Investing used to be so easy. You’d find an asset class you liked, and buy
it, and then, if you were right, it would go up, and you’d make money.
Not any longer. The problem is that the hot
attractive asset class, it would seem, is now foreign stocks. The $2.1 billion
Waddell Advisors Asset Strategy Fund, for instance, has just 25
percent of its holdings in US equities.
If you’re a dollar investor who’s bought foreign stocks over the past couple
of years, you’re smiling right now. Not only have those stocks increased in
value in local-currency terms, but the dollar has weakened at the same time,
turbo-charging your returns.
The problem is that you’re not only a stock picker any more: you’re layering
FX risk on top of stock-price risk. When both move in your direction, as has
been the case of late, you’re happy. But now you have two ways of losing
money, not just one: either your foreign stocks can go down in value, or the
dollar can go up in value. Investing is a more dangerous game, these days.