FOREX RATES – THE “SECRET INGREDIENT” OF OVERSEAS DEALS ZIV MAGEN
Now, if you treat overseas investments in the same
If you liquidate your overseas purchase funds one
way you treat your "home grown investments" -
week
meaning you put in your funds whenever a good
transactions can take up to five business days, so
deal
income
that's the minimum you'll need), you have very little
whenever it's required elsewhere, and move exact
choice as to what exchange rate to transfer them
amounts to and from wherever there's an expense
on. You'll have to take whatever the market gives
to be paid - it may feel like a gamble. And, like in
you at the time, or you'll face penalty fees, or even
the restaurant analogy above, gambles sometimes
worse, lose the deal and your initial deposit!
comes
along,
withdraw
your
pre-settlement
day
(most
international
work, and sometimes fail horribly. The reason is, of
course, the secret ingredient - exchange rate
And, if you transfer those funds when rates are
fluctuations.
low, you may find that you haven't liquidated
enough. The rate drop "ate" $600 or $6,000 of your
THE PROBLEM
funds, for instance and suddenly you need to
Even if you're investing in one of the world's most
financially stable countries and currencies (the last
few years should hint to you that there's really no
such thing), the very fact that your funds come
from a different country already introduce an
element of fluctuation. While the Japanese Yen
may perform fabulously at any given point in time,
the US Dollar may fluctuate wildly, and vice versa.
A stable currency may not change by more than
5% against another every year, and if the
corresponding currency is similarly stable, it may
also not change by more than 5% against the
former, as well. But that already spells a potential
10% up or down swing graph, which at its peaks of
best and worst cases, can mean differences of up
to 20% between the moment you transfer funds
from currency A to B and the moment you withdraw
them back from B to A.
The vast majority of
currencies fluctuate more than that over of the
course of one year and are even more volatile over
the course of a month or six.
Starting to get the picture?
transfer yet another small sum, at the same rates
or worse (because you're even closer to settlement
day), and have to pay sending and receiving bank
charges YET AGAIN, which normally are fixed and
don't change much in accordance with the transfer
amount. Imagine paying an extra $80 fee, only
because your previous transfer ended up being
$300 short!