Dear Mr. Tan,
When my foreign currency matured recently, the bank consultant got me into dual currency investment. He sounded very logic that US dollars will further depreciate and that he believed that the Australian dollars will appreciate. This is a month tenor. He did not work out the exact loss I would face if the situation is not favourable to me.
After I read your article in you website, I felt terrible. What if I lost when it matures on 14th December. This is my savings for the past 18 years. I had put it in fixed deposits all these years and never thought I could be persuaded into this foolish act of mine.
What is your advice to me if I got the other currency and not the base currency. Should I just put the Australian dollors into a fixed deposit? I want to thank you for enlightening me in many of your articles.
REPLY:
If you do not wish to take any risk, you should keep the money in Singapore dollar fixed deposit and earn 2% interest. You can also invest in a money market fund or in Government bonds.
If you invest in foreign currency, you can take the risk and hope for the best. You will earn a higher interest rate, but this could be offset by the possible depreciation in the foreign currency.
The foreign curreny may appreciate and give you a double benefit. Read this FAQ: http://www.tankinlian.com/faq/foreign.html
I am not able to give specific advice on which currency to invest in.
From what you wrote, I think whether for big or small amounts for foreign currency deposit, it is not worth your worry. Why? Because for small amount, even if it is favourable, the gain may not be that much but cause you so much worry. For big amount can have big gains but also much bigger worries. It will also affect your mental health if you are not risk prepared and strong to take it.
ReplyDeleteYes, I just did a what-if analysis.
ReplyDeleteEarning - capped and limited.
Losses - Unlimited.
What a "unfair" game for investor.