The US dollar is one of the strongest currencies in the world today. As such, it is not as volatile as other currencies, including the Philippine peso. If you’re looking to diversify your investments, you may want to consider investing in US dollars.
If you’re new to investing in dollars, here’s our guide on how to invest in dollar currency. We’ll discuss why it’s a good idea to invest in dollars and the different investment products you can buy.
Is Investing in Foreign Currency a Good Idea?
Typically, investing is the next step to saving. You have accumulated enough money for your emergency funds and, possibly, your life savings. The next logical step is to protect your savings from inflation by growing your money through investments.
One of the investment options for Filipinos is investing in foreign currency. This type of investing capitalizes on the volatility of the values of currencies. Similar to trading stocks, you buy a certain amount of dollars today and then sell it when the dollar appreciates in value, so you turn a profit in Philippine pesos.
Here are reasons investing in the dollar is a smart choice:
1. Investing in the dollar is a great way to diversify your investment portfolio. You can invest in short-term or long-term, depending on your strategy.
2. It is also highly accessible – a stockbroker, while beneficial, is not necessary – and you can make your own predictions based on political and economic news. No need to rely heavily on “insider information.”
3. Compared with other investments, currency trading has higher liquidity and lower transaction fees.
4. It has a high potential for profit since the US dollar is still the world’s principal reserve currency, with one of the largest economies in the world. As such it is a hard currency that is not likely to suddenly and significantly depreciate in value.
So, yes, investing in foreign currency can be a great idea. However, it is important to note that all types of investments come with a certain risk generally tied to the global economy. If the dollar’s value falls relative to the Philippine peso for whatever reason, then investments in USD will also suffer.
As with any investment, it’s important to be aware of the factors that influence its value and the risks to mitigate loss.
How to Invest in Dollar Currency
Are you interested in investing in the dollar currency? Here are investment products to get you started:
Dollar Savings Account
Perhaps one of the easiest and most secure ways to invest in the dollar is by opening a dollar deposit account. This is a great starting point for those who are new to investing in foreign currencies. One of the benefits of opening a dollar account in the Philippines is you can simply deposit your dollars into the account and let it grow as it accumulates interest. You can then use this account to invest in other products.
Just don’t let your RCBC dollar account go dormant!
Forex Trading
You can start by investing directly in a currency through forex trading, which is usually done through a forex broker. In this type of investment, you bet on the value of the US dollar against another currency, such as the Philippine peso, either on the spot or at a later date.
Investors buy and sell foreign currencies based on their predictions of which currency will increase in value. The goal is to buy a currency at a lower value and sell it at a higher price so you can turn a profit. With this type of investment, you’ll need to be aware of the best times to buy dollars.
International Stocks
If you’ve invested in a multinational company, you’ve probably already invested in USD. Most multinational companies operate or convert their revenues from international markets into dollars. If you’re investing in USD, it may be a good idea to focus on US companies that generate international sales.
So, when it comes to international stocks, you should consider how much the exchange rate is for dollar to peso in addition to the company’s performance.
US Dollar Exchange-Traded Funds (ETFs) and Exchange-Traded Notes (ETNs)
ETFs and ETNs are both exchange-traded securities that track the performance of the dollar over time. Both are traded like stocks and offer a great way to invest in USD without directly trading currencies.
With an ETF, you invest in a fund that holds various assets, which may include stocks, bonds, or commodities. Meanwhile, an ETN are unsecured debt security issued by a bank.
Since these types of investments hold diverse assets, they offer less risk and potentially higher returns. It can be a good idea to invest in dollar currency through ETFs or ETNs because of the security they offer.
Foreign Currency Sovereigns
A sovereign bond is sold by governments to raise money for various projects. This type of investment offers fixed interest for a specified number of years and is repaid at face value upon maturity.
You can invest in US treasuries. With this, you’ll be investing in US government-backed debt instruments. So, essentially, you are not only investing in the US dollar but also in the US government.
Are You Ready to Invest in USD?
Investing in US dollars is a great way to grow your money and protect it from inflation over time. If you have extra USD, take the time to learn how to invest in dollars through one of these investment products.
Take advantage of RCBC’s foreign currency deposit and online foreign exchange to maximize your dollar’s earnings. We’re also here to guide you in making smart financial decisions so you can manage your wealth and achieve your life goals.
If you want to know more about our US dollar investment products, don’t hesitate to contact us.
