How To Invest In Foreign Currencies & Foreign Stocks
Previously I had mentioned several ways to invest for a recession or a major downturn in the US economy. In that post, I stated that one of the ways to hedge against the declining dollar (apart from my favorite method of buying gold) was investing in foreign currencies.
Several people emailed me asking how to buy foreign currencies.
A few were concerned that they would have to travel overseas and open a foreign bank account. Luckily, it isn’t so difficult. You have 3 choices.
1. Buy Currencyshares ETFs. You can choose between several currencies like Australian Dollar (Ticker: FXA), Swiss Franc (Ticker: FXF), Japanese Yen (Ticker: FXY), Euro (Ticker: FXE), etc. If you have a brokerage account, its as easy as buying stock. This is probably the easiest method. They also pay monthly dividends and are quite similar to buying a foreign currency CD.
2. Open on account with Everbank and invest in their foreign currencies CDs or directly open an account in a foreign currency.
3. Open on account with Interactive Brokers and directly buy foreign currency (this is probably the most hassle so you’re better off sticking with the top 2 methods).
If you’re interested in buying foreign stocks, the easiest way is to buy the ADRs (American Depository Receipts). However a lot of foreign stocks do not trade in the US as ADRs. A good way to play the foreign markets is to buy foreign ETFs. For example, if you’d like to buy blue chip dividend paying swiss companies, the Swiss Helvetia Fund (ticker: SWZ) is a great investment. (I also happen to like the Swiss Helvetia Gold Coins too!). If you think Singapore’s economy is doing well, you can buy the iShares Singapore Index ETF (ticker: EWS). Or if you like Brazil, you can buy the iShares Brazil Index (ticker: EWZ).
For a more comprehensive list of foreign ETFs check out How To Conquer The World For Fun & Profit. If you’re interested in learning more about currency trading or investing in foreign currencies, I strongly recommend Everbank’s free daily newsletter about the currency markets, the Daily Pfennig. It’s really good.
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May 27th, 2008 at 10:04 am
Hey, thanks for the post. No doubt I am one of the ones who was asking about this, in my first blog post:
http://fluomundi.typepad.com/fluomundi/2008/05/strategies-for.html
I think we both agree it’s important for Canadians and Americans both to be invested in foreign markets. Reportedly, Canada’s economy is at its slowest in 16 years, and, we all know the story with the U.S. economy.
May 28th, 2008 at 5:56 am
If you are really interested in buying foreign currency, you could simply open an account with Oanda.com with as little as $100. You don’t have to pay commissions like the ETF’s and there’s no management fees. In addition to that you earn interest daily.
You could also use margin and thus actually be able to hedge your exposure up to 50 times.
May 28th, 2008 at 5:58 am
I might check out Everbank.
Also, I love the word number & read time!
May 28th, 2008 at 6:57 am
I will have to look into these. In the mean time I need to find a good price to dumb my SIRI stock that has done nothing for me… I have been waiting for years it seems like for a merger.
May 29th, 2008 at 4:52 pm
Living off Dividend,
I was a stock broker in Malaysia 15years ago. We have a saying in Malaysia that if America cough we sneeze, ie America is the big brother so our stock market was very much affected by DJ.
In view of that philosophy, how can I be sure that all these currencies are going to do better than our US currency ( I am naturalized now). I do hope you do not think I am challenging you, I am trying to learn various aspect of investing ( I am sure you know I am heavy in gold, silver, molybdenums and energy the last 5 years and I like to diversify).
Having said that, I remembered in 1998, a lot of my Brunei friends invested in N.Z dollars. (yes, I worked in Brunei for about 5 years, just to give a bit history on Brunei, it is a oil rich producing country in S.E Asia, their currency is peg with Singapore,there is no income tax in that country, the Sultan used to be the richest man before Bill Gates come along). I think a lot of my friends were investing in N.Z dollars because N.Z dollars went through the South spill. I think after about 5 years, most of my friends who invested in N.Z Dollar made a lot of profit.
What are the currencies do you personally think is worth buying at this period ?
By the way, about gold, I am going to start buying some of the shares which I sell before summer. These are the ones which are in my radar : GG, NEM, and SSRI.
Regards,
Jamy
Stumbled the post and wrote a review.
May 29th, 2008 at 5:17 pm
You’re right – as 25% of the world’s economy, if the US sneezes, the rest of the world does catch a cold.
last year the US Dollar depreciated against all major currencies.
CAD is at parity, AUD is close behind. CHF is also close to parity. JPY is closing in on the 100 Yen level. nearly all south east asian currencies have appreciated against the dollar in the past 2 years.
The Indian rupee is up 20% from 2 years ago.
Personally, I like AUD, INR, CHF & JPY – but there’s a chance the dollar may rally if the Fed says they’re going to stop raising interest rates.
If I were to buy today, I would get in slowly at this point – maybe take a 25% position and take the remaining position over the next 6 months.
May 29th, 2008 at 8:43 pm
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May 30th, 2008 at 10:09 pm
Good tip about Oanda, DGI. I will check them out…
May 31st, 2008 at 6:23 am
This is a great article. I just started to ask the question on how easy is it to invest in FX items….These 3 recommendations is a great start….Thanks again and I have added you to my blogroll…
May 31st, 2008 at 12:48 pm
Great post. How would I report the interest I earn through foreign CDs if I purchased them through Everbank? Would they be able to handle the forms I need? Would they be treated similarly as interest earned on U.S. based CDs?
June 1st, 2008 at 7:38 am
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June 1st, 2008 at 12:29 pm
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July 22nd, 2009 at 1:29 am
Traditionally gold has always held its value better than the dollar in terms of buying power. An ounce of gold has always been able to buy a well tailored suit and that ounce of gold will not lose its value like currency.