By Adrian Mastracci, KCM Wealth
Special to the Financial Independence Hub
“Investors who have US cash and/or US portfolios are advised to revisit their currency strategies.“
Canada’s Loonie has been falling to under 70 Cents against the US Dollar.
Recall it climbed from near 86 cents in mid-2009 to over parity.
Many market forces, such as currencies, are well beyond investor control.
Currency adds yet another potential hazard or reward to portfolios.
Of course, currencies are extremely hard to predict. They can also move very quickly in either direction.
Treat currency as an asset class
Treat currency as an investment with longer time horizons. Those with US cash and/or US portfolio may consider the merits, if any, of converting to Canadian Dollars.
It is important to get a handle on the Canadian tax cost of the US cash/portfolio before taking any action. It may also make good sense, depending on account values, to convert on more than one occasion.
- Canadians who spend US$ cashflow may not be concerned about the currency moves.
- Long-term investors who already have US cash may add to their asset mix, say the S&P500 or Dow Jones.
- A form of a hedge may be buying oil/energy in Loonies.
- Converting Loonies to invest in US$ does not make sense for the majority.
- Canadians should consult a cross-border tax professional to become aware of US reporting requirements.
Overall, ensure that any currency action taken fits in within the goals of the personal roadmap. Once your decision is made, move forward and don’t look back: no second guessing.
Adrian Mastracci, MBA, is president and portfolio manager for Vancouver-based KCM Wealth Management Inc., specializing in designing and stewarding retirement portfolios.