I have recently started investigating the benefits of investing in foreign currency Certificates of Deposit (CDs). I had read that a CD in Australia was paying 7.7%. This sounded like a safe bet to me. You deposit money for a fixed period of time with the rate the bank sets for you. If you go through certain U.S. banks you can get FDIC insurance on the foreign CD you are buying.

This is fine if you realize that the money you are investing will need to be converted into the currency you are investing in—in this example Australian dollars. You do take a risk on exchange rates going against you if the dollar gains against the currency you invested in. Make sure you understand what you are getting into before you do it. Do that due diligence on every investment, even if you think that the investment is safe. Know what you are getting into and assess the risks and rewards associated with that investment. Better to be safe than broke!

This entry was posted on Monday, June 16th, 2008 at 8:00 am and is filed under Investing. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.