Nov 05

Stop Currency CFD Trading!

The following extract was taken from David Swensen’s book, “Pioneering Portfolio Management”, and for those who don’t know who David Swenssen is…he is the Chief Investment Officer of the Yale Endowment Fund and possibly the finest multi-asset class investor ever.

“Foreign currencies, in and of themselves, provide no expected return. Some market players, as part of so-called macro strategies, speculate on the direction of foreign exchange rates. Foreign bond mutual funds provide a vehicle through which investment managers sometimes take speculative positions. Top-down bets on currencies fail to generate a reliable source of excess returns, because the factors influencing economic conditions, in general, and interest rates, in particular, prove far too complex to predict with consistency. Sensible investors avoid currency speculation.”

Now whilst currency can provide diversification benefits for high risk asset classes such as equities, by itself, as suggested, it should be avoided. It is currency markets, one of the toughest markets in existence, that Mum and Dads can sucked into from these get rich quick trading courses…I wish ASIC could close down all currency trading schools and stop retail investors from trading in currency related CFDs…if its too tough for Swensen, I’m pretty confident it’s a loser’s game for the average retail investor.

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