#16 Little Acorns: Strong Dollar Masks True 71% Gain

stride-blog-strong-dollar-masks-true-71-gain-featured.jpgYes, you did read that right. In GBP terms, on its two-year anniversary, my portfolio is up by 71%. However, I report in USD and in those terms, my gains are a much lower 30.48%.

30% is still extremely good and I’m happy with it. 30% is beating all the major market tracking indexes by a very comfortable stretch. But, as I’ve been asked by many followers, why do I report in dollars at all when pounds make my gains look so much bigger? 

Why I Report in US Dollars When I'm UK Based

When I sold my flat in 2014 and used the money to start Little Acorns, I wanted to blog about my progress in language as accessible as possible.

English is the international language of commerce. But, the international language of money is dollars. Wherever you go, dollars count. Want to look up the price of Arabian oil, Jamaican coffee or Krugerrands? You’ll find them all listed in dollars per barrel, pound or ounce.

The dollar is currently the strongest it’s been since 2002. To the uninitiated – among whom I still count myself in many ways – it seems counterintuitive that a strong dollar will have a negative impact on any portfolio reported in dollars.

Yet this is the case, because no currency stands alone. It is always in a state of comparison with others. A strong dollar means a more expensive dollar. If you’re converting to dollars from other currencies, as I am from pounds, you get fewer dollars for your money.

While the dollar soars, the pound, its closest comparison in terms of global and historical significance, is dipping up and down around its lowest point in decades. Analysts are predicting better things for the poor, old GB pound in 2017. But they did also forecast a cliff-drop for the US dollar if Trump was elected and look how that turned out.

Ultimately, the currency I report it is simply a means of keeping my records consistent. Currency doesn’t hold any true weight for me until I come to sell. If I sold everything today, I’d receive my gains in GB Pounds which would bring me gross profits of 71%.

My initial £58k investment is now worth £98k (excluding my cash amount). This represents annualised gains of 30.76% p.a.

In dollars, my annualised gains are 14.45% p.a. This still beats seven bells out of the standard market tracking indexes such as S&P500, which over the same time frame returned 3.5% p.a.

It also means I’ve made the same profit in two years as it took me ten years to make as a property investor.

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Why Value Investing is Nothing to Do with Politics

Currency isn’t the only thing analysts and forecasters have got wrong lately, of course. None of them thought the UK would vote for Brexit, or that America would elect Trump as its new president.

Within hours of the UK’s shock referendum results our markets had nose-dived.

They have since recovered, but the weakness in GBP means in global terms, our market is treading water.

In the case of the states, markets also dived but recovery took a matter of hours. Meanwhile, the USD has skyrocketed; meaning in global terms, the states has leapt ahead on Trumponomics.

In the run-up to both Brexit and the Trump / Clinton election, I was asked what I’d be looking for in terms of my next buys. How would these two seismic political events effect my investment choices? What would I have to change in their wake?

The answer is: absolutely nothing. A strong business today is going to be a strong business tomorrow; and a weak management team or financial outlook is not going to be magically corrected by a shock political shift.

My STRIDE targets before and after June 23rd and November 8th 2016 were the same. Valuations might have changed briefly with the unusual market activity but it didn’t take long for things to right themselves.

Value investing is a solid choice for me, as a long term investor, precisely because the focus is on the strength of a business and its ability to weather political or economic storms.

What the currency and political turmoil has highlighted for me, is my relief at not being either a day trader or FOREX investor.

Little Acorns portfolio break down

Current value: $143,085.61

30 holdings, 17 of which are up.

Sold: Lannet

Bought: 3i Group

Top 3 performers:

  • Svolder AB +91%
  • ATOSS software +84%
  • C-QUADRAT Investment AG +83%

 Bottom 3 performers:

  • FT Group Co Ltd -68%
  • Cenkos Securities plc -63%
  • Formosan Rubber Group Inc -59%

My most recent portfolio update email: 

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Topics: Little Acorns Portfolio


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