Investing in foreign currencies is a way to diversify your risk beyond the domestic investment market. When choosing to invest in a foreign currency, there are many factors to consider. One currency to consider is the Norwegian krone, which has been a traditionally strong currency due to their oil reserves and strong economic outlook. When investing in a foreign currency, you can minimize complexity and risk by purchasing a currency vehicle, like an exchange traded fund (or ETF), or a certificate of deposit.
Determine which kind of investment vehicle best suits your needs. For many people the simplest option is an ETF, or exchange traded fund. These funds allow a simple and easy way to invest in the currency market, and they allow returns based on the performance of the krone versus the dollar. Alternatively, you can invest in a foreign currency CD -- or certificate of deposit -- which works just like a traditional CD, only using the krone instead of the dollar.
Use your brokerage account to invest in the vehicle you have chosen. If your brokerage account allows online trades and includes one of those options, you can execute the trade online.
Contact your broker if your online account does not include the option to invest in one of these currencies directly and ask them to assist you in investing in Norwegian krone.
Many brokerages have a minimum investment amount per trade. In addition, some investment accounts have minimum investment amounts themselves. Be prepared to invest as much as necessary but not more than you can afford to lose.
Investing in foreign currency can be a good way to diversify your account, but be aware that as with all investments, there are risks involved. Specifically, when investing an any foreign currency, the biggest risk to your investment is the relative appreciation of the US dollar when compared to the other currency, in this case the krone. When the dollar appreciates significantly compared to the currency you've invested in, your investment's relative value drops. Although Norway -- and indeed, many Scandinavian countries -- have a history of stable economies, these fluctuations can happen at any time and to any market.
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