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About Michael A. Weiss, CFA
Expertise
I can provide high quality answers to questions about mutual funds domiciled in the United States. Overall, I have 15 years of investment experience. I am currently the Editor of <a href="http://www.mutualfundinvestor.net/">The Mutual Fund Investor</a>, a quarterly publication that provides recommendations and commentary on various no-load mutual funds. I am also currently the Chief Investment Officer of a state registered investment advisory firm that specializes in no-load mutual funds.

Experience
Overall, I have 15 years of investment experience. I am currently the Editor of The Mutual Fund Investor, a quarterly publication that provides recommendations and commentary on various no-load mutual funds. To learn more about The Mutual Fund Investor, please visit <a href="http://www.mutualfundinvestor.net/">http://www.mutualfundinvestor.net/</a>. I am also currently the Chief Investment Officer of a state registered investment advisory firm that specializes in no-load mutual funds.My mutual fund experience began at a company called Lipper Analytical Services, where I researched and wrote about mutual funds. Lipper is one of the premier mutual fund research and ratings organizations. After Lipper, I worked as an investment analyst for Merrill Lynch’s multi-billion dollar Mutual Fund Advisor and Selects Programs. I also have experience working with individual stocks and bonds. I have managed investment portfolios for both Merrill Lynch Investment Managers as well as Evergreen Investments. Organizations CFA Institute CFA Society of Philadelphia Publications The Mutual Fund Investor Education/Credentials CFA charterholder MBA in Finance and Investments from the Zicklin School of Business at Baruch College

You are here: Experts > People/Relationships > Retirement Planning > Mutual Funds > Investing

Topic: Mutual Funds

Expert: Michael A. Weiss, CFA
Date: 6/10/2007
Subject: Investing

Question
Dear Michael,
This is not exactly about mutual funds but rather foreign currency. I was wondering if people actually invest in say British Pounds. And if people do invest in this kind of thing,how is it done?
                      Thank you,
                        Sam

Answer
Hi Sam,

Thank you for your question. I know this is not a mutual fund question, but I would be more than happy to help you. Yes, people invest in foreign currencies. First, I should explain that people buy or sell foreign currency generally to either speculate about the future price of a particular currency or to hedge a portfolio position.   You could either buy a foreign currency long with the expectation that the foreign currency will appreciate or you could sell a foreign currency short with the expectation that the currency will fall. When you buy, you make money when price of currency rises. When you sell, you make money when the price of the currency falls.

Let me also explain the hedging strategy. Here is an example: Portfolio manager of Mutual Fund ABC has found a terrific British stock to add to Mutual Fund ABC. All of the company’s fundamentals are fantastic and the manager believes the security will appreciate significantly over the next 12 months. The only issue is, however, that the fund manager believes that the British pound will depreciate substantially over the next twelve months. To protect the stock’s potential gains, the manager would hedge this investment by taking a short position (selling) foreign currency. Of course, it costs money to sell the currency, but this cost may be small in comparison to the gains on the stock.

As far as buying foreign currency for investing or speculating is concerned, this would generally be achieved by entering into options or futures contracts. There are plenty of physical or online brokers that offer trading in these securities. If you want to implement this type of strategy, I would suggest selecting a reputable broker and working with a foreign currency specialist to help you guide you through the process. Be careful if you attempt to implement these types of strategies. Options and futures are derivatives and can be riskier than the more traditional trades of stocks or bonds.

I hope this helps.

Sincerely,

Michael A. Weiss, CFA
The Editor
The Mutual Fund Investor
www.mutualfundinvestor.net

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