Consequences of the BNS decision

[Gregory D.]

Hello everyone,

I am taking advantage of this post to introduce myself.
My name is Gregory, I am 36 years old, I live in Switzerland and I have decided to become a more relaxed investor, hence my interest in investing in growing dividends.
I would like to thank you Jérôme for the quality of your site.

Following the decision of the SNB to stop the floor rate, the performance of our CHF portfolio is looking gloomy.
I wanted to know what you think about it, Jerome?
Do you rather see this as a reinforced buying opportunity since with the same quantity of CHF, we can buy more currencies and is it really a hard blow for our portfolios on our currency positions?

Greetings,
Gregory

[Jerome]

Hi Gregory
Thank you for your compliments. It is clear that this news is a big surprise and I must say that I did not expect it. At least not so quickly.
Now, the surprise effect having passed, here is what I think:
– short-term effect on my portfolio: moderate decline due to exchange rate variation
– moderate decline because since the creation of my portfolio I have selected securities that are expressly little affected by exchange rates (see my various articles on currency risk). This means that if the dollar falls, the price of the counterpart security rises, and vice versa.
– for investors who have cash in CHF: very good opportunities to buy in foreign currencies (I had already taken advantage of a very high peak in the CHF in August 2011 to buy CVX at a good price, just before the floor rate was set).
In short, no need to panic. We knew it was going to happen… we just didn't expect it to happen this quickly.

[Gregory D.]

Thank you for your reply.
And then we are long-term investors so let's take a step back!
Good evening,
Gregory

[Pat Jac]

Hello Jerome,

I did not understand your paragraph above: how can it be that if the CHF is revalued, our US securities in dollars are not valued even less expensively in CHF?
You also say that those who have cash in CHF have good opportunities to buy in foreign currencies: don't you think that there is a very high risk that the CHF will continue to appreciate and that the potential capital gains on securities in euros or dollars will be wiped out by the exchange rate loss?
I have never seen the Swiss franc fall in 20 years, the risk seems great to me...

[Pat Jac]

No: please send me a link to resubscribe by VISA payment, I think I'm past the deadline.
Thank you and have a nice day.

[Jerome]

here is the link to resubscribe: http://www.dividendes.ch/my-membership-options-page/

Pat Jac, you are absolutely right: the CHF is a structurally strong currency, unlike the dollar.
This is why you should choose stocks that benefit from a weak dollar when investing in US stocks.
When investing in Swiss securities, you should, on the other hand, choose securities that are little impacted by a strong CHF.
This is one of the foundations of my dividend strategies. I talk about it in particular here:
http://www.dividendes.ch/2011/12/actions-en-devises-etrangeres-et-risque-de-monnaie-12/
http://www.dividendes.ch/2011/12/actions-en-devises-etrangeres-et-risque-de-monnaie-24/
http://www.dividendes.ch/2012/01/actions-en-devises-etrangeres-et-risque-de-monnaie-34/
http://www.dividendes.ch/2012/01/actions-en-devises-etrangeres-et-risque-de-monnaie-44/
http://www.dividendes.ch/2013/07/se-proteger-contre-le-risque-de-change-en-investissant-de-maniere-globale/
I think this answers your two questions.

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