The Money Mustache Community
Learning, Sharing, and Teaching => Investor Alley => Topic started by: Omar on October 08, 2013, 12:33:09 PM
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Hello,
Has anyone seen this site before?
Deposits.org (http://Deposits.org)
very high interest rates..
but you would be taking a risk with currency fluctuations.
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Looks like inflation still beats out the interest..
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Hello,
Has anyone seen this site before?
Deposits.org (http://Deposits.org)
very high interest rates..
but you would be taking a risk with currency fluctuations.
If markets are efficient, the expected future exchange rate differs from spot rates by exactly the interest differential of any two currencies. In other words, in general, you probably can't make money off of interest rate differentials across currencies (a carry trade). I would only do it if you have specific reason to think the foreign currency in question will move differently than the market expects.
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In finance, this is called "the carry trade"; borrowing in low yield currencies and investing in high yield currencies. Historically, this trade does pretty well and been weakly correlated to stocks, but it took a beating in 2009 along with everything else.
If you want to play it in an easy way, you can just buy the ETF "DBV", which engages in this strategy for you and frees you from having to pick individual currencies or open foreign bank accounts. It could be an interesting diversifier, but it's not too sexy in my opinion.