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I live in a country with an uncertain, collapsing economy. The exchange rate compared to USD and EUR@ is sky rocketing that effectively wiped off 20% of people's savings in just 8 months! See USD-LKR.

I'm venturing into forex markets as a possible investment. At the same time I want to compare that with how real estate markets usually behave in uncertainty with high inflation.

Is this a good strategy?

(I'm coming from an engineering background, with less experience in Economics.)

closed as primarily opinion-based by Pete B., Dheer, JoeTaxpayer Jan 12 at 4:51

Many good questions generate some degree of opinion based on expert experience, but answers to this question will tend to be almost entirely based on opinions, rather than facts, references, or specific expertise. If this question can be reworded to fit the rules in the help center, please edit the question.

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This all depends on your risk tolerance. Preservation of capital wise just buying a basket of the stable global currencies and sitting on it will preserve capital well but lose to inflation in the medium/long term.

Property is very hard to call and hedge as its a static, high deprecation asset that unless you are able to buy properties in numerous locations also exposes you to significant local risk (eg you buy a house in a town that suddenly loses its main industry it can quickly fall in value dramatically). This one is very hard to comment on without more local knowledge of where you would be buying etc.

A more risky but still fairly safe option is to buy a product(s) like a US/UK/EU government bond fund where the fund holds a basket of bond maturities that generally will beat inflation. The disadvantage is it exposes you to interest rate risk which can change the absolute value of the fund and expose you to loss (or gain).

Adding yet more risk you could buy corporate bond funds: higher return but significantly higher default risk and volatility to the fund(s).

The final and most risky option is to buy baskets of shares or an index fund of global stocks. These will protect you from inflation in your local country as represent the earnings and capitals of 100s+ companies trading in many different currencies. The downside is they can easily half in a severe financial crisis, but also generally beat every other asset class in long term return as well.

  • Thanks. The first google result that come up for index funds is vanguard global index fund. Your last option is about funds like this, right? – Kasun Gajasinghe Jan 9 at 17:37
  • Assuming it is a stock fund yes. Vanguard also offer global bond funds. If you post a link to the fund itself we can answer easily. – Philip Jan 10 at 9:17

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