Currency – a double whammy
“Risk varies inversely with knowledge.” – Irving Fisher
When you invest in offshore assets such as international share trusts, you are exposing yourself to an extra risk. If our currency rises in relation to the overseas currency, your investment will drop in value in Australian dollar terms. Of course the opposite is true too – if our dollar weakens, you gain. This is not a reason to avoid investing in overseas assets but you should try to get a feel of where our dollar is heading before you do it. Alternatively, you could talk to your adviser about an international trust that uses hedging strategies that will protect you against adverse currency movements.