How to invest with the high CAD
Is the high (and rising) Canadian dollar taking devaluing your U.S. stocks? Yes it is… So how do you invest with the high Canadian dollar? Well first - don’t yank all your investments back home. Your portfolio could use the bulk purchases of cheap American equities and greenbacks right now.
Think about it - the Canadian dollar is not likely to stay at its $1.07 level in the long run. Drew Abbott, vice-president and investment adviser at TD Waterhouse Private Investment Advice expects the loonie to settle in the 95-cent to $1 range within the next 18-months.
I understand its hard to watch the value of your investments offshore drop with the U.S. dollar - especially when your Investment Advisor told you to “diversify with foreign investments”. I also understand it makes it even harder when you see local stocks and the TSX performing much better than your own foreign holdings. Finally, I’ll probably get on your last nerves when I tell you to ignore it.
Well, don’t chase the loonie like a bunch of running bulls. Remember what happened when you chased those tech stocks? That’s exactly what the Canadian dollar is turning into - a growth stock, rather than a currency. One the most important keys to investing is PATIENCE. Right now, we have to resist the urge to pull back all our investments back to Canada, and take advantage of the long-term opportunities we are presented with.
“Over the longer haul this is a golden opportunity to at the very least consider slightly increasing holdings in foreign securities. We’ve had an unbelievable run between the Canadian dollar and the TSX over the last five years, and I just cannot believe we’re going to have another prolonged period like that of extreme outperformance†–Douglas Porter, deputy chief economist at BMO Nesbitt Burns Inc.
“In the short run, you may be hurt by staying offshore or in the United States, but in the long run you’ll do well with U.S. stocks. You can take your $1.06 or $1.07 and buy some pretty cheap stocks in the United States but you need staying power and patience, and a lot of people don’t have that.†–Irwin Michael, portfolio manager at ABC Funds.
“Even if you put that into a U.S. money market fund earning 5 per cent, if the dollar comes back down from $1.07 to $1, that’s a 12-per-cent return over a year. The major move’s obviously been done. Whether we’re timing it properly is impossible to tell, but that’s one strategy.†–Drew Abbott, vice-president and investment adviser at TD Waterhouse Private Investment Advice.
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Actually, the U.S. dollar is expected to drop another 25-40% over the next few years.
The elite are fleeing the country. Do a google search on Jim Rogers. He’s not sitting in the U.S. waiting for the dollar to come back. Warren Buffett has put his money overseas. Why should the average person sit on a losing proposition for who-knows-how-long?
Do yourself a favor and put your money to good use somewhere else. Any losses today will likely be much worse later on.