Investing in Currencies
July 14, 2010 at 16:42 PM EDT
Investment managers use many different assets to construct portfolios. One of the top tools for mitigating risk is good old-fashioned cash. However, cash does not always have to be in US Dollars. Investors can store their hard-earned savings in other currencies, too. But currency values fluctuate; so foreign currencies are usually differentiated from cash as an asset class. Currencies are unlike other assets. For instance, currencies are used for monetary exchange across the globe. People don’t buy groceries with gold coins or mutual funds in France – they use Euros. That’s the way we usually think about currencies. But currencies can do more than buy groceries. If you’re a US-based investor, your investment account can gain value when holding a currency that appreciates against the US dollar. Your account can…