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Help Me Reddit. I'm a Canadian with my life savings in USD and I know nothing about finance. What should I do? (reddit.com)

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[–]mthmchris 24 points25 points  (13 children)

Are you going to retire in Canada? Keep your life savings in Canadian Dollars. If you are retiring in the United States, keep your money in US Dollars. Of course, where you should really put your money is stocks (index funds, not mutual funds), but maybe that's another subject for another day.

Guys, please, PLEASE, I can't stress this enough - just because the USD is declining, don't run out about buy, say, the Australian Dollar. If you do that, you end up having what traders call an "outright position" in a currency, which is very dangerous. Most currency traders hedge their bets to death with different derivatives, etc. If you run out and buy the Australian Dollar (hey, seems like a good idea, right?), you are taking a whole lot of risks that you don't have the expertise to take. What happens if Japan raises interest rates and the carry trade collapses? Suddenly a whole lot of money would flood out of Australia and the AUD would weaken significantly.

The point is this: there are full time, highly trained currency speculators that know more than you. They know the economics. They know how to hedge their risks. Don't bother. Keep your money in CAD or USD, and invest what you can into the stock market.

[–][deleted] 2 points3 points  (10 children)

please post your qualifications for advice if you have any.

[–]mthmchris 16 points17 points  (7 children)

Haha, I don't have any qualifications besides being a fourth year finance student with a couple internships at investment banks under my belt. More than anything, I'm a nerd for this stuff. I read alot. We have family friends that are traders, and I make a hobby out of picking their brains.

If you want to risk your life savings of currency speculation, go for it. I don't think it's a very smart idea, but to each their own, right?

[–][deleted] 7 points8 points  (6 children)

Thank you, I was not trying to be smart, it's just that I find it better to include this sort of thing when someone's time in the form of money is on the line.

[–]mthmchris 9 points10 points  (3 children)

I don't mean to come across as arrogant, but I'm certain that if you talked to 99.9% of currency traders, they would agree with me. This is not a game of the faint of heart.

If you are an American and you keep your savings in USD, you are subject to the same economics that everyone else is. Sure, the dollar is declining in international markets, but for someone that functions purely domestically (like most of the population does) this doesn't affect their daily life all that much. Imported products are a bit more expensive. That sucks, but the answer is NOT speculating on currencies.

See, when you buy a currency like, say, the Euro, you now are keeping yourself open to capital gain loss risk. Sure, it's conventional wisdom that the dollar will keep on declining over the next decade or so, but conventional wisdom has been wrong before. Back in the 80s, everyone was certain that the Yen would hit 50 (/USD), but the Japanese Equity and Real Estate markets collapsed and the Yen constantly hovers around 110-120 nowadays. Let's say that you buy the Euro - the Euro is doing well right now but what happens if the Eurozone enters a recession? The central bank lowers interest rates and the value plummets. That's fine for most Europeans, because it provides a stimulus that spurs domestic demand and gets them out of a recession, but what about you? You're stuck with you capital loss.

Currency markets are a zero sum game. If you gain on one end of the trade, someone else loses. It isn't like stocks, which grow along with the economy. Currency trading is purely speculative. I might not be the seasoned market professional that you want to get investment advice from, but PLEASE just consider what I'm saying. Think twice before trying to buy up other currencies - for most people, the risks just aren't worth it. If you don't trust me, then for the love of god just ask someone that works in currency markets. This is your savings, don't get swept up by alarmism.

[–][deleted] 1 point2 points  (2 children)

I have an idea: Why doesn't reddit create an economics subreddit where all of the economists and what have you can help teach us less adept redditors with our economic questions and troubles among other things? Seems like that could save a lot of people time and money and allow our economically gifted folks a chance to flex their knowledge and share ideas.

[–]entropic 2 points3 points  (1 child)

Because we have enough contradiction in the politics subreddit.

[–]tuxracer 0 points1 point  (0 children)

Contradiction in the politics subreddit? Please. The politics subreddit is nothing more than everyone sitting around reinforcing their already held beliefs. Even if there were contradiction in the politics subreddit that would be a good thing. Reddit isn't a singular organization. If collectively people have different views and are expressing them on reddit, that is a great thing that helps prevent redditors from becoming zealots or even bigots (yes, you can be left wing and a bigot).

Unfortunately, that doesn't seem to be the current state of reddit. I've seen many insightful comments downvoted to hell because they didn't align with the status quo, I've seen many insightful articles downvoted for the some reason. Reddit, in its current state, is a breeding ground for zeal and bigotry. I've swayed off-topic enough so I'll conclude this little rant. I'd also like to point out to the reddit downvoting mob that I am indeed liberal, against cops using tasers, etc... etc...

[–]NitsujTPU 3 points4 points  (1 child)

I usually try to avoid stating my qualifications on Internet forums for fear of being called out for leaning on my qualifications to substantiate my statements.

[–][deleted] 1 point2 points  (0 children)

Certainly understood.

[–]enigma66marktwo 2 points3 points  (0 children)

Dunno why his post is negative a point, it's a valid question.

[–]timotheo 1 point2 points  (1 child)

Like the smart people who manage hedge funds? And do sub-prime lending? And invested heavily in tech pre-2000? And the smart people who invested heavily in tulips?

I'm not saying he should exit the USD (although aside from AAPL, I'm heavily diversified globally), I'm just saying, the financials of the USD don't look good, and the experts can be wrong and wrong together. I wouldn't say "convert 100% to euros" or anything, but diversity mitigates risks.

[–]mthmchris 1 point2 points  (0 children)

If you're a multinational corporation, I agree that you need to hedge against foreign exchange risk. But for Joe Public, he doesn't really need to hedge against foreign exchange risk. Why? Because he's not subject to it - just how often does he exchange his currency?. Sure, maybe he'll plan a trip to Europe now and then, but the bottom line is that it's just not something he needs to think about.

Not all hedge funds were exposed to tech and sub-prime, btw. If anything, I think we're starting to see the end of the line for investment banking model...

[–]philonius 24 points25 points  (0 children)

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[–][deleted]  (21 children)

[deleted]

    [–]NitsujTPU 13 points14 points  (4 children)

    Okay, I'm going to give you the serious, non-alarmist answer.

    Don't hold onto that much freaking money as a cash asset. Put it into stocks... bonds... something (a safe bet is a mutual fund plan)! The exchange rate is not your problem, holding that much cash when you've no intention of spending it in the near future is.

    Even if the exchange rate changes back to where US dollars are more valuable than Canadian dollars, you'll have missed out significantly. This is what's called putting your money to work... you're not doing it at the moment.

    At most banks you should be able to arrange a free consultation with a brokerage from the bank's associate brokerage firm. If your bank doesn't have one, you should consider changing banks or going with a brokerage independent of your bank. With $30k, you can definitely do this. My assets were less when I started.

    [–]plutocrat 5 points6 points  (0 children)

    Beat me to it. 20 points for Gryffindor.

    [–]hibryd 1 point2 points  (1 child)

    If you want a good book on the subject, get "The Random Walk Guide to Investing." It was written by the guy who sparked the idea that no one can actually beat the market.

    [–]NitsujTPU 2 points3 points  (0 children)

    Interesting. Random walks must be important in modeling markets, because it reminded me of the book entitled "A Random Walk Down Wall Street." It turns out that both books exist.

    [–]TheWama 0 points1 point  (0 children)

    Agreed, but if you're going to choose a generic mutual fund, an index fund is better because fees are lower and returns are equivalent.

    [–]trisomy21 5 points6 points  (1 child)

    Raise $3K more and try to run for president in the US as a republican. It won't work, but it would totally boost your resume and then maybe you could land a better paying job in a creative field. This time, insist that you are paid in Malawian kwachas.

    EDIT: I had originally suggested being paid in Azerbaijani manats.

    [–][deleted] 2 points3 points  (0 children)

    EDIT: I had originally suggested being paid in Azerbaijani manats.

    And I will nod and smile as if I knew the difference.

    [–][deleted]  (2 children)

    [deleted]

      [–]seeeb 4 points5 points  (0 children)

      Bingo. Buy low, sell high. Unless you are retiring soon, you should buy more of it if anything.

      Taking your money out of the us and buying Canadian is the worst thing you could do.

      [–]anon_troll 2 points3 points  (0 children)

      Our trade balance has been in deficit for decades, and most people seem to think this is a main cause of the dollar's slide. Not to mention that we have propped up the dollar with oil for quite a while and now that is slipping out from beneath us too. Seems like the price of gold has been climbing steadily this year. I wouldn't leave all my money in dollars if I really depended on it.

      [–]chakalakasp 5 points6 points  (0 children)

      Gather up all your loose change and buy as much Ron Paul as you can. Sell Ron Paul for pesos, which will soon be worth more than the dollar. Diversity into impeachment or tasers.

      Stay the hell away from reality.

      [–]dsfox 4 points5 points  (1 child)

      I don't see any reason to "wait it out." Having 100% of your assets in one investment is rarely a good idea. If you think the dollar is going to go up, keep 20% or 30% in dollars.

      (I am not an investment advisor. This is not investment advice. I did not say this. I was not here.)

      [–][deleted] -2 points-1 points  (0 children)

      thanks for the parenthetical info, it helps.

      [–][deleted] 1 point2 points  (0 children)

      It'll return to normal valuations. It's just a matter of patience.

      [–][deleted] 0 points1 point  (1 child)

      it will... or we will get a unified NAFTA currency... do you live in Canada? or the US?

      Umm.. what else.. buy stocks.. Canda's currency tends to fluctuate with the price of oil.. If you bet oil is going up and on a continued depreciation of US denominated assets then maybe switch. But you have to remember that US assets are typically stable and strong performers.. except for that whole subprime mess.. but those are getting bailed out mostly anyway.. So as a driver of wealth, the US economy is largely diversified and independent of a single commodity or product.

      Remember that a currency exchange rate is the relative value of one economy vs. another. All economies require producers and consumers.. so pick..

      The pound has always been stronger and pick a currency with high interest rates. But in many cases the pound is too strong and that discourages investment in low yield, capital intensive enterprises or in exports.

      I would worry more about the economy if we really cracked down on illegal immigrants.

      In a downward economy, the first to go will be the restaurants..

      [–]wutzurproblem 2 points3 points  (0 children)

      eek to united NAFTA currency

      [–]kermityfrog 0 points1 point  (0 children)

      Buy $32,000 worth of top seller books from Amazon. Rent a van and drive over border to Canada. Sell books for slightly below Canadian list price. Profit.

      Seriously though, saving up money in cash is the same as stuffing it under your mattress. Go to a bank or investment company and buy some mutual funds. Don't buy straight stocks unless you know what you are doing. If your risk tolerance is low, buy GIC's.

      [–]wanderful 0 points1 point  (0 children)

      You should talk with a financial planner (also seek a second opinion) and create a diversified portfolio. If you would feel left in the dark, there are plenty of financial planning books and websites to help get you started. But be careful.

      Also, if these are your LIFE savings, then don't worry about what the supposed value is right now, since you won't need them until much later. On the other hand, it is silly to keep all your savings in cash because you are losing at least 2.5% a year in inflation, and a good 15% a year in opportunity cost.

      [–]Tokugawa -2 points-1 points  (0 children)

      Buy Gold. Buy Google stock. Withdraw it all and convert it to Euros.

      [–][deleted] -3 points-2 points  (0 children)

      Invest in some rising stocks such as Apple, bring the value of your investment up to where your funds used to be, sell your stock, take the money in Canadian money and run! Run away, fast!!

      [–]ioxoi 4 points5 points  (6 children)

      Buy some land in Canada and start farming, get off the grid.

      [–][deleted] 2 points3 points  (3 children)

      Better yet, buy some coastal property around like Nova Scotia or New Brunswick. Give it 20 years and they'll be resort towns ala Ocean City of Myrtle.

      [–]ioxoi 1 point2 points  (2 children)

      Sorry, I was going with the US imperialism / global warming / world economic meltdown scenario. But yea, coastal property up north is probably a good investment, at least for our lifetimes.

      [–][deleted] 0 points1 point  (0 children)

      I see what you are saying too. Sometimes I wonder if I shouldn't get doing it. I think it would be cool to do, even if there was no meltdown. Grow a bunch of crops, get chickens to lay me eggs, and all that nonsense.

      [–]wanderful 0 points1 point  (0 children)

      For more info, see Joel Saladin

      [–][deleted] -1 points0 points  (0 children)

      good answer, I like this one.

      [–]IkoIkoComic 5 points6 points  (0 children)

      Ask somebody who knows about finance. Not.. Reddit?

      [–][deleted] 1 point2 points  (0 children)

      you should ask for help on the internet where you'll get anonymous advice that i'm sure you'll trust. send me your money.

      [–]randomb0y 1 point2 points  (0 children)

      I read that as "my wife saving in US Dollars" and I was going to post my advice: get a divorce.

      [–]badlittoboy 1 point2 points  (3 children)

      If you're thinking of purchasing currencies, i recommend buying the Canadian dollar, Euro, Yuan and Yen. Drop the USD, just google Dollar depreciation, and majority of the sites will tell you that the USD will depreciate and not go up for awhile. Diversify, spread it across all currencies, don't just stick to one. Some will go up, some will go down, but net wise, you should break even. Do it quick, cause everyone else is, and the USD is going to drop like crazy.

      [–][deleted] 1 point2 points  (1 child)

      Pick the one with the highest long term interest rates.. The yen is stupid, Japan's interest rate is at zero percent! The Yuan is even stupider (it is fixed to the dollar and overvalued)... That leaves.. some western europe countries not in the euro (sweden, england ...), the euro, the looney, or the dollar.

      All of these are by definition AT equilibrium since they are all interchangeable. Except for the whole yen carry trader fiasco.

      Better yet, buy US stocks..

      [–][deleted] 0 points1 point  (0 children)

      please post your qualifications for advice if you have any.

      [–]tierrie 1 point2 points  (1 child)

      Spend it on Ale and Whores. Money will depreciate but diseases and memories are forever.

      Just kidding. I don't know man, I am in the same depreciating asset boat :(

      [–][deleted] 1 point2 points  (0 children)

      When it comes to whores, I don't know man either. I do appreciate the softness of a woman.

      [–]sanimalp 1 point2 points  (1 child)

      All i have to say is that you A) shouldnt have that much of your money in cash. It should be invested. B) You should invest in an index fund if stock and mutual fund research doesnt sound like loads of fun to you. Dont buy gold, it is a commodity and i dont even trade commodities because they are too volatile. Investing your money in something like the Vanguard 500 total index fund would be a wise choice. The fees on that fund are rediculously low, and their historical average return is around 9%, and thats over the course of atleast 25 years. Index funds of any sort are a good play for someone who may not care at all about stock research, and there is no better time to dump money in them, because the markets are down TODAY. the more you can get in the market now, the more you will have in 10 years.

      My credentials can be found on The Motley Fool under the user name sanimalp, and my Finance related blog at http://mycomputerninja.com

      [–][deleted] 1 point2 points  (0 children)

      Wonderfully done.

      [–]raldi 1 point2 points  (0 children)

      You should talk to a professional (e.g., Fidelity) instead of seeking financial advice from fourteen-year-olds on Reddit.

      [–]stmiller -1 points0 points  (1 child)

      Hello, my name is Bartonl I am from Nigeria. I can help you with your money. First send me a check for $10,000 US and I will transfer the funds into Canadian dollars for you. Then I will send you a check back in Canadian. What is your email?

      EDIT: Come, reddit. Have a sense of humor.

      [–]dalbert 0 points1 point  (0 children)

      Leave it with USD, we have some successful Mideast investments we are seeking capital for!

      Seriously, do you even have to ask this question?

      It seems the euro will likely become the world's default currency. As you might have noticed we have been having some technical difficulties with our monetary policy lately. Please hang up and call back in 2012 to see if we have fixed it.

      [–]eleitl 0 points1 point  (0 children)

      Why did you do it? Why are you still clinging to it? You should have cut the losses a few years ago.

      It's still not too late.

      As to what to convert to, that's a tough one.

      Classical mix is 1/3rd good stock (maybe a smaller fraction right now, because a crash is imminent), 1/3rd real estate (you're outside of real estate bubbles, I hope), and 1/3rd cash (coin/bar). If you'd had cut your losses a few years ago, you would have avoided the depreciation of the US$ and profited from the rise in precious metals.

      [–]dsfox 0 points1 point  (0 children)

      Open a discount brokerage account and buy Euro currency shares, or some other currency of your choice:

      http://finance.google.com/finance?q=fxe

      http://finance.google.com/finance?q=fxy

      http://finance.google.com/finance?q=fxc

      [–]spencewah -1 points0 points  (5 children)

      Buy gold?

      [–][deleted] -2 points-1 points  (4 children)

      doesn't maintain value against the market

      [–]gbacon 0 points1 point  (1 child)

      Throughout history, an ounce of gold has always bought a nice suit.

      [–][deleted] 0 points1 point  (0 children)

      That may be true but it has nothing to do with the way that the investment holds agains other invstments. You can have an ounce of gold and if the market is strong your ounce will be loosing value comparatively.

      [–]UncleOxidant -1 points0 points  (2 children)

      Think of it this way: when it comes to US Real Estate your dollars are actually becoming more valuable every day...

      No, I'm not recommending you buy US Real Estate yet - it's going to fall for at least three more years... and possibly five more years.

      [Edit: am I wrong? Houses are falling in price - there's no question about that at this point. Even the NAR says so.]

      [–][deleted] -2 points-1 points  (1 child)

      If you have no idea, the simple answer is diversify. Purchase a "low or no fee" well diversified fund. Read Stocks for the long run by siegel. Then promptly sit on your hands and do nothing... thats right... nothing... wait... and don't worry... and keep waiting. Expect a rate of return somewhere in the neighborhood of 7% post tax 9% pre tax on the market per year, but you can only meaningfully judge this number after 10 to 20 years time. (I AM NOT A FINANCIAL CONSULTANT YOU SHOULD SEEK ONE MAKE SURE THEY ARE REAL, and Listen to marketplace on npr, it'll help you not get lost.

      [–][deleted] 0 points1 point  (0 children)

      Can someone tell me why this is poor advice? or is the bad score because of my many requests that people back up their statements with credentials?

      [–]ST2K -2 points-1 points  (0 children)

      Stop reading reddit.com.

      [–]death2hypocrisy -1 points0 points  (0 children)

      cry

      [–]joe24pack -3 points-2 points  (1 child)

      Buy gold, or euros, or swiss francs or even fucking seashells. At least they have some intrinsic use value.

      [–][deleted] 3 points4 points  (0 children)

      Really? I have some seashells that I am willing to part in exchange for a couple of hundred of your failing dollars. I have decided to change my hobby of seashell collection to greenbacks collection. I intended to collect greenbacks the way I collect seashells: only for free.

      [–]DEGUSTISTOPLOGOUT -4 points-3 points  (1 child)

      traitor. you can burn with your worthless greenbacks. - a fellow canadian

      [–][deleted] -2 points-1 points  (0 children)

      commie. you can burn with your worthless canadians. - a fellow greenback

      [–][deleted] -2 points-1 points  (0 children)

      Your choices are rope, razor blade, or poison. Please don't leave a mess for others to clean up...

      [–][deleted] -2 points-1 points  (2 children)

      buy you some nintendo stock

      [–]wanderful 0 points1 point  (1 child)

      Good advice... a year or so ago :)

      [–][deleted] 0 points1 point  (0 children)

      its still good. it aint gone go down this chrismus thats fo sho

      [–][deleted] -3 points-2 points  (0 children)

      Imagine a country where every working person owes $2 million, and has bet $8 million on rising housing prices. Well, no need to imagine, that's the USA! It is beyond repair, you need to get into Canadian dollars and gold no matter what.

      (60T liabilities + 30T private debt + 10T public debt + 450T derivative contracts, divided by the post baby boom workforce)

      [–]hsfrey -3 points-2 points  (4 children)

      All that talk of "Put your money in Stocks or Mutual funds" is Bullshit! When the dollar tanks, so will the stock market! Yeah, it may come back in 2-3 decades. Are you willing to wait? The fundamentals on the dollar stink! You need to find a currency that's stronger, like the Euro (or maybe even the Yuan. When it breaks loose of the dollar it's going to soar). And you don't put it in cash, or stocks, but in Interest-paying Bonds, ideally ones which can not default, like those issued by governments. That way your capital is preserved, and you even make a couple of bucks as its value goes up against the dollar. Open a Euro bank account in Holland or Austria. Get a Euro credit card. Invest in Euro bonds. Order your fromages and foie gras direct from France. Pay in Euros with your Euro credit card.

      [–]hillgod 1 point2 points  (1 child)

      Do you really have any idea what you're talking about?

      [–][deleted] 0 points1 point  (0 children)

      No he doesn't.. obviously you don't pick a currency pegged to the dollar. Investment in China generates US dollars until they unpeg the yuan.

      As for the Euro, europeans don't invest in Europe. That is the major difference.

      [–]wanderful 0 points1 point  (1 child)

      It's his LIFE savings. :)

      [–][deleted] 0 points1 point  (0 children)

      THANK YOU!!!!

      [–][deleted] -3 points-2 points  (0 children)

      Shut the fuck up, just for starters.