Take into account a Brazilian investor with R$1,000 to allocate every month from January 2000 via June 2026. Each methods under use month-end closing costs and pay roughly 2.1% in conversion prices, a 1.1% monetary transactions tax plus a 1.0% foreign money unfold, every time capital strikes offshore.
The primary is dollar-cost averaging: convert and make investments R$1,000 within the S&P 500 each month, regardless of the alternate fee. No view, no discretion, no pause.
The second is unattainable. Contributions accumulate at home risk-free charges and convert solely at alternate charges recognized prematurely as exceptionally enticing, then purchase the identical index. Name it the oracle technique, as a result of it assumes foreknowledge no investor has.
The month-to-month purchaser completed with roughly R$2.92 million. The oracle completed with roughly R$2.17 million. The hole is about R$748,000, or 34.5%, in favor of the investor who by no means tried to be proper concerning the foreign money.
The result’s price stating exactly, as a result of it’s straightforward to overclaim. It doesn’t present that foreign money ranges are irrelevant, and it displays one historic path below a selected set of assumptions. It reveals one thing narrower and extra helpful: an ideal reply to the foreign money query didn’t cowl the price of the time spent ready for it. If flawless timing loses, the reasonable model, hesitant and solely often proper, begins from a worse place.
