Protect yourself by buying healthy currencies.
Even if an investor is confident in their portfolio, or the strength of the market, there will always be a level of risk. Like everything in life, there are risks that can occur when making investments. Crashes in markets, politics, and poor planning can all cause your financial decision to fall through. That is risk. Before one can learn how to combat risk, it’s vital to understand the types of risks that exist.
Investors with long-term goals of success are highly encouraged to hedge their portfolio. Hedging your portfolio is used to reduce the risk of adverse price changes for an asset and market volatility.
One way investors are protecting their portfolios is through buying currencies of a different country.
Why Invest in Currency?
There are many reasons one would choose to invest in a foreign currency, mostly protecting from risk. For one, diversification plays a key role in any healthy portfolio. By buying other currencies, you can hedge yourself against losing out from another investment or also gain from economic strength of another nation.
Speaking of hedging, currency can protect an investor from a political, or other events, that could affect their current investments.
There is also the possibility of capital appreciation. Like commodities and stocks, the value of a currency can increase, meaning the investor can profit, not just hedge.
How to Invest
Foreign exchange, forex, or FX, accounts allow investors to trade all major currency and some emerging market pairs. The forex market allows companies to move money across borders easily, minimize foreign currency risk, and maximize returns. Most simply put, this is the market where you can buy other currencies, like Swiss and Chinese currencies for financial gain. With the help of Alpen Partners advisors, you can protect you or your company with foreign exchanges.
What used to be a way for people to exchange currencies when traveling, the FX market has become a means of investment trading that has become quite common. This is the biggest trading market in the world, trading nearly $1.5 trillion each day.
ETFs are easy to purchase using traditional brokerage accounts. They are also eligible for margin, meaning investors can leverage their positions. Another advantage of ETFs is that they cost less. Since ETFs are traded as securities, the price of transaction is lower than the forex market.
Examples of Foreign Currency
If investing in foreign sounds like the right plan for you, there are many options. It’s important to choose a nation with a strong political and economic climate. This will ensure that your investment will do its job and hedge against the rest of your portfolio.
There are many benefits of the Swiss franc as an investment option. One of these benefits is Switzerland’s strong economic system with controlled requirements and slight growth. This stems from the size of the country.
The economy is so strong that there is no national deficit. The Swiss income exceeds its expenses, so the currency is fully backed by a self-reliant economy. The country also boasts low unemployment, high per capita income, and a popular banking destination utilized worldwide.
As the world’s second largest economy, China is a politically stable country that offers a lot to investors, including currency, and often out-performs Western nations in GDP. The nation is the largest manufacturing economy and largest exporter in the world. Not only is the economy huge, it is still growing, making the yuan a great potential investment.
Over the years, most international trade has been in the form of US dollars, some countries are no switching to the yuan when trading directly with China. This means the power of the yuan is sure to strengthen.
With a floating exchange rate policy, the yuan is controlled by the central bank.
The United States is home to the world’s largest economy and its currency is supported by and manufacturing and employment reports. Most international trade is conducted using the US dollar. It is a benchmark that trades against other currencies.
Alpen Partners and FX Advisory
The forex market can be tricky. If you are new to currency trading, there are many mistakes that can be made. With the help of an advisor who is well versed in the art of trading currencies, you can choose transactions that will benefit you safely.
FX Advisory accounts are accounts on which Alpen Partners can place orders that are instructed by the clients to trade currencies. Clients with FX advisory accounts make the final investment decisions themselves. Alpen Partners has a limited power of attorney on the account, with the authority to place FX orders in the system but not wire cash or securities out of the account.
Alpen Partners uses its extensive network and access to the trading floors of its partner banks to offer an 8am-6pm Swiss time service.
We can handle spot transactions, forward transactions, FX swaps, futures, options, and structured products in all leading currencies. Depending on the custodian bank that our clients choose, we can also offer advice on and execution of FX transactions in some emerging markets.
Clients who have FX advisory accounts with Alpen Partners are typically finance professionals who are looking for the safety of a top-rated Swiss custodian bank with the professional advice of our FX specialists and best-in-class execution of our partner banks.
For more information on risk management, diversification, kinds of risks, and more, contact Alpen Partners and our team of advisors and managers. Our objective is to provide our clients with a solution that is adapted to their specific needs in terms of expected returns, risk tolerance, future liquidity requirements, and potential tax and legal restrictions.
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