Interesting thoughts. I haven't found any Swedish investors who would consider holding a part of the the bond portion in EUR instead of SEK:Minor points:
According to strict investment theory, you should have the risk-free part of your portfolio in your home currency.
US citizens have it easy here. Their home currency is the world's safe haven currency, so they never think for a moment that they should use another currency here.
A Swedish investor who followed the strict theory and invested the bond portion in Swedish krona had to watch as the Swedish krona depreciated by 50% against the USD and 30% against the euro in the last seven years. And there was no compensation through higher interest rates. Inflation in Sweden was about the same as in the Eurozone.
Because of this currency risk, there are also people who say that, for example, in a 60/40 portfolio, having 40% of your assets in one currency is a major cluster risk.
- as Valuethinker noted, for small countries, it is better to choose the closest large currency, so for Sweden at least a good chunk of the bonds (if not all) should go to EUR hedged.
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Statistics: Posted by markus75 — Fri Jul 05, 2024 6:20 am — Replies 17 — Views 4057