Leveraged Investments Gone


Leveraged investments rise and fall faster than investments without leverage.

Many readers write and ask me the same three questions.

Which of the five portfolios that we track with Jyske bank do I personally hold?  How much leverage should they use in their investments? Which portfolios should they invest in?

Let’s start from back to front.

Which of the model portfolios should a person invest in?  Maybe all…maybe none.  No one should just hold any one of the five portfolios just because they think it is good or bad or might rise or fall. We track these portfolios so we can learn more about global investing and see how various ideas economically unfold. 

The more important aspect of selecting your investments should be what works best for you.  The three determining factors for where you invest should be:

#1:  Your financial circumstances.

#2:  Value.

#3:  Your beliefs.

Second question, How much leverage do I use?  Very little. I have had only about 10% of my portfolio leveraged.  Compare this to 200% for the Green Portfolio (which is up 265% this year).   Now I have none.  This is due to my financial circumstances.

I personally use a PIEC three layer financial plan.  See http://www.garyascott.com/2005/01/01/1276.html

My biggest risks are in my own business.  So a lot of my portfolio investments are basically in a multi currency portfolio of bonds…mostly in pounds, Swedish and Danish kroner.  Previously interest rates on Swiss franc and Czech koruna loans were lower than what these bonds paid.  Now interest rates have risen so it makes no sense for me to leverage the loans.

The equities I hold are mainly in Europe and I do not leverage equities…especially after markets have risen so much. Periods of high returns are normally followed by periods of low returns.

These facts, plus my belief that numerous economic woes are rising and my recollection of Oct 1987 leave me wanting to reduce risk in my equity portfolio. So now I have eliminated all my leverage.

Yet I am a multicurrency investor and my portfolio though not identical is most like the Dollar Short Portfolio below.

Curr                      Investment

AUD     5,00% BK Nederlandse Gemeenten 16.07.10

BRL    12,50% Brazil rep. of 05.01.16

GBP     6,375% Rabobank Nederland 20.03.09

HUF     6,50% Hungary Gov. 12.08.08

ISK       9,50% Iceland 13.06.2008

MXN     9,00% Mexican Bonos 22.12.2011

NZD     6,00% KFW 15.07.2009

TRY     10,25% KFW 09.02.2008

USD     3,875% Deutsche Telekom 22.07.08

USD     5,45% Hutchison 24.11.10

USD     7,20% Porsche Intl. 01.02.2049

EUR     Jyske Invest Favourite Equities

EUR     Jyske Invest German Equities

EUR     Jyske Invest High Yield Corporate Bonds

JPY      Jyske Invest Japanese Equities

USD     Jyske Invest International Equities

USD     Jyske Invest Emerging Market Bonds

This portfolio is only up 48.22% this year.  Three other portfolios look pretty much better.

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There is a final reason I liquidated my leverage now…to lead by example. Too many readers are thinking that the dollar short or dollar neutral Portfolios are only up 38% or 48% for the year. When one thinks that way they could be headed for trouble, so I hope investors will follow my lead and take greater care with their leverage.

Until next message, may your wealth grow as your risks dwindle.

Regards,

Gary

The autumn is exploding in color here this week. Here a two shots I took on an evening walk.

Wonderful colors now mean cold weather soon so we are ready to head south…to Ecuador .

P.S. We will look at our 2008 portfolios at our upcoming International Business and Investing course in Ecuador .

Space is always limited. We can have a maximum of 50 at this courses and currently 43 have reserved and paid.  Many more have enquired.

This course fee is rising from $549 to $799 next year for one and from $799 to $999 for a couple.  You can enroll in this course until it is full at the old low price.  You can enroll in the March 7-9 course at this low fee until November 3, 2007.

Sign up as soon as possible and share the satisfying, profitable and exciting lifestyle that being international brings with Merri and me. To enroll please go to:  http://www.garyascott.com/gr1018.html

Stay on and enjoy a two day real estate tour. Details are at

http://www.garyascott.com/catalog/ecuador-tours-november-2007

Stay on and enjoy our Shamanic Tour!  Don’t miss this tour as it will be the last for at least a year. We have had over 4,500 enquiries about Ecuador in the past five months. 90% of them have been about Ecuador real estate so in 2008 we’ll be expanding our real estate tours instead of the shamanic tours.

http://www.garyascott.com/catalog/ecuador-shaman-mingo-tour


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