So, what is it?
Currency risk, most people don’t even consider it if they’re investing offshore and are buying an asset that is denominated, in a different currency.
They aren’t just buying the stock, property, or business they’re also investing in the country’s currency.
For example, say you want to invest a property in the Philippines, but what if the Peso crashes? And now the value of your property is affected.
If you want to sell that property or take rental income, and convert it into a currency that you want, you would have lost a huge amount of your investment.
Another example, of this, would be if you invested in a property from Argentina in the past two decades, you’ve probably lost a large amount of money.
When you’re buying a property, stock, or any other type of asset offshore, you should carefully look at the country’s currency.
A good way to do this is by looking back 20 to 30 years and see how the currency has performed in different situations.
A few certain occasions you should look out for, would be the 2008 recession, the tech bubble, and the Asian financial crisis.
WRAPPING UP
Investing in foreign markets is a great way to diversify your portfolio, and catch some good returns in other countries.
However, you need to know a few things, so you aren’t putting your money in blindly, this is why watching for currency risk gives you a better understanding of what you’re getting yourself into, and you’ll be better prepared for anything that the economy throws at you.
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