Myles of Investments

Read about my successes and failures. Learn from my experiences and gain insight without losing any cash!!!

Lesson: Catching a Falling Knife
Lesson: Currency Exchange
Lesson: Mutual Fund
Lesson: Paid to Wait
Lesson: Pricing in a Downturn

This is where you’ll find find my Blog. I will comment on the latest news relating to investing, real estate, and the financial markets.

Lesson: Currency Exchange Hit

I bought into a stock that was traded in a foreign currency early in my investing career. I was sure the stock was undervalued, as the market had been beating it up for a while. They packaged mortgage debt and took a cut as the middleman, and I though this was a great business model, everyone needed houses and they were there to help, and make a living at the same time.

I made my investment, of a dozen shares or so, and waited to my big play to pay off. I was happy as I enrolled in the DRIP, and each quarter the company bought me more shares and my stake increased. As I was a student at the time, it took every extra cent to make this investment, and it was funded largely with birthday money that I had managed to stash away. I desperately needed some money to pay off some debt, so I looked at my holdings. Sure enough over about a year and a half, the stock’s fortunes had improved, and I was sitting on just over an 8% compounded annual return. I cashed in and closed out the account, and when I got the check and cashed it, I was surprised at my lack of gain.

I didn’t factor in what my currency was doing relative to the stocks, and my gain was virtually wiped out, as the price of currency had shifted dramatically over that time. This was an important lesson for me then, and I heavily consider it now when evaluating foreign stocks. Don’t forget the external factors that can impact real returns. It’s all nice for funds and newsletters to claim that they got an 8% gain, but they don’t always factor in the fees and the exchange, which can wipe out gains or put you at a loss. Take a step back and analyze the entire situation, and you might catch a bad deal you thought was the golden goose.