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Should I invest or should I wait while having foreign currency?

Personal Finance & Money Asked by Facon on July 22, 2020

I’m european living in Malaysia and receiving my salary in MYR. I already have a huge savings account worth of a full year of expenses in local currency at 1.5% APR, additionally, I have about the same amount already invested in VWRL.AS.
Money invested in the stock market will only be cash out in about 5 to 10 years from now to buy a home, iff necessary.

Normally, I need to exchange my currency from MYR to EUR using Transferwise or with a fellow friend before investing.

I plan to continue investing all remaining amount from savings account to VWRL.AS until I have about 3 months worth of expenses, as I don’t find the need for more.

Recently, due to COVID-19 pandemic, MYR / EUR exchange rate has taken a hit to my baseline with sample data, is as follow:

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I’m planning of leaving Malaysia some months from now. So my question is simple, should I continue investing in stock market as normal or should I wait until MYR / EUR exchange rate gets better?

One Answer

Fundamentally here you're asking for a sound prediction on direction of currency markets (and in a secondary respect the direction of the stock market). No one credible who even vaguely knows this will tell you, so you're not going to get an accurate answer to the specific question from anyone who isn't an idiot or a fraud.

Outside of this point, you clearly have some potential risk here you might want to hedge, and with these types of problems you always basically get to the same dilemma: pay an extra premium to hedge via stuff like currency hedged funds or futures with their slightly higher fees, or just take on the risk yourself for free. You can't have both.

As a result, most of this question comes down to just how much you care if currency continues to swing against you (and of course it can easily swing heavily back in your favour). If you care a lot and are happy to pay a premium to reduce your risk there are a variety of options open to you depending on your exact aims, if not you should just proceed as normal.

Answered by Philip on July 22, 2020

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