All investment portfolios are also optimised to reduce risk. Please note that results below do not include fees and are backtested.
We have three different types of strategies based on a client's risk profile. Once you answer a short risk questionnaire, your retirement accounts will be automatically invested on your behalf.
The Conservative Strategy = 8% returns per year
The Balanced Strategy = 12% returns per year
The Adventurous Strategy = 16% returns per year
Returns above are an approximation based on backtesting; they are slightly lower than investing in USD directly due to the hedging risk, but very useful if you are resident in Europe which uses EUR or living in country which has a currency which closely tracks EUR or you are investing for shorter periods of time and investing with EUR.
The performance data shown represent past performance, which is not a guarantee of future results and do not include transaction fees. Investment returns and principal value will fluctuate, so investors' shares, when sold, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data cited.
At first, we looked at automated trading systems using EUR ETFs which were traded in the UK on the London Stock Exchange (LSE) or Germany on the Deutsche Börse. However, there were some issues. Most EUR ETFs have had a much shorter shelf-life than in the USA which meant there was not enough solid data available for thorough testing. We could have used some of the newer ETFs and leveraged ETFs in EUR in the UK or Europe, but with so little data to test, it was not as reliable to form models and predict future returns. There would have been too much guesswork involved, so we weren't comfortable with the risk levels.
We also tested data from some of the older EUR ETFs in Europe, but the returns were not as good ad using a EUR hedged version of the USD strategies. In the end, it seemed to make more sense to use the USD ETF trading system which invests in the largest companies in the world such as Google, Amazon and Apple rather than invests in mainly EUR based companies or using ETFs in EUR GBP which often had higher expenses than their US counterparts.
The US dollar actually makes up more than 64% of the global central bank's foreign exchange reserves. In the foreign exchange market, the dollar rules. More than 85% of forex trading involves the US dollar. Furthermore, 39%of the world's debt is issued in US dollars.
You can read more here about why the US dollar is the world's reserve currency.
So, instead of creating strategies in ETFs based in EUR listed on the LSE or the Deutsche Börse.with limited data and lower returns, we are using a EUR-hedged version of our USD ETF strategies. We believe this will give clients better returns at a lower risk with better predictors of outcome. However, we may switch to EUR strategies in future once we have more data.
We compensate the currency risk with E-micro futures. One future has a value of 12,500 EUR, so that is why the minimum account size is 15,000 EUR. This is the minimum account size for the hedging to work. The futures need to be rolled over every 3 months. This is why we recommend accounts to be held for 5 years or more so that the hedging can work and the market can also ride out any business cycles.
You can see the E-micro futures contracts for EUR/USD here. Click here to read more about hedging risk. Also, if you invest in amounts which are not a multiple of 15,000 EUR, some of the EUR will remain a currency risk, as the futures contracts cannot be split into smaller parts, i.e. if the trade volume is 20,000 USD, and a EUR future contract is traded at 15,000 USD, the remaining 5,000 USD will be exposed to some currency risk. Just something to be aware of.
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