Currency diversification

I think one of the most difficult aspects of the current monetary system and economics -- and how it affects investing -- is the relativity of the value of currency in relation to other currencies.

You can make 5% on your US dollar investment but still losing spending power because the yen goes up against the US dollar.

In the past, this has not been particularly important for US residents getting a US dollar income. Everything we bought was priced in dollars. We might notice Toyota prices going up and down, but overall, it didn't make any difference unless and until you travelled overseas.

Yet as the world's economies adapt and change, we will all be affected by the relative strength of our own national (or multi-national, in the case of the euro) currencies.

Therefore, everybody should have some source of income from other currencies, and therefore should consider making good investments outside their own country.

Some people in the US advise simply investing in major US corporations that do a lot of business around the globe (Coke is the most recognized brand name in the world. They even have a flair for designing how the name looks in other alphabets -- the Coke logo in Thai looks more impressive than the English version.) And this makes a lot of sense.

However, I favor diversifying your investments in different currencies -- NOT trying to make money from trading the foreign exchange markets (that's madness for a normal person), but simply from hedging your sources of investment income. At a minimum, try to have some Japanese yen, US dollars and euros. Also, British pounds, Australian and Canadian dollars.



foreign exchange investing
foreign exchange investing