1

My situation as follow:

I'm planning to go abroad to study a semester during my undergrad, and then do my PhD also in abroad. My future plans are also living in abroad. The currency in these countries are all Euro. Moreover, the value of TL (the currency of my own country) loses its value significantly compare to Euro.

Now, the clever thing to do convert all of my savings to Euro, and invest in the from of Euro, so that my savings will not be affected from the devaluation of TL compare to Euro.

But the thing is as far as I know there are limited investment strategies in Euro in my country, which are still affected by the devaluation. For example, there is something called Eurobond where we can buy bonds in with Euro, but the value of the bond varies when the value of TL changes with respect to Euro, so that as long as you hold the bond until its maturity, the bond behaves as if it is a TL bond.

Question:

What kind of investment strategy to follow when the savings will be used in abroad/ in a different currency then your countries currency ?

Edit:

As @nanoman put it: I can get euros but there is no proper way of (as far as I know) getting any return.

Improve this question

1 Answer 1

Reset to default
1

Convert savings of the Turkey lira to euros but then open a euro-based leveraged forex account and take positions in the lira. The advantage is that leveraged currency positions can be changed in a few minutes time. Now if the leveraged position size is the same amount as the savings then there is no actual leverage.

Also, consider some of the fundamentals. If the Turkey interest rate were to come-down and return-to-normal then Turkey lira bonds would go up in lira value. But if Turkey interest rates were to come-down then the currency might drop on a lower interest rate or the currency might go up on the positive of returning-to-normal.

And I would be inclined to invest in a major European bank that has branches in Turkey. Of course the bank is based in the euro currency, the bank pays a dividend, and the bank will likely have growth over long periods of time.

Improve this answer
6
  • 2
    Why take positions (you seem to mean long positions) in the lira, which seems to undercut the point of converting to euros? OP's goal is "that my savings will not be affected from the devaluation of TL compare to Euro". The problem seems to be opening any euro-based investment account. OP can get euros but doesn't have a way to get any return -- would have to just proverbially keep the euros under the mattress. That may not be the worst thing since euro interest rates are currently very low.
    – nanoman
    May 26, 2019 at 2:00
  • @nanoman "OP can get euros but doesn't have a way to get any return" : that is exactly my problem. Thanks for summarizing.
    – Our
    May 26, 2019 at 3:41
  • The investor could convert to euros and then take sell-side EUR/TRY forex positions as needed. Or the investor could stay in lira and take buy-side EUR/TRY positions as needed. When in the lira the advantage is the local currency interest rate. When out of the lira the advantage is the major currency as better at holding value. Buy-side EUR/TRY positions pay-out a roll-over interest while sell-side EUR/TRY positions receive a roll-over interest payment.
    – S Spring
    May 26, 2019 at 3:43
  • @SSpring: There's no reason at all to both convert to euros and have an FX account. OP can either open an FX account in Turkey and take a position in euros. Or convert to euro and deposit in a single-currency (Euro) account, anywhere in Europe willing to maintain an account for a Turkish resident.
    – Ben Voigt
    May 26, 2019 at 20:03
  • The OP has a future plan of expenses in euros but a current situation of living in Turkey at 20% inflation! I think a trading back-and-forth in the currencies is likely. A better practice than trading would be a slow-roll opportunistic hedging. However, if there is a funded amount held for future expenses in euros then that amount should simply be in the euro either by deposit or by hedging.
    – S Spring
    May 26, 2019 at 22:41

Your Answer

By clicking “Post Your Answer”, you agree to our terms of service, privacy policy and cookie policy

Not the answer you're looking for? Browse other questions tagged or ask your own question.