves in the ETFs on top of the movement of price of the stocks or bonds themselves.


ASX ETF’s are quoted in Aussie Dollars

All ETFs that Raiz invests in on your behalf are quoted in Australian dollars. It doesn’t matter if the ETF is tracking is the ASX200 Index, our local Top 200 on the Aussie Stock Exchange, or if it is tracking the performance of the US S&P500 Index, the price you see in your performance graph is expressed in Aussie Dollars.

If your portfolio with ETFs tracks foreign companies, it will benefit if the AUD weakens versus the currency where the stocks are traded. On the flip side, if the AUD has a strong period, this will result in a reduction of the Aussie ETF price by that amount.

E.g. For IVV, the ETF that tracks the performance of the S&P500 Index, the returns of the ETF are dependent on both the performance of the equity index and the movement of the AUD/USD exchange rate.

A falling AUD can help cushion portfolio performance

The USD is often seen by global markets as a safe-haven currency, and often strengthens against the AUD when equity markets are in decline. So even if a US or global stock or bond tracking ETF is experiencing negative returns, the falling AUD can act as a brake pad, helping to reduce the negative returns of a falling market.

The same affect will happen in reverse. If the AUD is particularly strong, it will reduce the returns in Aussie Dollar terms of any overseas tracking ETFs.


Overseas exposure can help diversification

At Raiz, all seven of our portfolios have some overseas exposure, and the same global tracking ETFs are all available to those using the Custom Portfolio Option. By having some exposure to global assets and global currencies, you are not just limited to the returns from what is happening with Australian companies and our domestic economy, but you can also track the performance of assets and companies around the world 😊

All investments carry risk.

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If you have read all or any part of our email, website, or communication then you need to know that this is factual information and general advice only. This means it does not consider any person’s particular financial objectives, financial situation, or financial needs. If you are an investor, you should consult a licensed adviser before acting on any information to fully understand the benefits and risk associated with the product. This is your call but that is what you should do.

You may be surprised to learn that RAIZ Invest Australia Limited (ABN 26 604 402 815) (Raiz), an authorised representative AFSL 434776 prepared this information.

We are not allowed, and have not prepared this information to offer financial product advice or a recommendation in relation to any investments or securities. If we did give you personal advice, which we did not, then the use of the Raiz App would be a lot more expensive than the current pricing – sorry but true. You therefore should not rely on this information to make investment decisions, because it was not about you for once, and unfortunately, we cannot advise you on who or what you can rely on – again sorry.

A Product Disclosure Statement (PDS) for Raiz Invest and/or Raiz Invest Super is available on the Raiz Invest website and App. A person must read and consider the PDS before deciding whether, or not, to acquire and/or continue to hold interests in the financial product. We know and ASIC research shows that you probably won’t, but we want you to, and we encourage you to read the PDS so you know exactly what the product does, its risks and costs. If you don’t read the PDS, it’s a bit like flying blind. Probably not a good idea.

The risks and fees for investing are fully set out in the PDS and include the risks that would ordinarily apply to investing. You should note, as illustrated by the global financial crisis of 2008, that sometimes  not even professionals in the financial services sector understand the ordinary risks of investing – because by their nature many risks are unknown – but you still need to give it a go and try to understand the risks set out in the PDS.

Any returns shown or implied are not forecasts and are not reliable guides or predictors of future performance. Those of you who cannot afford financial advice may be considering ignoring this statement, but please don’t, it is so true.

Under no circumstance is the information to be used by, or presented to, a person for the purposes of deciding about investing in Raiz Invest or Raiz Invest Super.

This information may be based on assumptions or market conditions which change without notice and have not been independently verified. Basically, this says nothing stays the same for long in financial markets (or even in life for that matter) and we are sorry. We try, but we can’t promise that the information is accurate, or stays accurate.

Any opinions or information expressed are subject to change without notice; that’s just the way we roll.

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