A few years ago, I considered venturing into currency trading.
The allure of capitalizing on the recent appreciation of the Chinese Yuan (RMB) against the US Dollar (USD) was tempting. The ‘managed floating’ nature of the Chinese exchange rate, with its distinct swings, seemed to present potential trading opportunities.
However, after careful consideration, I decided against pursuing this path. My investment philosophy aligns more closely with value investing than day trading. I am primarily interested in long-term investments in assets that demonstrably increase in value over time, rather than speculating on short-term price fluctuations.
This decision to give up currency trading stemmed from several key factors:
- Speculative nature. Currency trading inherently involves a significant degree of speculation, which aligns poorly with my risk-averse and value-oriented approach.
- Lack of value creation. Unlike other investments, currency trading does not contribute to the creation of real value. It merely involves profiting from fluctuations in relative exchange rates.
- Unpredictability and volatility. Currency markets are notoriously unpredictable and prone to sudden fluctuations, making it challenging to consistently generate positive returns.
- Focus on tangible assets. I prefer investing in tangible assets like dividend-paying stocks, which offer the potential for capital appreciation alongside a steady stream of income.
Furthermore, my aversion to the risk of defaults associated with bonds led me to prioritize equity ownership. I believe owning a stake in a company provides a stronger long-term investment proposition compared to owning someone else’s debt.
Moving forward, I plan to utilize my Chinese RMB and Polish PLN primarily for acquiring USD to invest in high-quality dividend stocks in the US market. This approach aligns with my investment philosophy and prioritizes long-term wealth creation over short-term speculation.
