Investing in Foreign Currency

[Ah Hai]

Some people like to invest in foreign currencies to earn a higher yield. For example, they can earn 3.1% on Australian dollars (1 month deposit) compared to 0.2% on Singapore dollars. However, they have to consider the spread of 1.7% in converting to Australian dollars and back. The higher interest rate is taken away entirely by the spread for short time deposits.

You can reduce the spread to 0.1% by investing in Australian dollars through the forex trading market. For example, if you wish to invest in AUD 50,000 you can buy the same amount in the forex market. Although you have to put in a margin of only 2%, i.e. AUD 1,000, you can keep the remaining 98% of the invested sum in Singapore deposit and enjoy the same investment result.



Posted by Tan Kin Lian at 9:29 AM

 

[Ah Hai]

Saturday, April 03, 2010
Poor financial future for Singaporeans
I feel sad for the people of Singapore. Most of them work hard and are frugal. They save for their future and for their children. But, when they come to retire, you do not have enough savings and are asked to continue to work longer.

What went wrong? Most of them get a poor deal from the financial products that they invested in. Take an example of a family which saves $500 a month over 35 years. They should have earned a return of 5% p.a. and received $570,000 for retirement,. But the yield obtained by most of them would probably be 2% p.a. giving them only $306,000 (or 54%). The difference of $264,000 (i.e. 46% of the total) went to pay the high earnings and profits of the financial services industry. I am not aware of any other country in the developed world where as much as 46% is taken away from the hard earned life time savings of the people.

If each family contribute $7,500 a year (i.e. $264,000 over 35 years), the total contribution from one million families would amount to nearly $8 billion a year. This is a lot of money. This is why the top executives in banks and life insurance companies can earn several million dollars a year. And in recent years, higher salaries are being paid for top executives who are willing to be unscrupulous in over-charging customers and giving them a poorer deal.

This arrangement works well for the board of directors, as their fees are benchmarked to the profits and to the government leaders whose remuneration are benchmarked to the top earners in the country. Of course, the people are condemned to a bleak financial future, but the government leaders do not seem to care.

Tan Kin Lian

 

[Queen Seok Duk]

You can reduce the spread to 0.1% by investing in Australian dollars through the forex trading market. For example, if you wish to invest in AUD 50,000 you can buy the same amount in the forex market. Although you have to put in a margin of only 2%, i.e. AUD 1,000, you can keep the remaining 98% of the invested sum in Singapore deposit and enjoy the same investment result.

So are you investing in the 'interest' or 'exchange' rates ? If you don't sign up with the bank's foreign currency deposit, who is going to pay you 3.1% interest ?

 

[jw5]

If he feels that way, then he should stand for elections at the next GE, get elected and speak up for the ordinary singaporean in parliament.
But please don't expect people to sign a petition indicating that they want him to stand for elections or promising that they will vote for him before he even decides to be a candidate. He should respect the voter's choice and decision at the polls.

 

[Ash007]

6.0% leh, where got 3.1%? Or do you mean 3.1% per month giving you 37.2% pa?

http://compare.smh.com.au/term-deposits

 

[Queen Seok Duk]

6.0% leh, where got 3.1%? Or do you mean 3.1% per month giving you 37.2% pa?

http://compare.smh.com.au/term-deposits

Foreign Time Deposit for Aussie Dollars in Singapore banks is 3.5% or thereabout.

But if you use Singapore Dollars to place deposit in Aussie Dollars, they will have to convert your SGD to AUD first. So the 'spread' that bank earns from the exchange rates will erode your 3.5% interest.

 

[Queen Seok Duk]

You can reduce the spread to 0.1% by investing in Australian dollars through the forex trading market. For example, if you wish to invest in AUD 50,000 you can buy the same amount in the forex market. Although you have to put in a margin of only 2%, i.e. AUD 1,000, you can keep the remaining 98% of the invested sum in Singapore deposit and enjoy the same investment result.

Can someone explain the above in detail ?

(1) How to put that 98% into Singapore deposit ? If in Singapore deposit, the interest is only 0.2%.

 

[axe168]

Posted by Tan Kin Lian at 9:29 AM

If I place it in our term deposit in Australia, I'll get a return of approx 5.5%/pa..

Alternatively, I can obtain a loan and place it into the offset account - I get about 6.5%.

How about invest in Property and Shares in Australia ? For approx 9-12mths, the return is about 45%. Avg annual growth about 8-12%.

Whatever I do, my returns are way better than CPF 2.5%.. or local bank's interest of 0.5%. Common sense will tell me to obtain my CPF asap and put it onto good use.

 

[Queen Seok Duk]

If I place it in our term deposit in Australia, I'll get a return of approx 5.5%/pa..

Alternatively, I can obtain a loan and place it into the offset account - I get about 6.5%.

And if it's a loan, don't you have to pay the bank interest ?

Is Tan Kin Lian talking cock or what ?