How to buy international stocks if the dollar stays strong

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Many financial firms say U.S. investors should own foreign stocks as well as domestic stocks. The problem is that when you own foreign stocks you get exposure to the currency of the country where a stock is domiciled. That means in addition to the stock’s performance, your total return will include the performance of the foreign currency translated into U.S. dollars.

Currency moves can be bigger than stock moves. Currency moves can either enhance a positive stock return or wipe it out altogether, turning it into a loss. Alternatively, currency moves can amplify a negative stock return or reverse it, turning a loss into a gain.

Lately foreign currencies have faltered versus the dollar (DXY) , and that has hurt the returns in dollars of U.S. investors with a foreign stock allocation.

© Provided by Dow Jones & Company, Inc.© Provided by Dow Jones & Company, Inc.

For this reason, a class of exchange-traded funds hedges currency exposure, leaving dollar-based investors with only the stock return and neutralizing the currency-generated headwind or tailwind.

Fund companies providing full suites of currency-hedged foreign equity ETFs include iShares and Deutsche Asset Management. The Deutsche suite clocks in slightly cheaper than its iShares counterpart. The Deutsche X-trackers MSCI EAFE Hedged Equity ETF (DBEF) levies a 0.35% expense ratio, and the Deutsche x-trackers MSCI Emerging Markets Hedged Equity ETF (DBEM) costs 0.65%. By contrast, the iShares Currency Hedged MSCI EAFE ETF (HEFA)  costs 0.36%, while expenses for the iShares Currency Hedged MSCI Emerging Markets ETF (HEEM)  run 0.71%.

Asset management firm AQR argues that unhedged investors in foreign stocks historically have incurred increased volatility without any boost in performance, due to the foreign currency exposure. This is the worst of all possibilities, according to the modern way of looking at investments — more volatility, but no commensurate gain.

It’s true that currency’s impact on stocks tends to lessen over time. Hedged and unhedged performances for foreign equity indexes tend to converge for multi-decade periods. And even the most recent 10-year period produces some convergence when compared to three- or five-year periods.

But not all investors can wait decades. For those investors, a currency hedged ETF may be more prudent.

That said, the dollar’s rally may be over. The messages from the Trump administration are mixed on this. Treasury Secretary Steve Mnuchin has argued for a strong dollar, but a weak dollar would encourage American exports, which Trump generally wants to boost. If the dollar weakens, being unhedged on foreign stock holdings (having exposure to foreign currencies) would be the better strategy.

Yet your portfolio doesn’t have to be fully hedged or fully unhedged. You can split exposure between a currency-hedged fund and a non-hedged offering. That way, an investor gets some foreign currency exposure, just not the full amount.

Whatever you decide — fully hedged, fully unhedged or partly hedged — don’t try to be differently hedged at different times. Making currency bets is beyond the scope of both individual investors and financial advisers.

One other possibility: avoid foreign stock exposure altogether. Most financial advisers don’t recommend that, especially now that foreign stocks appear cheaper than domestic stocks on a variety of valuation measures. But veteran investors Warren Buffett and Jack Bogle seem to think a purely domestic portfolio is fine. After all, about half the profits of the companies in the S&P 500 (SPX)  come from outside of the U.S., and many of those companies implement their own currency hedge on foreign revenues and expenses.

John Coumarianos

Source:http://www.msn.com/en-us/money/mutualfunds/how-to-buy-international-stocks-if-the-dollar-stays-strong/ar-AAmURoK

How to find the next million-dollar idea

I'm often asked what has driven my career as a serial entrepreneur. Here
are the steps that I go through for each new venture I embark on. 
I call them "The Five C's" of entrepreneurship.

Creativity

The first act of creation is in the mind. Before you can do it, you have to think of it. It's that simple.

A massive business opportunity is right in front of you. Right now. But do you see it? How about that new product that billions of people around the world want? Still don't see? Trust me, it's there. The biggest obstacle standing between you and the goals you want is your own creativity. Imagination is an ocean of wealth that anyone can access. It never runs out! Here are two practical steps to harness creativity as an entrepreneur.

Warren Buffett's 9 rules for running a business

First, practice awareness. Be more conscious of how you and others are feeling. Get off auto-pilot mode as you experience life. Annoyed you can't find a cab? Delighted you could order food in one minute? Note it. Second, apply imagination to the pain or opportunity you've identified. These pains often linger in my mind for weeks, months and sometimes years before a solution comes to me. To nurture my imagination, I engage in meditation, music, travel or other activities that loosen my mind and snap me out of routines and habits. The magical moment is when the idea that cures the pain comes to you and you understand how a combination of business models, technologies, processes, products and go-to-market strategies will solve the problem.

Clarity

After you've thought through the business design that cures a pain, the next step I take is to focus on the precise nature of the opportunity. Is the market large enough? Who exactly is your customer or user? What are the other options to solve the problem? Is yours better?

"A massive business opportunity is right in front of you. Right now. But do you see it?"

One thing to watch out for at this stage is your ego. Are you engaged in selective listening, downplaying your potential customer's concerns and over-valuing your solution? Do you just have third-party market research data or do you have an intimate knowledge of the problem or opportunity? It is very easy for the desire to become an entrepreneur to overshadow the importance of knowing the facts and, even worse, ignoring information that points to significant flaws in your business idea. I have made this mistake.

Conviction

After clarity on the attractiveness of the business opportunity, the next step is to get enough conviction to take action toward launching the business. Should you quit your job or invest your family's savings to build a prototype? Only you can answer this question because everyone has a different species of fear. It is fear of all the things that can — and will — go wrong.

Cramer's 3 tips for investors just starting out

I've found that one of the best ways to manage this fear is through visualization. No data, market research or opinions of others will replace this. A powerful guide to overcome your fear is compelling imagery of the end goal in your mind. I remember "seeing" my start-up idea being popular and used by many as I pondered leaving the hedge fund I worked for in 2004. It was as if I got a sneak peek into the future and all I had to do was jump toward the inevitable. I quit my job in December and started working full time on my idea. I worked from my apartment with one developer in Russia building Hopstop, a company that would solve the problem of getting around large cities with the use of train, bus and walking. Apple acquired Hopstop in 2013.

Capital and Connections

An entrepreneur with the best idea in the world will not get funding nor find strong team members if they don't have the relationship capital to get the attention of investors and potential employees. It is relationship capital that usually leads to venture funding (financial capital) or success in recruiting a strong team (human capital).

CNBC PRIME

THE PROFIT

The Profit effect: Shuler's BBQ

Returns Fall 2016

Watch full episodes | TV schedule

How many times have you found that perfect employee, adviser or investor on Linkedin and found you didn't have the 1-2 degrees of connection needed for a warm intro? This is probably my biggest challenge as an entrepreneur for every company I've started. I am sure other entrepreneurs feel the pain of access and attention. It is also understandable that professionals have to make decisions on how to split their time between work, family and other commitments. So how do you allow strangers to connect with you while managing your limited time? That's the problem my new start-up, Gigameet, plans to address. The company facilitates high-impact one-hour meetings for a fee and a portion of the fee goes to support the professional's charity.

Concentration and Confidence

The next step is execution, which requires concentration. I was fortunate to have sat on HopStop's board with Yaron Galai. He taught me about the importance of focusing on the core user proposition, product and experiments. There are countless resources to help you at this stage. If you are a first time Internet entrepreneur, I suggest you listen to all the videos by Y-combinator and Michael Skok. The journey will always have highs and lows and you will often doubt yourself. Try not to. Have the confidence to continue pushing along until you've fine-tuned your product and found the levers for your business to achieve rapid growth. I wish you the best on your own journey.

4 billionaires reveal the secrets of their success

Commentary by Chinedu Echeruo, the founder of three Internet companies: HopStop, Tripology and Gigameet. He lives in New York City. 

Source:http://www.cnbc.com/2016/03/16/how-to-find-the-next-million-dollar-idea-commentary.html