Image courtesy of Moyan Brenn
Image courtesy of Moyan Brenn

With the big changes in the markets lately, due to various happenings in world politics, it can be easy to think that it would be a good idea to invest in foreign currency. If you had predicted the slump in the dollar after the US election you could have invested in a currency just before, perhaps sterling and then taken advantage after the election result and bought dollars with it and got a lot more for your money. However, things are not as simple as this.

If you want to make a quick buck out of investment then you need to be able to predict the future. This is not easy or else everyone would be doing it and making their fortune this way. Therefore you need to think hard before you make any investment like this.

Normally when investments are made they are for a long term. This is because, due to the nature of any investments, the value fluctuates on a day to day basis. In the short term this could mean that the investment reduces in value and so if you only kept money invested for a month, you may end up drawing out less than you invested and there could even be fees to pay as well. Therefore it is normally expected that an investment would take place for a minimum of five years but often for a number of decades. Most things increase in value over time, due to inflation and other influences and therefore you would expect that after a long period of time you would be able to draw out more money than you put in and hopefully this would be more than inflation or that you would get in a safe savings account. However, there is always a risk with investments and it could be that when you need the money it just isn’t worth as much as you had hoped.

This is why it is always wise to only invest money that you can afford to lose. Take a calculated risk but leave your money invested for a significant period of time and make sure that any fees you have to pay, either regular fees or a withdrawal fee, plus the tax you will have to pay on any increase in value, will make it worth the investment. It is certainly a decision that would be better discussed with a financial advisor.

A financial advisor will charge for their help but it will be worth it. They will be able to show you past patterns of the value of money invested in foreign currency and you will be able to decide whether you think it is an investment risk that you are willing to take. You will need to decide whether you are prepared to risk losing the money, whether you can leave it tied up for as long as is necessary and whether you think that any fees and tax will still make it worth the investment. It should not be a snap decision but one you consider for a long time.