Can you buck the weakening rand with the DB x-tracker FTSE 100?
With the rand doing tumbles in the markets right now, you need a way to expose your money to international markets.
You see, by earning money in pounds or dollars, you're protecting yourself from the weaker rand here at home. In fact, you're increasing your investment returns. ETFs are a great way to get exposure offshore with limited risk and capital outlay. Today we've found you the ideal offshore-exposed ETF to add to your portfolio. Here's what you need to know about the DB x-tracker FTSE100...
Well it could be a good bet as a rand hedge investment right now
You see, its returns are driven by the weakening rand and the performance of large UK-listed companies.
In the past, most of the returns investors received from the DB x-tracker FTSE 100 came from the rand’s poor performance against the pound than in gains in the underlying stocks. This becomes clear when you look at the results.
The fund has an annualised three-year return of 13%, its stocks however, have lost 1.25% per year over the past three years. This is proof that the weakening rand is driving its performance.
The outlook for the rand is massively bleak right now... But the UK is uncertain too
I’m sure you’ve seen the predictions on the rand falling significantly before the end of the year. That means this could be the right hedge your investment portfolio needs..
But is it really?
You see, since this fund tracks stocks in the UK, you need to look at what’s happening in that country right now to see if it’s a solid investment opportunity. Very soon, there’ll be a referendum in the UK where voters will decide whether the country remains part of the European Union or whether it leaves.
It’s too soon to tell whether the results of the referendum will be positive or negative. We don’t know what will happen to the pound if the UK leaves the European Union. So, the best thing for you to do right now is wait for the results of the referendum on 23 June.
Sometimes doing nothing with your investments is safer...
This is a pure equities investment which means the performance might be more volatile than you might like. General market risks, exchange rates, interest rates, inflation and regulatory risks are just some of the things you need to consider.
Let’s see what happens in the next few months and revisit this opportunity then