Yes, using other currencies such as SGD to buy US stocks will expose you to forex risks. When you buy US stocks and USD depreciates against SGD, your net profits after all transaction fees and currency conversions will be reduced.
With that being said, this should not be the main reason why you should not be investing in US stocks. One of the main reason USD depreciates is because the US Feds have been printing and adding more money into the economy as seen from the US M2 money supply (basically means how much money or cash there is in the US economy)*.
This increase in money supply would mean that the money would have to flow somewhere, and no doubt, most of the money will actually flow into stocks, which will cause stock price to increase. This presents huge opportunities in the US stock markets, and as an overseas investor, despite knowing about the depreciating USD, it will be a risk that i am willing to take to have access into US markets.
No doubt, forex risks are significant and if your capital is not big, it can be almost "invisible". I think i was blindsided by how well US stocks are performing (as compared to my homeground SG stocks) and have disregarded such a fact. Your question reminded me I have such an exposure as well, so thank you for that 🤣
Moving forward, knowing that USD will depreciate in the near future:
Don't convert a lump sum of SGD (or whichever currency) into USD, as your USD-SGD rates will be locked in.
Diversify your investments into other markets.
*https://tradingeconomics.com/united-states/mone...
Yes, using other currencies such as SGD to buy US stocks will expose you to forex risks. When you buy US stocks and USD depreciates against SGD, your net profits after all transaction fees and currency conversions will be reduced.
With that being said, this should not be the main reason why you should not be investing in US stocks. One of the main reason USD depreciates is because the US Feds have been printing and adding more money into the economy as seen from the US M2 money supply (basically means how much money or cash there is in the US economy)*.
This increase in money supply would mean that the money would have to flow somewhere, and no doubt, most of the money will actually flow into stocks, which will cause stock price to increase. This presents huge opportunities in the US stock markets, and as an overseas investor, despite knowing about the depreciating USD, it will be a risk that i am willing to take to have access into US markets.
No doubt, forex risks are significant and if your capital is not big, it can be almost "invisible". I think i was blindsided by how well US stocks are performing (as compared to my homeground SG stocks) and have disregarded such a fact. Your question reminded me I have such an exposure as well, so thank you for that 🤣
Moving forward, knowing that USD will depreciate in the near future:
Don't convert a lump sum of SGD (or whichever currency) into USD, as your USD-SGD rates will be locked in.
Diversify your investments into other markets.
*https://tradingeconomics.com/united-states/mone...