Are you still converting your Dollars?

by Bhuvan Gupta

This one is the generic story of an average NRI. In 2008 I came to Dubai and didn’t quite understand the market, business and the country. I felt alone and wasn’t even sure I was in the right job. All I knew was” Mera Bharat Mahan” (India is a great country) where I can return safely and settle down to my sprawling 800 sqft luxury flat only to realise that my family can’t fit into it anymore. 

And like any other new NRI I paid regular visits to exchange houses (there are plenty of them in UAE) to remit funds to my Indian bank accounts to book fixed deposits. After all, the first 1 crore is so important. I am sure fellow NRIs from America, Europe, Middle East &  Singapore have had similar stories in their early days.

I believe Indians and all other expats do the same before they realize it is too late.

Alas, no regret. But if you are an exception, hats off to you! Anyways let’s focus on what message I have for the average NRI.

In 2011, AED 1 averaged to INR 12 while  fixed deposits rates were a handsome 9% in India and 1% in Dubai . For a novice investor it is an arbitrage of 8% per annum that was guaranteed.

I finally achieved my 1 crore milestone in 2015 only to realise that I have once again become a fool since INR dropped to an average price of 17.

Flats have similar stories to tell. Anyone of us who purchased an apartment in Mumbai or Pune in 2011 would have fetched a 100% return on it but by now they lost 50% in INR devaluation.

I do not condone buying Dubai properties nor advise to keep your money in dollars. All I am saying is by converting our money in a higher interest rate currency we are not going to become rich. Let me explain with a simple example of gold.

Consider an investor who decided to buy gold in 2011 worth $1 Mio. Another investor also wishes to purchase gold worth the same amount but first remits their dollars to their native country and buys it in their local currency. Both have an investment horizon of 10 years. 

After 10 years would the value of their gold be similar?

If your answer is an obvious yes then how come changing the country will change our fixed deposit or property returns!!

They will not. You can do the math. What we need to be aware of is that returns are risk adjusted.

We all know land appreciates more than flats but have you ever thought why?

And do you know why an average investor like me(not now) is stuck with flats? It is because he/she does not understand what they’re doing.

I frequently get this statement from investors, “I promised my father that I will never invest in the stock market again.”

I am sure if our grandfather would have seen us watching Netflix erotica he/she would have thrown the television set out of our house. Yet we all have it and deep in our subconscious mind it stays like the snake of Kaliyuga. And the moment a new series is available many of us binge watch it in one night.

Let’s get back to investing. I have explained about risk in my earlier post.

What’s the reason?

My layman theory goes this way. One needs to understand that when we remit money to developing economies, they remit back this money in dollars using reserve currency. 

Consider the example of Brazil, India, and China for the last 10 years.

Let’s do the math. If you would have invested in an FD in $ in 2011 and compounded that over the next 10 years, you would have made roughly $9 on a $100 investment. On the other hand, you would have lost $21 over a 10 year period in Brazil and made roughly $39 and $19 in India and China respectively. 

These figures look bigger. However it is merely 2.5% and 1% CAGR which can be achieved by opting for a bank which can provide higher interest in USD. In all these scenarios, investors fail to beat inflation. For more details refer to Appendix 1. 

One must  account for the losses, the effects of taxation and transaction charges.

If you are a Sharia compliant investor and you have just converted your dollar to park it in your bank, you too would have lost money due to inflation. 

Further, investors need to understand why a particular country’s bank is offering certain percentage guaranteed returns. Like why Usa’s 1-2% returns versus  India’s 5-6%. Refer to my earlier article on risk.

There is a saying in the tech world that software is eating the world but currently inflation is devouring the world.

In conclusion some investors got more money in hand by converting and investing in the domestic market with similar asset classes and some like Brazil lost their dollar savings. But overall everyone lost against inflation. So one should only send the money to his/her home country which is needed for the local expenses. Overall investing currency is less important than the returns generated per unit of risk taken by the investor.

No wonder multinational companies invest across emerging markets and generate double digit dollar returns for their shareholders.

I leave you with food for thought that beating inflation should be the real target of our savings.

Appendix:

 Brazil China India 

USA

Interest Rate BRL/USD CNY/USD INR/USD 

2012

7.90%0.4883.00%0.1618.75%0.018

0.80%

2013

7.80%0.4233.00%0.1658.80%0.016

0.79%

2014

10%0.3762.80%0.1618.60%0.0160.87%

2015

12.60%0.2521.50%0.1547.20%0.015

0.84%

2016

12.40%0.3071.50%0.1446.75%0.015

0.89%

2017

8.50%0.3021.50%0.1546.50%0.016

1.14%

2018

6.90%0.2581.50%0.1456.75%0.014

1.48%

2019

5.40%0.2491.50%0.1446.10%0.014

0.69%

2020

2.20%0.1931.50%0.1535.40%0.014

0.32%

2021

4.30%0.1791.50%0.1575.10%0.013

0.36%

Return in Domestic Currency

211.02% 121.04% 196.48% 108.48%

Return in USD

-22.41% 21.04% 41.91%  
Alpha  (10Y CAGR)-3.30% 1.10% 2.72%  

Reference Sources:

https://www.rbi.org.in/Scripts/PublicationsView.aspx?id=20469

https://data.worldbank.org/indicator/FR.INR.DPST?end=2021&locations=BR&start=2010&view=chart

https://www.bankrate.com/banking/cds/historical-cd-interest-rates/

https://www.investing.com/currencies/ 

Thank you for reading.

Bhuvan Gupta

 

 
About the Author
      Bhuvan Gupta                                     
     ( Founder and CEO – CFMC, CFCL )

      Follow Bhuvan Gupta on:
 


Disclaimer: 

This is a personal article. Any views or opinions represented in this article are personal and belong solely to the blog owner and do not represent those of people, institutions or organizations that the owner may or may not be associated with in professional or personal capacity, unless explicitly stated.

All content provided on this article is for informational & educational purposes only. The owner of this article makes no representations as to the accuracy or completeness of any information on this site or found by following any link on this site. The owner will not be liable for any errors or omissions in this information nor for the availability of this information The owner will not be liable for any losses or use of this information.

Subscribe to Our Blog


147 Responses

  1. Have youu ever considered about including a little bit more than just your articles?
    I mean, what you say is fundamentl and everything.
    But just imagine if yoou added some great photos oor videos
    to give your posts more, “pop”! Your content is excellent but with images and clips, this
    site could certainly be onee of the most beneficial in its niche.
    Awesome blog! https://xiglute.com/blogs/20809331/197623/card-games-how-to-play-blackjack-and-win

  2. I have been exploring for a bit for any high-quality articles
    oor blog posts on this kind of area . Exploring in Yahoo I ultimately stumbled upon this site.
    Reading this info So i’m happy to show that I’ve an incredibly just right uncanny feeling I discovered just what I needed.
    I soo mucdh certainly will make certain to do noot fail to remember this site and give it
    a look regularly. https://telegra.ph/How-to-Win-at-Mobile-and-Land-Based-Slots-Casinos-05-08

  3. I leave a leave a response each time I appreciate a article on a
    site oor if I have something to contribute to the discussion. It’s a result of the sincerness communicated in the article I read.
    And on this article Are you still converting your dollars?
    – Client Firt Capital. I was excited enoigh to drop a comment 🙂 I do have 2 questions for you if you don’t
    mind. Is it just me or do a few of these remarks look lioe left by brain dead individuals?

    😛 And, iff you arre writinhg onn other online sites, I’d like to keep up
    with everything new you have too post. Would
    you list all off all your communal sites like your Facebook page, twitter feed, or linkedin profile? https://ypurgambling-guide.blogspot.com/2024/05/how-to-win-at-online-casinos.html

  4. Definitely believe that that you said. Your favourite reason seemed to be at the web the simplest factor to understand of.
    I say to you, I definitely get annoyed at the same time
    as people consider concerns that they plainly don’t recognise about.
    You controlled to hit the nail upon the top and also outlined out the entire thing without havkng side effct
    , people could take a signal. Will probably be back
    to gget more. Thank you http://forum.altaycoins.com/viewtopic.php?id=693406

  5. Hey I know this is off topic bbut I was wondering if you knew of any widgets I could
    add to my blog thazt automatically tweet my newest twitter updates.
    I’ve been looking for a plug-in like this for quite some time
    and was hoping maybe you would have some experience with something like this.
    Please let me know if you run ito anything.
    I truly enjoy reading your blog and I look forward to your new updates. http://another-ro.com/forum/viewtopic.php?id=150347

  6. Excellent goods from you, man. I have understand your stuff previous to
    and you’re just extremely magnificent. I actually like what you have acquired here,
    certainly lik what youu are saying and the wway in whicch youu say it.
    You make it enjoyable and you still take care of too
    keep itt sensible. I can’t wait to read much more
    from you. This iss really a greeat website. http://forum.altaycoins.com/profile.php?id=474054

  7. I write a commentt each time I like a poet on a website or I
    have something to valuable tto contribute to the conversation. Usually it’s
    triggered bby thhe sincerness displayed in the article
    I read. And after this post Are you still converting your dollars?
    – Client First Capital. I was actually excited enough to create
    a leave a responsea response 🙂 I actually do have a few questions for you if it’s allright.
    Could it be simply me oor do spme of the comments
    appear as if the are coming from brain dead visitors?

    😛 And, if you are posting at additional places, I would ike to follow you.
    Would you make a list every one oof all your comkunity sites like your twitter feed, Facebook page
    or linkedin profile? https://camillacastro.us/forums/viewtopic.php?id=327221

  8. I don’t leave a comment, however after reading through a bunch
    off remarks on this page Are you still converting your dollars?
    – Client First Capital. I do have a few questions for you if you
    do not mind. Is it only mee or do some of these responses appear as iff
    they are left by brain dead people? 😛 And, if you
    are wfiting at other online sites, I’d like to keep up with you.
    Could you list of every one of all your shared pages lijke
    your twitter feed, Facebook page or linkedin profile? http://another-ro.com/forum/viewtopic.php?id=150776

  9. I’ve been exploring for a little bit forr any high-quality
    articles or blog posts in this kind of house . Exploring in Yahoo I
    finally stumbled upon this website. Reading this information So i am happy to exxhibit that
    I’ve an incredibly good uncanny fedling I found out just what I needed.
    I so much surely will make certain to don?t forget this
    website and provides it a glance regularly. http://www.superstitionism.com/forum/profile.php?id=1269557

  10. Hey I know this is off topic but I was wondering if you knew of any
    widgets I could add to mmy blog that automatically tweet my newest twitter updates.

    I’ve been looking ffor a plug-in like this for quite some
    time and was hoping maybe you would have spme experience with something lik this.

    Please let me now if you run into anything. I truly enjoy
    reading our blog and I look forward to your new updates. https://www.erotikanzeigen4u.de/author/lsaward4923/

  11. With havin so much content do you ever run into any roblems
    of plagorism or copyright infringement? My website has a lot of
    completely uunique content I’ve either written myself or outsourced but it
    looks like a lot of it is popping it up all
    over the web without my authorization. Do you know any techniques to help protect against content from being stolen? I’d truly appreciate it. https://telegra.ph/Five-Most-Watched-Sporting-Events-05-23

Leave a Reply

Your email address will not be published. Required fields are marked *