Tuesday, May 14, 2013

Avoid Dual Currency Investments

Hi, Tan:
Thank you for your article on DCI posted on the internet.  That is indeed very insightful.  

Could you kindly educate me on the in-depth of DCI?  For am interested but would like to minimized the risk.  Am a very conservative invester - will never go for margin for am a firm believer of 'living within your means and to bless others when opportunity arise'.

My advice is to avoid it altogether. Don't waste your time trying to figure out the complexities. 

If you want to learn how to invest to get a good return, and manage the risk, attend the FISCA talk on financial planning, www.fisca.sg/events

1 comment:

yujuan said...

Yes, avoid them like the plague.
Novice Investors must have grasp of political and macro economic factors which impact the currency movement of country base.
Take e.g. the yen versus US$. The Yen depreciated about 20% against the $ due to change in political power and adoption of inflationary measures to kick start the economy. But copycatting US in QE policy by cracking up the printing machine, the yen headed downwards.
Ditto with the pound when UK adopted the QE policy, the pound broke the S$2 support level to settle around $$1.90 now.
Why? Simply the yen and the pound is not an international currency like the US$, so effect is within the country only.
World Economics is the biggest factor in the Aussie $ decline, the resources boom is over as long as China's economy is weak but overspending has taken place.
With so many factors to consider, it's best to avoid currency betting or gambling, a better word.
You dun wan to be caught at the wrong end of the stick with overnight fundamental news.
The banks who sell you these products have terms worked into the contract against investors' interests to protect themselves. E.g. there is a cut loss level in basis points should the currency chosen depreciates.
Banks call it for investors' protection, but they have already earned in the Ex rate charged at commencement, and the cut loss level is very narrowly stringent, with losses borned by investors rather than the Banks.

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