Matthew 6:24 reminds us all we cannot serve two masters: God and mammon (money). But Proverbs 28:20 emphasizes the blessings that will come to all faithful men, as long as he does not commit his entire existence to becoming rich. This delicate balance is not difficult to accomplish, since high-risk investments are, for all intents and purposes, gambling. Precious metals are an excellent hedge against inflation and an integral part of a diversified portfolio. The other low-risk, potentially high-reward investment few Americans have even thought about is the foreign exchange market.
A G20 Summit was held in Moscow last month in an attempt to quell the ongoing and increasingly volatile currency wars happening all across the globe. Japanese Prime Minister Shinzo Abe was the primary focus of the meeting, which brought together the finance ministers and central bank governors of 20 countries that control 90 percent of the world’s economy. Abe has already ordered the Bank of Japan to print 12 trillion yen in early January, which immediately caused the Japanese currency to drop to a near 30-month low against the dollar.
The People’s Bank of China has responded rather harshly, by manipulating the value of the renminbi (yuan) to balance a perceived deliberate attempt by Japan to boost exports with a debased yen. The Federal Reserve in the United States and Bank of England have also instituted quantitative easing (money printing) policies to the tune of $85 billion monthly and £375 billion total, respectively.
A currency market correction will ultimately happen once the printing craze stops, and those invested in more than just U.S. dollars will have an advantage over dollar-heavy investors.
Forex vs. Physical Currency
The foreign exchange market, similar to gold exchange-traded funds, is a way for Americans to trade foreign currencies based on real-time values, 24 hours per day, five days per week. But the savvy investor should take complete control of their portfolios by physically possessing as much of their wealth as possible. Brian Ferdinand of Liquid Holdings, who turned tiny startup ECHOtrade into a $100 million Wall Street player, said investors should minimize risk not only by diversifying, but also employing the right strategies. By possessing the physical foreign currencies, investors have total control of their money and do not have to rely on computers and internet to manage it.
How To Obtain Physical Currencies
Here is where investment in foreign currencies gets interesting. There are several companies in London that deal in the physical foreign currency market, but refuse to deal with American citizens because of strict regulations. A representative from Pepperstone.com, which has offices in Shanghai and Melbourne, Australia, said he could not help me because I’m an American. Velocitytrade.com said it can provide the “most foreign currencies,” but said renminbi are difficult to get. The Bank of China, which has a branch in New York City, will sell renminbi to city residents who have an account with them. Thus, if you want renminbi, either contact a friend in New York to do it for you, or hire a broker.
Yen currently have a 100-to-1 exchange rate with the dollar, while renminbi trades at about 6.5-to-1. The euro and British pound are much more expensive, but it is ultimately up to the individual investor as to which currency they believe will come out on top.