Be Exposed In The Different Kinds Of Risks In The Forex Market

Submitted by: Charlie Weyer

The recent decline in the dollar hasn’t been felt by most Americans because the rest of the world’s nations, especially Asian nations, have either cut prices or tied their currency to the value of the dollar. This means that the products that we import from them haven’t increased in price. When you visit Europe, you’ll be surprised to see how small the value of the dollar is today.

But what’s going to happen next? How much will those dollars be worth in the years to come? It’s better to save today and manage your funds wisely even if the Fed says that inflation is under control.

Within a span of 24 years, the purchasing power of your money can be cut down and all this can happen at an annual inflation rate of 3 percent. You need to double the money that you are earning right now in order to maintain your current lifestyle in the future. You may think that it’s quite impossible.

You need to think about how to hedge against the potential of the dollar to decrease in value in the future. One way of hedging is through gold but nowadays, investing into other currencies is much more preferred by investors. Long term investors can take advantage of the different investment alternatives while speculators trade foreign currency futures.

One form of investment is the foreign currency bank certificate of deposit or commonly known as CD. You are not required to open a new account in a foreign bank just to be able to switch your dollars into other currencies. You may also check online sites since they offer different FDIC insured certificates wherein it shows the denominations of the different currencies.

The interest and your earnings in a foreign bank if ever you will invest there are just about the same. If the CD reaches its maturity date, you may convert it back into dollars but there is a possibility for you to earn or lose depending on how strong or weak the foreign currency was. At the very least, you should be willing to invest $10,000.

You might want to know something about foreign currency ETFs as well. This type of investment is being valued through the assets inside the fund and also, this is a new form of exchange traded fund and also is a listed security. The assets here refer to foreign currencies such as one currency ETF like British pound, euro or any others. Through the foreign money market account, it would seem like owning these shares which are traded on the NYSE or Amex.

Next investment type that you may apply is putting your extra funds in currency mutual funds. There is one mutual fund that specializes in investing directly in hard currencies. I’m referring to the no load fund which started in May 2005 and now, it has more than $110 million assets.

The manager selects the foreign currencies for the investor and changes it from time to time. In this way, the investor gains professional management and is also exposed in different types of investment which would later on be for long term use. Today’s current figures are 43 percent assets placed in euro, 16.5 percent in the Canadian dollar, 10 percent in the Swiss franc, 8 percent in gold and the rest of the 22.5 percent are placed in Swedish, Norwegian, British, Australian and New Zealand currencies. Aside from investing at a minimum of $2,500, what you need to do is to get hold of the prospectus and application form from their website.

You need to save a lot in order to invest properly so next time you pull out a dollar out of your wallet, think twice. Yes, you’ll need lots of them when you retire and hopefully those dollars will be worth enough to pay for your retirement. This is the hurtful truth that one needs to accept that is why you need to hedge in your own little ways.

About the Author: More information on the topic of foreign exchange is located at

ozforex.com.au/

for money transfers international.To read other foreign exchange articles make sure to visit

ozforex.com.au/

for uk money transfer.

Source:

isnare.com

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