the Wealthy Canadian

Whether you are an investor or a trader it is important to understand how global currencies can affect you. If you own all Canadian equities, the equities all rise but the Canadian dollar tanks, are you still doing well? Not really. If you want to travel or purchase any goods imported from outside Canada then you will be paying for it using a currency other than the CAD (Canadian Dollar).

There are two things that you can do with the FOREX.

1. Simply understand the implications of the CAD being traded on the global market, and how that impacts your personal finances.
2. You can trade currencies yourself (in a similar way as on the stock market).

So for your personal finances what do you need to know? With the strengthening CAD (against the USD) you will have more buying power in the global market (or at least in the USA). As long as American prices remain constant (or within a reasonable inflation) your CAD will now allow you to purchase more stuff in the USA than it did two years ago.

The down side is that any US stocks that you own are likely not returning nearly what you thought it was. For example, I purchased Coka Cola (KO) stock a while back at $53.50, but the dollar was trading at around 1.05. So in terms of my currency (the currency that allows me to by bread in Canada) KO cost me CAD56.18 (USD53.50 x 1.05). The USD/CAD rate is currently at around 1.0215 and KO is currently trading at USD55.28. So The current price of KO for me is CAD56.46, I’ve only made 18 cents even though the the price of KO is up 1.78.

The good news is that the CAD will likely fall sometime in the future. If you do purchase American stock while the CAD is up, it will appear that you got a discount when the CAD falls.

Where do you plan on retiring? Some sunny beach locale in the Caribbean, or do you plan on being a snowbird and spending you winters in Arizona? If you want to spend anytime outside of Canada then it is important that you consider your currency risks. Retirement/ vacations with a dollar worth only 0.65 is not very attractive. So you may want to consider buying American stocks or even money while your buying power is good.

Actively trading on the FOREX is another topic for another day. But know that it can be done. If you are passive investor, then it’s enough to know that currencies need to be considered when planning for your future.

ps, While I was finishing this post I noticed that Million Dollar Journey was hosting a pole about how people might take advantage of the current rate.