Vista Financial Advisors

Investing in Tomorrow. Today.
Vista's Investment Strategies

Foreign Bonds and Currencies

Few portfolios contain foreign bond and foreign currency holdings—yet this is a primary example of another separate catalyst group, a way to gain more safety through true diversification.  When the US dollar is down, foreign currencies are often “up.” In addition, with the current historic levels of foreign debt and trade deficits, it simply seems logical and wise to diversify your portfolio into multiple national currencies.  Foreign currencies can also serve to reduce volatility during panic periods. In the weeks following 9/11, for example, currencies like the Swiss Franc and New Zealand dollar moved up considerably against the plunging US dollar.

One reason this category often performs well during negative periods for the US economy is that, during these periods, investment funds tend to flow out of the United States, into investments in foreign countries.  I know you may already be getting tired of the constant reference to “eggs,” but this is simply a way to "not have all your eggs in one currency."  While you might not feel that you understand a lot about these types of investments, there are exchange-traded funds (ETF’s) and mutual funds available in these categories that make diversifying much easier.