Why Currencies

Welcome to the Largest Market in the World

The “currency market” or interbank is the world’s largest market trading double the daily world volume of bonds and ten times the daily world volume in stocks.

Confusing? – not really:

The world's currency markets can be viewed as a huge melting pot: in a large and ever-changing mix of current events, the price of one currency in relation to another shifts accordingly, and money can be made (or lost) from those price shifts.

Assets - like stocks, bonds, real estate, gold, art etc - are valued in money. By that definition, currencies are not ‘assets’. But unlike other assets, currencies are traded as pairs, always one currency against another currency, in a zero sum game (winners win from losers, losers lose to winners), whereas swings in the values of other assets (including real estate) can have huge wealth effects that can deeply impact economic prosperity.

No other market encompasses and distills as much of what is going on in the world at any given time as currency prices.

What Does Diversification Really Mean

• Diversification is not about just investing in foreign equities or in bonds. Diversification is investing in any non-correlated assets to reduce risk and provide more consistent returns.
• Any individual asset class will go through losing periods. By investing in more the one asset class simultaneously, losses may be partially offset by gains elsewhere.
• Correlations between investments should be negative (or low).Diversification into investments which are very diverse will generally help your portfolio to be less risky.