I live in Brazil and next week I'm gonna move to Sweden. I'll stay there for the next two years with a scholarship that covers all my living expenses. I have some money here (in BRL) that I won't need in these next two years and now I'm trying to decide what I'm going to do with it.

How can I decide what's the best option:

  • Keep my money in an investment in Brazil (ROI is roughly 13% per year)

  • Take my money with me to Sweden

Keeping my investment in Brazil is not clearly a best option because the brazilian currency has been losing value over the years.

  • You left out a very important piece of information: When and where will you need the money? How long will you intend to keep it invested? Is it savings for retirement? – Chris W. Rea Aug 4 '15 at 23:59
  • This money is for emergencies, I don't plan on spending any of it during the 2 year period mentioned above. For the purposes of this question, suppose that I would use it immediately after these two years, most likely in Sweden, not Brazil, but this is harder to predict. If it doesn't incur in too much work, please consider both cases (spending in Brazil and in Sweden). – JLagana Aug 5 '15 at 0:50

I will attempt to answer three separate questions here:

  1. Should you leave your emergency fund in a high yield investment?
  2. Should you leave your emergency fund in BRL or convert it to SEK?
  3. Can a moderate risk investment in BRL or SEK yield better results?

Should you leave your emergency fund in a high yield investment?

The standard answer is that an emergency fund should not be in an investment that can lose value. The safest course of action is to put it in a savings account or other very low risk investment somewhere.

Should you leave your emergency fund in BRL or convert it to SEK?

This question becomes: can a reasonable and low risk investment in Sweden be comparable to or better than a low risk investment in Brazil?

Inflation in Brazil has averaged a little less than 6% over the last 10 years with a recent spike up above 8%. A cursory search indicates interest rates on savings accounts in Brazil are outpacing inflation so you might still expect a positive return on money in a savings account there.

By contrast, Sweden's inflation rate has been around 1% over the last 10 years and has hovered around 0 or even deflation in recent years. Swedish interest rates for savings accounts right now are very low, nearly 0%. Putting money in a savings account in Sweden would likely hold its value or lose a slight amount of value.

Based on this, you might be better off leaving your emergency fund invested in BRL in Brazil.

Can a moderate risk investment in BRL or SEK yield better results?

The answer to this a little unclear. The Brazilian stock market has been all over the place in the last 10 years, with a slight downard trend in recent years. In comparison, Sweden's stock market has shown fairly consistent growth in spite of the big dip in 2008. Given this, it seems like the fairest comparison would your current 13% ROI investment in Brazil vs. a fund or ETF that tracks the Swedish stock market index.

If we assume a consistent 13% ROI on your investment in Brazil and a consistent inflation rate of 6%, your adjusted ROI there would be around 7% per year.

The XACT OMS30 ETF that tracks the Swedish OMS 30 Index has a 10 year annualized return of 9.81%. If you subtract 0.8% inflation, you get an adjusted ROI 9%.

Based on this, Sweden may be a safer place for longer term, moderate risk investments right now.

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The key is whether you plan to stay in Sweden forever, or plan to move back to Brazil after completion of 2 years.

If you have not decided, best is stay invested in Brazil. Generally markets factor in currency prices so if you move the money into Krona and try and move it back it would in ideal market be more or less same. In reality it may be more or less and can't be predicted.

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