The Importance of Holding USD: Why Canadians Shouldn't Overlook This Crucial Financial Decision
As the world's largest economy, the United States plays a significant role in shaping global markets. The US dollar (USD) has long been the world's dominant reserve currency and is involved in most international transactions. This blog post will outline the reasons why forgoing USD could be a poor financial choice for Canadians and how incorporating it into one's portfolio can lead to better financial outcomes.
1. Diversification and Risk Management
An essential investing principle is diversification. Having a diverse portfolio of assets can aid investors in reducing risk and preventing potential losses. Because Canadians only use the Canadian dollar (CAD), their investments are subject to changes in the national economy. By using USD in their portfolios, investors can reduce risk and perhaps experience long-term growth while hedging against economic downturns or currency volatility.
2. Paying extra when buying items in USD online
Canadians sometimes experience low conversion rates and additional costs when making purchases in the US dollar, particularly when doing so online. This is because the currency rate offered by Canadian banks and credit card providers frequently includes a markup that can be much higher than the actual exchange rate. For foreign shipping, processing, and customs clearance, many American-based online merchants may impose additional costs. These charges can soon mount up making it significantly more expensive for Canadians to buy products from the US. By holding a USD account, Canadians can use a USD credit or debit card to buy items online need to avoid additional costs.
3. Access to Global Opportunities
The USD's position as the main reserve currency in the world gives it access to international investment opportunities that the CAD might not have. Canadians who own USD can therefore access a wider range of investment opportunities, including US equities, bonds, and real estate. Compared to investments restricted to the Canadian market, these can provide larger returns and greater stability.
4. Currency Appreciation and Exchange Rate Fluctuations
The value of investments made by Canadians may be impacted by currency appreciation and exchange rate changes. Canadians can profit from the US currency's appreciation against the Canadian dollar by holding USD. Increased investment returns and a preservation of purchasing power when traveling or making purchases in the US are possible outcomes of this appreciation. Furthermore, having USD in one's portfolio can act as a natural buffer against currency risks, providing stability when the foreign exchange markets are volatile.
5. Stronger Economy, Market Performance and Inflation Protection
Canadians can win from stronger economic performance and inflation protection by owning USD. The American economy consistently surpasses the Canadian economy in terms of growth and market performance, with historically larger returns being offered by the US stock market. These returns can boost a portfolio's overall performance, which could result in greater long-term gains. Additionally, the US Federal Reserve has a proven track record of keeping inflation under control, and US inflation rates typically tend to be lower than those in Canada. Hence, investing in USD can aid in maintaining purchasing power and defending the true value of assets against rising costs.
In conclusion, Canadians may want to consider including US Dollar in their financial portfolios. They get diversity, risk management, access to international opportunities, currency appreciation and improved economic performance, and protection from inflation by doing this. A well-balanced portfolio should contain a variety of currencies, including the US Dollar, to maximize potential returns and reduce risk, even though it is not necessary to convert all assets to USD. It’s critical for Canadians to take the initiative with their financial planning and to think about retaining USD to create a solid and resilient investment strategy. A financial advisor can offer individualized guidance based on each client’s financial objectives and risk tolerance.
To get the best CAD to USD exchange rates, use RemitBee’s currency exchange service. The best part is that the entire exchange process may be done online from the convenience of your home or place of business. There are no additional costs, and exchange rates are consistently favourable.
Here’s how:
Step 1
Sign up and verify your RemitBee account
Step 2
Select ‘Currency Exchange’ then select the currencies and amount of money you would like to exchange
Step 3
Connect your Canadian bank accounts
Step 4
Confirm details and exchange your money
Step 5
After 2 business days, your newly converted funds will be in your account
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