With the equity market doing its usual dance, a lot of this volatility may be making long term investors nervous. If you’re in this boat, and if you’ve been doing some reading on what to do next, then you’ve probably come across suggestions about diversifying into other asset classes in order to restore stability in your portfolio. We’ve been told time and again that diversity is the key to long-term growth for investment portfolios and a great strategy to use for smoothing out these bumps and craters in the markets. One of the more interesting ways to diversify is through foreign currency investment accounts. For those of you interested in diversifying through foreign currency, you’ll be happy to know that EverBank offers several relatively lower risk options in this area. Here’s a list of what they have available:
Foreign Currency Hedging: Diversify With EverBank CD Accounts
Before checking out these investment products, be aware that EverBank caters to high asset customers, so it’s not uncommon to have higher than usual initial deposits required to open an account with them.
EverBank WorldCurrency CD
You can open a WorldCurrency Certificate of Deposit with a minimum of $10,000. There aren’t any monthly fees for this account, and it’s FDIC-insured for bank failure. But note that you can gain or lose money based on currency fluctuations. These single currency CDs are available with terms of 3, 6, 9, or 12 months.
Your returns include a fixed interest portion as well as the potential to earn extra from the appreciation of the selected currency held in the CD. At this time (note that rates do fluctuate), the Australian dollar WorldCurrency CD offers an interest rate of 2.5% and an APY of 2.52% for the three-month term. For the CD that buys into the South African rand, the rate is 4.38% and the APY is 4.42% for the six-month term.
There are 17 currencies available for the EverBank WorldCurrency CD. However, you won’t be able to find CDs at every term for all the currencies; the South African rand, for instance, isn’t available in 9-month or 12-month terms. Rates are subject to change, so check them again before you commit to a specific CD.
In addition, you’ll be able to use the Asset Manager Service. It allows you to integrate your CD account with several other EverBank services like banking or investment accounts. You can read more about these other EverBank products here.
Watch out for early withdrawals as the penalty is steep. An early withdrawal from a CD account will incur a penalty of all interest accrued to date. What about when your CD matures? You can choose to liquidate your account at that point, take the interest and reinvest the principal, or decide to rollover the principal and interest to maximize the growth of your investment.
EverBank WorldCurrency Basket CD
This CD will be a better fit for you if you’re interested in several different currencies. This is a good idea if you’re looking for a diversified basket of currencies. The CDs offered here are made up of currencies that have regional ties or common economic or geopolitical strengths.
You can choose between terms of 3 or 6 months for the EverBank WorldCurrency Basket CD. The CDs include three or more currencies and there aren’t any monthly account fees. To open an account, you’ll need a minimum of $20,000. Like with all EverBank CDs, you can expect FDIC insurance for bank insolvency although you can experience a loss if the underlying currencies of your CD lose ground against the dollar (but you’ll receive gains if their value goes up). While we seek to hedge our investments, there’s still risk in pursuing this strategy.
One of the CDs offered of this type is the Debt-free Basket CD. It features the Australian dollar, the Brazilian real, the Japanese dollar, the Singapore dollar, and the Swiss franc. Currently, the 6 month rate is 1.65%, with an APY of 1.66%.
Other multi-currency CDs include the Pan-Asian Basket CD, the New World Energy Basket CD, and the Commodity Basket CD, which includes currencies from the commodity-based countries of Australia, Canada, New Zealand, and South Africa. Overall, there are 15 multi-currency CDs to consider.
EverBank WorldCurrency Access Deposit Account (Money Market Account)
If you’d like a money market account to help you invest in foreign currencies, the WorldCurrency Access Deposit Account can be a solution. It doesn’t have monthly fees, it’s insured by the FDIC, and it can take as little as $2,500 to get started. Note however that you won’t start earning interest until you bump that deposit up to $10,000.
When you have initial deposits of at least $10,000 you’ll be able to earn interest in the currency of your choosing. And you’ll be able to transfer funds and make withdrawals or deposits between investments in worldwide markets, subject to federal limits imposed on money market accounts. EverBank claims that the currency conversion rate that you pay (e.g. the cost incurred during currency exchange) will be within 1% of the market rate for the foreign currency of your choosing.
Unlike the WorldCurrency CDs, you won’t be locked into a fixed rate. But just like with the CDs, you also face the risk of losing money if the value of the dollar or the foreign currency fluctuates. The flipside here is that you’ll receive a gain if your currency assets increase in value.
This account also provides benefits like identity theft protection and credit monitoring.
Read More About EverBank’s Foreign Currency Products
If you’d like more guidance before you start investing in foreign currency, EverBank has some tools to help. The website’s research section shows historical foreign currency exchange rates, currency news, and a list of available currencies. Also, there’s a six-page PDF on currency investing. It includes a chart on actions you can take with your accounts and takes a closer look at a WorldCurrency CD.
You can apply for an account online or learn more by calling (800)926-4922. In order to open an account, you’ll need to send in a deposit along with your signed application.
Just remember that any investment can lose money. If the foreign currency you’re investing in declines, you might lose your principal, so be sure to monitor your CDs or deposit account as time passes. It’s a good idea to talk to your financial adviser before committing to a new investment.
Foreign currency can be an engaging way to diversify your investments. If you’re thinking about taking the plunge, consider looking at EverBank’s WorldCurrency CDs and money market account.
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{ 7 comments… read them below or add one }
I had not seen foreign currency CDs before. However, looks like it might be good way to diversify some of your portfolio. Plus the short time frames do not keep your money locked up for very long.
It might be fun to try one of the 3 month CDs just to see how it goes. However, make sure it is risk capital you are investing.
I think these funds are the future of saving, but the minimums are too high for most people under 30. Everbank’s really ahead of the game.
These foreign currency investment accounts are pretty interesting. I will have to consider them as a way to diversify. The rates seem to be quite good compared to comparable US financial vehicles. Why the focus on EverBank? Do they offer the best foreign currency investment accounts?
Just read Austin’s comment and I would agree with him that a drawback for most people for the foreign currency investment accounts will be the high minimum initial deposit, but I am interested.
I understand that china is now selling their quan in limited amounts. Where can I buy their currency?
@James,
If you are interested in forex trading, check out this forex broker list.
Everbank advertises a Foreign Currency Deposits product otherwise known as World Currency Cds for depositors, in effect, to buy a foreign currency cd while leaving their money in the US. In reality, the same result can be achieved by buying a foreign currency forward contract and depositing your money in an FDIC insured bank of your choice.
Log onto CurrencyAve.com to learn more about this.