Safe-Haven Currency and Sequence Risk – Why Currency Can Be Crucial in Retirement

People who invest globally usually think about stocks, bonds, and returns—but far too rarely about the currency in which their real life actually happens. This article explains why that can make a major difference during difficult market periods.

Many people assume that what matters most in a long-term portfolio is the average return it delivers over time. But that view misses something essential. In real life, it is not just the size of returns that matters, but also when good or bad years happen. Someone who suffers major losses in the first years of retirement or portfolio withdrawals is in a completely different position from someone who faces those same losses much later. That is exactly the issue at the center of the scientific article Safe-Haven Currency and Sequence Risk: A State-Dependent Swiss Franc Overlay for Global Portfolios. 

The article highlights a point that is often overlooked in practice: for people who invest internationally, it is not only the portfolio itself that matters, but also the currency in which they actually live and pay their expenses. Someone who lives in euros or Japanese yen does not experience wealth the way it appears on a U.S. dollar-based market report. Financial reality only becomes real once the portfolio’s performance is translated into the investor’s actual spending currency. And that is exactly where additional risks can arise—risks that often remain almost invisible in more traditional portfolio analysis. 

This matters because a globally diversified portfolio outside the United States is often still heavily shaped by the U.S. dollar. In calm market conditions, many investors barely notice that. But in more difficult periods, it can happen that not only stocks or bonds come under pressure, but the currency translation works against the investor as well. In that case, the damage hits from two sides: first through falling markets, and then through conversion into the currency in which the investor actually pays rent, buys groceries, covers healthcare costs, and manages everyday life. The article makes it very clear that currency is not just a technical side issue. It is an independent factor in financial stability.   

That is where the paper’s central idea begins. It examines whether a small, carefully used reserve position in the Swiss franc can help investors get through these periods more safely. The Swiss franc has long been viewed as a currency that often attracts demand during times of crisis. Many investors see it as a safe haven. The article takes that observation and turns it into a concrete, testable strategy for international portfolios. This is not about speculation, and it is not about moving large portions of wealth into Swiss francs on a permanent basis. It is about a small, rule-based protective position that becomes relevant only during periods of elevated market stress.   

The basic idea is simple. When markets come under serious pressure, a defensive currency reserve can act like a buffer. Its purpose is not primarily to increase returns. Its purpose is to help limit deep damage during the most vulnerable periods. That can be especially important in the early years of retirement or in the first years of taking regular withdrawals. When someone has to finance living expenses during a bad market phase, they are often forced to sell assets at unfavorable prices. That does not just shrink the portfolio—it also makes recovery much harder later on. For that reason, the article does not merely look at averages. It asks how losses, recovery time, and withdrawal stability change during real periods of market stress.   

One of the most interesting things about the paper is that it does not make sweeping claims. It does not say the Swiss franc is always the best answer. Instead, it develops a clear and practical rule. Global bonds should be hedged into the investor’s own spending currency so they can better serve their stabilizing role. Stocks can remain broadly international. On top of that, a small position in Swiss francs is only added or increased when certain stress signals point to elevated systemic pressure. In this framework, the franc is not treated as a permanent bet, but as a protective tool for difficult periods.   

That makes the article highly relevant to a practical question that matters far more to many investors than abstract market statistics: How resilient is a portfolio in the years when losses do the most damage? One weak calendar year by itself is not necessarily a disaster. The real problem begins when a portfolio falls sharply during the early withdrawal years and then takes a long time to recover. In situations like that, a defensive currency reserve can help soften the decline, shorten the time spent underwater, and improve the sustainability of withdrawals. That is where the article sees the real value of a small, state-dependent CHF position. 

The paper also shows that investors need to think consistently in terms of the currency of their actual life. A portfolio may look perfectly acceptable in U.S. dollars on paper. For someone living in euros or yen, however, the real picture may be significantly worse. On the other hand, a small protective position that looks unimpressive to a dollar-based investor may make a meaningful difference once everything is measured in the investor’s true spending currency. The scientific core of the article therefore rests on a simple but often neglected insight: It is not only the assets themselves, but also the currency in which a person experiences crises, that determines how stable a portfolio really is.   

At the same time, the text remains realistic. The Swiss franc is not presented as a magic solution. Even a defensive currency can create drag or opportunity costs during calmer market periods. Its behavior also depends on monetary policy and broader political conditions. That is exactly why the framework in the paper is not ideological. It is designed to be testable: transparent, falsifiable, and measurable against clear benchmarks. The proposed solution is not meant to impress. It is meant to hold up in the real world. 

In the end, the article delivers a clear message: anyone living outside the United States and investing globally should not treat currency as a side issue. In difficult years, it can play a decisive role in the stability of a portfolio. In this model, a small, state-dependent allocation to the Swiss franc appears as a possible protective building block—not as a permanent speculation, but as a concrete response to a simple question: Which currency helps protect me when markets fall and I still need to keep living off my portfolio?

The full scientific article can be found at:

Elias Rubenstein (2026): Safe-Haven Currency and Sequence Risk A State-Dependent Swiss Franc Overlay for Global Portfolios
Published in: Journal of Banking and Financial Dynamics, 10(3), 15–21. https://doi.org/10.55220/2576-6821.v10.912