Saturday, 2 August 2014

Forex play with property loans

Stocks vs forex, which is more risky?

Many would have said Forex is more risky, thats because Forex is a high leveraged game played by high net worth people. As we understand currency, currency is a commodity driven by demand and supply - indicators of economic drives demand and supply and the float of the nations' currency is far too wide to be manipulated by any individuals. In view of the large float of currency out in the market... try shorting the currency?

In stocks, we often hear of manipulations by some fund house or bankers to short or drive up demand. Often there is a finite stock volume and it would be possible to drive up and down demand for this finite number of stocks. 

Have you seen $$ becoming zero overnight? Or have you seen Stocks delist overnight or being suspended?

The answer is clear. 

In property, there is a way to play forex at 1:1 level and that allows you to mitigate the margin call risks associated with high leverage investment like forex. You simply use a "collateral" to offset against any losses. 

Lets put this in example. 

For a $400k property say in AUD vs SGD. Historically prices fluctuates about 30% every 5 years or so.

Start point at year 1 - you have put in 80,000 and 320,000. at 1.18SGD to 1AUD. When AUD fell to parity, you convert the loan to SGD loan... hence instant 30% gains in forex = 30% reduction in mortgage liability. When AUD rise to 1.3 : 1 SGD, you can convert to AUD loan again. Such conversation over time allows you to earn the forex exchange rate without ever lifting a finger.

Money printing anyone?

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