Maintain your old Siemens Hipath system

Advice for International Investors on How to Safeguard Their Profits

What are the risks?

Today, investors are increasingly turning to global markets to find opportunities for profit, giving urgency to the issue of protecting returns from foreign exchange risk. While there are many excellent investment opportunities to be found all over the world, volatility in the currency markets can and does affect the profitability of these investments. An understanding of how currency rate movements can affect profits can help investors protect their bottom line from this uncertainty.

A vivid example of how currency volatility can impact profits occurred in 2004. When the US stock market rallied, investors from Europe converted their euros into dollars and sent them to America to take advantage of these opportunities. Even though there was a 30% gain in the US stock market that year, it was accompanied by a 22% decline in the value of the dollar. Although the European investors had earned substantial returns on their stock investments, their profits were reduced considerably when converted back into euros because of the decline in the dollar.

Investors in other markets are also exposed to currency rate risk. When interest rates increased in the UK, many investors sent capital from all over the world to profit from these higher returns. However, at the same time, the price of the US dollar versus the pound sterling was subject to great volatility -as much as 11% in 2004! Because of this, the amount those American investors took home varied greatly depending on when they chose to convert their profits back into dollars.

Exchange rate risk can be a threat to your profitability when investing abroad. While it is impossible to predict exactly where the markets will go, you can protect yourself from this kind of volatility. Read on to learn how easy it is to hedge against currency exchange risk by taking a position in the spot foreign exchange market.

How to protect your profits

Protecting your investment profits by hedging in the spot currency market is simple and inexpensive, and completely protects your account against currency market volatility. Hedging entails taking a position in the market so that the effects of foreign exchange movements are neutralized, and gives you the peace of knowing that your profits are not vulnerable to movements in the currency market.

The principle of a hedge is simple. An investor who has invested his funds abroad wants to make sure that he is protected if the currency of the country he has invested in depreciates. Depreciation in the value of the foreign currency would mean that he gets less of his home currency when he converts his profits. The simplest way for an investor to avoid a loss like this is to sell the currency of the country where he has invested in the spot currency market. If it depreciates in value, he will profit from his spot position.

In an example taken from go currency.com someone from the UK who is investing 300,000 pounds in the US wants to make sure that when he takes his profits home, he is protected if the dollar gets weaker. To do this, he would sell dollars in his trading account so that he profits if it does get weaker. When he converts his investment funds back to pounds, his gains in the currency market will cancel out any losses caused by exchange rate volatility.

All hedging takes is a little foresight and a trading account. The total transaction cost of a hedge is minimal-only $150 in the example above. Any losses of investment capital are completely offset by gains in a currency trading account, making hedging an inexpensive and very efficient way to protect against substantial risk.

Article created by Gerron Richard Woodruffe.

Gerron Woodruffe is an affiliate of gocurrency.com. Go currency is a free online currency rate converter.

In The News:

Man jailed for sharing footage of Christchurch mosque shooting
Tue, 18 Jun 2019 01:17:00 +0100
A man has been jailed in New Zealand for sharing footage of the Al Noor Mosque attack.

Former Egyptian president Mohammed Morsi buried after court death
Mon, 17 Jun 2019 17:02:00 +0100
Ousted Egyptian president Mohammed Morsi has been quietly buried under heavy security in Cairo after his collapse and death in court, a lawyer said.

US increases Middle East troops after claiming photos link Iran to tanker blasts
Mon, 17 Jun 2019 21:43:00 +0100
The US is to send another 1,000 troops to the Middle East in response to what it describes as "hostile behaviour' by Iranian forces.

Four injured in shooting at Toronto Raptors victory parade
Mon, 17 Jun 2019 22:45:00 +0100
Four people have been injured in a shooting at a victory parade for the Toronto Raptors basketball team, police have said. 

'Right-wing' link to killing of pro-migrant German politician
Mon, 17 Jun 2019 15:29:00 +0100
German prosecutors believe there was a "right-wing extremist background" to the suspected murder of a popular member of Chancellor Angela Merkel's party who was known for his pro-migrant views.



tikatoshop.it

Erfahrungen mit Pallhuber Wein
Agen Bola SBOBET Terpercaya

Travel in comfort and at your leisure with CT Airlink Limousine & Car Service for top quality private transportation and exceptional customer service. We operate Sedans, SUVs & Vans for CT Car Services to covering all Connecticut airports including Car Service from CT to Newark Airport , Mohegan Casino Uncasville CT, Foxwoods Casino Mashantucket CT, Manhattan Cruise Terminal NYC, Brooklyn Cruise Terminal NYC and Bayonne Cruise Terminal NJ. CT Airlink hire licensed and friendly chauffeurs who have in-depth knowledge of the Areas.

Penny Stock Investing

The Nature of Penny StocksFor anyone new to investing in... Read More

Powerful Options Basics Lessons Improving your trading in 180 days.

An option is a traded security that is a derivative... Read More

Mutual Fund Selection Made Simple By Indexing!

Non-indexed mutual funds try to keep it secret that actively... Read More

Powerful Hidden Techniques Mystery Formula - The Covered Call Option Trading Buy-Write Strategy

For better or worse, most option trading investors purchase stocks... Read More

Investment Rowing

You have rowed a boat at some time haven't you?... Read More

Lobster Trapping for Investment Ideas

Recently, my family and I took a trip to Maine... Read More

Stock Market Retirement Investment Plan

For a successful retirement investment plan to work in the... Read More

5 Day Trading Tips for Success

1. How to Treat Gap Openings A gap up or... Read More

The Past Does Not Equal The Future: Mutual Fund Returns!

A way that investors get ripped off and in a... Read More

Can Your Annuity Do This?

Okay, so I can tell you I have sat in... Read More

Investing in World Markets

There are many different ways to invest in world markets:... Read More

Margin Benefits are Marginal at Best

Margin is one of those things that novices find puzzling... Read More

Finding a Broker

"Hey Joe! I need help finding a broker. I notice... Read More

Why Should I Use Penny Shares to Build Wealth?

A strategic question. Why indeed?1. A penny share would usually... Read More

A Secret Revealed: Why Most (Day) Traders Fail

The following perspective on (day) trading comes from my many... Read More

Success Trading: Some Basic Terminology for New Traders

The world of trading can get very complex because the... Read More

Franchise Opportunity Sellers Beware; franchise buyers lie on forms?

It seems completely absurd that franchise buyers lie about their... Read More

Discipline in Investing and Trading

Discipline can be simply defined as your ability to follow... Read More

Getting Started Investing is Often the Hardest Part

There are several reasons people give for not investing their... Read More

Just what is Arbitrage Investment?

In the simplest of terms, Arbitrage means to exploit price... Read More

When NOT to Invest

Unfortunately, many investors who are seduced by the lure of... Read More

An Introduction to Offshore Investing

Once upon a time, offshore investment strategies were spoken of... Read More

How To Create Wealth In The Stock Market

First and foremost, an opportunistic strategy for creating wealth in... Read More

Coca-Cola - A Value Stock?

There has been much talk lately about Coca-Cola and its... Read More

The Perfect Mutual Fund

The Perfect Mutual Fund is the one you build yourself!The... Read More