| Recognizing the international investor's interest in broad
currency diversification, most Swiss annuities are offered in Swiss francs (Sfr), Deutsche
marks (DM), US Dollars (US$), or European Currency Units (ECU) - or any combination
thereof. You choose the denomination or your annuity and thereafter you always have the
option to switch currencies at any time. (A nominal fee of Sfr 300 per switch will be
charged). While the Swiss franc is certainly the international
investor's first choice due to its long-term strength against all currencies, short-term
gains may be achieved in one of the other available currencies. Currency exchange rates
fluctuate from day to day. In many cases, however, a strong trend in a particular currency
becomes apparent, and for the more active investor,
the currency switch option can be used to
further optimize your return.
To illustrate this technique, review the graph shown above. The graph
represents the Swiss franc from 1993 to the 1st of this month. This graph is updated
monthly. The numbers along the right side represent the performance of the Swiss franc
in%. Notice the high and low points on the chart. These points represent the optimum
return you could have received if you purchased a Swiss annuity in 1993 with Swiss francs
and employed the currency switch option with exact precision. The low point is -19%. The
high point is 11%. This is a combined return of 30% (from -19% to 11%) over 2 years or
approximately 15%/year. Now add the Swiss annuity guaranteed return and the profit sharing
dividend of 5.5% to the 15% for a total annualized return of 20.5%. This is the optimum
return you would have received for the two year period from 1993 to 1995 if you employed
the currency switch option using the Swiss franc and the US Dollar with exact precision.
Now for reality and the minimum calculation over the same period. Notice on the
chart where the two lines (upper and lower) are drawn. They are drawn at the 6% (upper)
and -15% (lower) points. By using this new low point of -15% and new high point of 6%, we
calculate a minimum combined return of 21% or 10.5%/year. Add the guaranteed return and
the profit sharing dividend of 5.5% and the total annualized return is a more realistic
16%.
In summary, during this two year period, the total annualized return using the
currency switch option would have been anywhere from 16% to 20.5%, but more likely closer
to the 16% level. And, you only had to employ the currency switch option strategy once
during this period.
Once the strategy is understood, generating a total return of 16% to 20.5% from
a safe, secure 5.5% Swiss annuity investment can be accomplished quite easily and safely
without the high risk of leveraged currency trading.
|
