Awareness of FX impact on your portfolio
In the second part of this series, we examine the impact of currency movements on your investment portfolio.
Just as you would not put all your eggs in one single stock, there are merits to having other currencies as part of your investment portfolio, whether on its own or as part of your assets denominated in foreign currencies. Holding on to foreign currencies can actually protect your portfolio from unexpected risks and aid you in reaching your investment goals.
By diversifying your FX portfolio, you reduce unsystematic risks that are tied to specific asset classes. Moreover, diversifying across a range of markets may help you receive more entry signals and this increases your chance of encountering favourable market conditions.
If you refer to our earlier post on the trend of the USD against the SGD, it is important to decide the allocation of SGD versus non-SGD exposure to ensure what the composition of the non-SGD exposure should be. This ensures a globally balanced portfolio that produces better risk-adjusted returns with a lower level of volatility as compared to holding an SGD-only portfolio.
You may also need to account for your longer-term life goals, such as sending your child overseas to study. An estimate of how much you would need can be found here.
Therefore, portfolio diversification through an exposure to currencies of countries that are associated to these goals would reduce overall volatility.
For example, someone with a business in the US and diversified SGD-based investment portfolio could be looking to send his children overseas to study.
If the country of choice happens to be Australia, he may need to consider have a strategic FX portfolio allocation of towards SGD, USD and AUD, in line with his needs.
With our OCBC new FX execution platform, we provide you with seamless and secure exchanges of currencies at attractive rates, along with a constant access to wealth insights to keep you updated on the latest FX market trends.
Start trading FX with OCBC Digital today!
1. Any opinions or views of third parties expressed in this document are those of the third parties identified, and do not represent views of Oversea-Chinese Banking Corporation Limited (“OCBC Bank”, “us”, “we” or “our”).
2. This information is intended for general circulation and / or discussion purposes only. It does not consider the specific investment objectives, financial situation or needs of any particular person.
3. Before you make an investment, please seek advice from your Relationship Manager regarding the suitability of any investment product taking into account your specific investment objectives, financial situation or particular needs.
4. If you choose not to do so, you should consider if the investment product is suitable for you, and conduct your own assessments and due diligence on the investment product.
5. We are not making an offer, solicit to buy or sell or subscribe for any security or financial instrument, enter into any transaction or participate in any trading or investment strategy with you through this document. Nothing in this document shall be deemed as an offer or solicitation to buy or sell or subscribe for any security or financial instrument or to enter into any transaction or to participate in any particular trading or investment strategy.
6. No representation or warranty whatsoever in respect of any information provided herein is given by OCBC Bank and it should not be relied upon as such. OCBC Bank does not undertake an obligation to update the information or to correct any inaccuracy that may become apparent at a later time. All information presented is subject to change without notice.
7. OCBC Bank shall not be responsible or liable for any loss or damage whatsoever arising directly or indirectly howsoever in connection with or as a result of any person acting on any information provided herein.
8. Investments are subject to investment risks, including the possible loss of the principal amount invested. The information provided herein may contain projections or other forward-looking statements regarding future events or future performance of countries, assets, markets or companies. Actual events or results may differ materially. Past performance figures, predictions or projections are not necessarily indicative of future or likely performance.
9. Any reference to a company, financial product or asset class is used for illustrative purposes and does not represent our recommendation in any way.
10. The information in and contents of this document may not be reproduced or disseminated in whole or in part without the Bank’s written consent.
11. OCBC Bank, its related companies, and their respective directors and/or employees (collectively “Related Persons”) may, or might have in the future, interests in the investment products or the issuers mentioned herein. Such interests include effecting transactions in such investment products, and providing broking, investment banking and other financial services to such issuers. OCBC Bank and its Related Persons may also be related to, and receive fees from, providers of such investment products.
12. You must read the Offer Document/Indicative Term Sheet/Product Highlight Sheet before deciding whether or not to purchase the investment product, copies of which may be obtained from your relationship manager.
13. Any hyperlink to any third party article, or other website or webpage (including any websites or webpages owned, operated and maintained by third parties) is for informational purposes only and for your convenience only and is not an endorsement or verification of any such article, website or webpage by OCBC Bank and should only be accessed at your own risk. OCBC Bank does not review the contents of any such articles, website or webpage, and shall not be liable to any person for the same.
1. Foreign currency investments or deposits are subject to inherent exchange rate fluctuation that may provide opportunities and risks. Consequently, exchange rate fluctuations may affect the value of your foreign currency investments or deposits.
2. Earning on foreign currency investments or deposits may change depending on the exchange rates prevalent at the time of their maturity if you choose to convert.
3. Exchange controls may apply to certain foreign currencies from time to time.
4. Any pre-termination costs will be taken and deducted from your deposit directly and without notice.