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Currency As An Investment

14 March 2018 No Comment

Foreign currencies are proving to be a very popular investment instrument. Investors are always trying to find new ways to grow their money without the risk of the stock market or the anemic growth of bonds. More and more often this means going global to try to figure out another option.

There are a lot of reasons why they are shying away from the stock market. The advent of strip-mall brokers and investment apps have brought a lot of inexperienced investors to Wall Street, and they’re making decisions that don’t always benefit the other investors around them.

Currency becomes an obvious choice because it’s a little less crowded and populated with considerably more sophisticated investors who make better decisions.

If you’ve considered a foray into currency, there are some things you should know about it before going much further.

The first thing to understand is that not all currencies are a good choice. Certain economies are in a perpetual state of struggle, meaning that their values go up and down dramatically in a very short time. Nations with frequent political turnover, civic unrest, and war are just too risky.

On the other hand, stabilizing economies can be ideal. The Iraqi Dinar is looking better all the time with the removal of Saddam Hussein fading further into history. As the country’s security climate improves and its democracy strengthens, the Dinar could quickly turn into a very strong investment instrument. And these early days of that upturn are the time to jump in, not years down the road when the major growth has already taken place.

Another important step is to follow the foreign currency exchange, also known as Forex. This provides essential information about what is happening and what could be ahead for various currencies, positioning you to take advantage of opportunities and to avoid risky situations.

That ties into our next point. Before getting into currency at all, you should study some basic international economics. It’s not necessary to return to college, but check out a good book at the local library and familiarize yourself with exchange rates and the balance of trade and inflation before you commit your money to anything.

Along the way, you should read a few cautionary tales. Germany after World War I is a perfect example. The countries that had banded together to defeat Germany were demanding repayment for their expenses in fighting the war, and the shattered German economy couldn’t keep up. Their only choice was to print money at an alarming rate, so high that postage stamps were printed blank and then rubber-stamped with a face value at the last minute. Those figures reached the millions of marks—just to mail a letter.

Investment is all about putting your money somewhere that it can be expected to grow. Currency is a great way to step out of the volatile world of stocks and to take financial refuge with a tool that is utilized by more skilled investors who will provide a solid environment for your investments.

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