Adding Foreign Currency to Your Investment Portfolio
The economy of the 21st century is a global one, with each nation’s economy affecting the others. When there’s an economic crisis in one part of the world, it’s sure to affect the rest us, but the results can be surprising. Some countries fare better, and even prosper as other economies flounder. Adding currency to your investment portfolio is one way that you can continue to see good returns, even when our economy is struggling.
Exchanging for Stronger Currency
When exchanging the American dollar for a foreign currency, you can view the world’s economies like a simplified stock market. While major global economies like the U.S., Japan, and Europe are experiencing a downturn in the value of their currencies, there are other countries that are experiencing tremendous growth.
Exchanging The U.S. dollar for stronger forms of currency protects against the devaluation of the dollar. You can exchange the dollar for the currency of a country that is gaining economic ground. Watch as your money strengthens in the foreign market, and then cash it back out later at a higher rate, because the your currency has strengthened even though the dollar hasn’t.
Foreign Investments
While you can turn a pretty profit by exchanging in foreign currencies, you can greatly compound your return by investing in foreign economies. A very conservative example of this would be opting for a foreign CD instead of a savings account to hold your money in. If a foreign currency is making a better return rate on investments, you’re going to yield more money with investments there than you would in the U.S.
You can assume varying levels of risk in the foreign market, just like you can here. Foreign investments serve to strengthen your portfolio against economic crisis in the U.S., such as the housing crisis that lowered the value of real estate across the board. If you’ve got some money tucked away in foreign markets, you can see portions of your portfolio grow, even if your U.S. portion is floundering.
Choosing Foreign Currencies
When choosing which types of currency to trade in, there are some key factors to be aware of.
Interest rates: The United States is experiencing historically low interest rates right now, which makes it pretty easy to find a currency that will yield a higher rate of return than the dollar. Research foreign interest rates when choosing foreign currency.
The Lifeblood of the Economy: Investing in economies that are powered by reliable factors will ensure that your investment is more safe. Economies built around strong commodities such as oil or gold aren’t likely to seriously falter any time soon.
This article was written by Tiecen Anderson, a content specialist for Buy Dinar.
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