We have plenty of options (and advice) covering investments from the comfort of behind-the-screen, but what if you want something tangible? An investment you can hold in your hands, stash away to protect your nest egg and cash out when the time is right.
Investing in hard currency is one of the simplest forms of doing so.
Betting on Growth
Tangible investments whether it’s purchasing gold bullion or the Iraqi dinar allows you to bet on the success of a country. Considering experts placing a 3.5% global growth (according to the World Economic Outlook by the IMF) – it’s looking to be a bright, profitable future for all that are involved.
Here are some things you need to know about investing in hard currency:
Hedging Against Interest
A 2.5% rate is becoming “the norm” with Federal Funds. Russia and China are now making moves to bypass the U.S. Dollar by siding with gold. Savings rates are falling.
The value of your hard currency investment is dictated by the market price.
Outside of catastrophic government failure or hyperinflation, you can expect a rising ROI by leveraging the exchange rates and success of the emerging markets. Though, one must remain steadfast with this type of investment as wild swings may occur due to political shifts.
Businesses seek better trade deals, cheaper labor, and untapped resources. When large corporations enter emerging markets the people traditional rural roles to those often found in manufacturing.
Just look at the meteoric rise found in China.
These shifts will happen as globalization continues to spread. Investment into a country’s currency before this economic progression sets in places you in a prime position to benefit from the increase in trade.
Investment into hard currency is as simple as walking into a local bank and requesting an exchange or using online platforms.
The benefit of online platforms over banks are the up-to-the-minute exchange rates which could further capitalize the investment. One could use real-time data to set buys and sells at desirable rates.
Betting on the currencies is included in this simplicity as it’s about tracking politics and finances. Seeing a dynamic shift in leadership, new trade deals or unrest are key indicators of a dip or spike.
Day trading in currencies has its share of lucrative players because of their ability to follow the news and act at the right time.
The Inherent Risks
Investments always come with some form or risk which is why it’s important to set your risk tolerance.
The problem with hard currencies – no matter if it’s gold or cold, hard cash – is that it loses value as it becomes readily available (the paradox of value). A sudden discovery of a new gold vein or rampant printing weakens the value of the commodity or currency effectively negating its value.
The hard currency could pose difficulty when breaking into smaller amounts and that’s even if you can get past the troubles of being a “small player.”
Global trade pushes great sums of money and commodities which means a small investment may not find it worthwhile to trade. Likewise, when everyone is dealing with large quantities it’s challenging to broker a deal where you’re receiving small payouts.
Come and Go
The same benefit of emerging markets is its drawback especially when an up-and-coming country provides better, lucrative deals to foreign investors.
Before you know it, industries have hopped borders and the locals are now experiencing a surplus of labor but with little exports – effectively crashing the market. With it goes the investment.
Diversity in Liquidity
It goes the same for hard currencies when talking investments: diversification is key. The beauty of hard currency is that you have 195 countries to choose from. Perhaps it’s time to explore this area of investing now that we’re in quite the exciting times.