Hello Mr Tan
I am retired. I am currently holding US Dollars converted from Dual Currency Investments. At the current low exchange rate and low interest rates, what should I do with the US Dollars to minimise my loss of about S$60k.
REPLY
If you think that USD will go lower, you can take your loss now. If you think that it will go up, you can hold on. But, I do not know whether it will go up or down. So, I cannot advice. Sorry.
6 comments:
This story shows the risk of a dual currency investment. If the currency drop, the investor can lose a lot of money. If the currency appreciates, the upside gain is just 1% or 2% more. The gain does not commensurate with the loss.
The bank says that you can hold until the currency recovers. Is this true? The longer you hold, the bigger can be your loss, if the currency keeps dropping.
Never, never invest (gamble) in a dual currency deposit. It is better to gamble in forex directly and take the upside and downside. At least, it is a fair gamble.
This shows lack of supervision from MAS, again.
Why are the risks of dual currency investment not explained properly to the retail investor?
On a bigger picture, why are such dangerous tools even allowed to be sold to the man-on-the-street at all?!
I think this kind of argument will continue i.e. safe or not safe investment and why MAS allow it to be sold. To be a successful financial hub, the poplulation must raise their own financial literacy. After the MB saga, you will discover each individual is responsible for their own financial literacy [MAS/Govt/FIs wash their hands on MB saga]. New, commission driven FA, profit driven Securities Houses, bottomline driven banks will continue to promote products to people whether they are ready or not. Every product has risk and the buyer may not be suitable but the FIs will still sell anyway.
So what to do? Ask, network, email to FISCA, ask TKL. Direct Forex trading seems dangerous but if you have the discipline & a sound plan, it may work for you e.g. you are in total control, invest small, low commission, stop-loss activation, set price target etc. These are strategies you can adopt to protect your investment while you have to knowledgeable on Technical Analysis to make buy/sell decision. Some people can take it while others may not. For those who dislike the above, then look for something that suit their risk profile. FD is one of them but low interest payout. Anything else, then he should put a bit more effort to know the risk. Consultant advise alone may not be enough thus asking around can help to further understand the risk involve. As for the writer above, he has not understood the risk enough thus searching for a way to move forward. Who can predict how the market move, some say up, same say down. Watching CNBC always end up with mix opinions. They seems to have all the reasons of why the market goes up or down. I think on the above, the writer should sit down objectively and calculate his risk with a different scenarios as well as whether he can hold if he thinks that US$ will return to 1.54 against S in a long term. Investing small amount and divesify can help a person think rationally in time of a market crisis.
To the retiree who seems to be sitting on a S$60K paper loss.
My dear fellow Singaporean.
First step is to get yourself a financial education. Be willing to put in the hard work and pay money to get a good financial education.
Someone famous once said, "If you think education is expensive, try ignorance."
Second step. Please take a look at a price chart of Singapore dollar versus the US dollar over the last 3 years (5 years would be better).
In general, before buying any asset that fluctuates in price (eg currency or shares), it's considered good practice to take a look at a 3 year price chart first.
I'm not going to tell you where to get a good financial education. I've spent and wasted good money running into 5 figures over many years on both good and bad financial education courses.
If you don't have the stomach to put in this type of sustained effort, it may be better that you stick with a savings account and a HDB flat.
Invest the rest of your time on your wife and children. Our time on earth is limited. If I had one year left to live, I won't be wasting my time on investing.
Step 3. Join FISCA. Maybe your plight will inspire others to form an investment study group within FISCA to learn about investments together. Making new friends and money. What can be better than that?
PS: I'm not a member of FISCA. This is a new organization and this is a chance for you to make a contribution.
One solution is to ask your bank if you can withdraw your investment in USD. Tell buy super blue chips US stocks (with good dividend) using this USD. Keep it for 5 to 10 years, I am sure you will have a good chance of breaking even or make money. Or just keep collecting the dividends.
Remember to diversify your stocks.
When you visit the bank, please do not buy more products. There is a possibility they will ask you to close account and buy "good, safe and sure win products". If you are interested in their advise, please take sometime to cool off or send your questions here or FISCA. It is your money and you need be careful.
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