Posted by forex at 9:38 AM
Read our previous post
1. Open a brokerage account with a traditional full service broker or with one of the many on line brokers which are available. The advantage of a traditional full service broker is the expert advice that is available. Although the cost of buying stocks is higher. If an investor is comfortable making their own investment decisions then a discount on line broker can cost a fraction of a full service broker.
2. Buy foreign currencies to hedge against the U.S. dollar. This can be done in several ways. Foreign currencies can be bought directly from a bank which handles them which can have very high transaction fees. Another way to invest in foreign currencies is through buying a foreign currency exchange traded fund (ETF). Finally foreign currencies can be invested in by buying foreign certificate of deposits (CDs) which are denominated in the foreign currency of the country issuing the CD.
3. Invest in foreign stock or stock funds which are denominated in the currency of the market in which they are traded. When an investor employs this strategy the dollars used to buy the stock or stock fund are converted to the foreign currency. If the stock or stock fund rises and the investor sells it he will make a profit on the stock or stock fund's gain. If the dollar has fallen in relation to the foreign currency the investor will also make a profit on the exchange back into dollars. However if the dollar rises in relation to the foreign currency the investor will lose money on the exchange back into dollars.
4. Buy a bond fund in a foreign market as a hedge against a falling dollar. Bond funds can work well as a hedge depending on the interest paid and the currency gains or losses of the foreign currency in relation to the dollar. In order to get maximum exposure to foreign currency avoid funds that have global or world in their names because they also invest in U.S. dollar backed bonds.
5. Research any prospective investment completely before committing funds to it. Even if an investor is following the advice of a broker they should do their own research to determine if the investment is right for them. There are many on line sources for researching stocks, currencies and bonds.