How do US citizens best invest in Euros?

October 1, 2005 3:16 PM

Suppose an American citizen living in America wanted to invest 10k - 50k of US dollars in Euros. What would be the easiest way of going about making this investment?

I only mention the dollar figure to see if there are any limits before certain rules kick in. What tax hoops and/or other legal hoops would one have to jump through? Is there anything else one should know about before making the decision to invest in Euros?

posted by pwb503 to work & money (9 comments total)

you can get certificates of deposit in euros (and many other currencies) from everbank. fdic-insured, too.
posted by jimw at 3:35 PM on October 1, 2005

It really depends what you want to invest in. Choice A is the currency of the investment, choice B is the actual investment. If you want to invest in a CD in euros, follow jimw's advice. If you want to invest in the euro stock market, you can buy some individual issues as ADRs on the domestic markets for larger companies. You can also invest in international mutual funds.
posted by cameldrv at 3:59 PM on October 1, 2005

Is there anything else one should know about before making the decision to invest in Euros?

So you want to buy some Euros in the hopes that the exchange rate swings in that direction? You'll be in competition with a whole damn bunch of organizations with a whole damn bunch of people who are a whole damn bunch smarter than you and can apply a whole damn bunch of fuckin'-A super-genius math to analyzing currency flows, and who make money primarily by knowing a whole damn bunch more than ordinary people do.
posted by ROU_Xenophobe at 4:03 PM on October 1, 2005

You can open an account with a forex trading site and buy euros that way. (i.e. refcofx) This would allow you to buy and sell euros anytime you want, unlike a CD.
posted by reverendX at 4:05 PM on October 1, 2005

As far as taxes, I guess that any gains you make must be reported as income. (either ordinary or capital gains depending on the holding period)
posted by reverendX at 4:06 PM on October 1, 2005

Following up on cameldrv's post, there are a number of exchange-traded funds (ETFs) that invest in the Euro zone. The advantage of ETFs over traditional mutual funds is that ETFs are generally more tax-effificent, and they can be shorted and in some cases even optioned.
posted by kindall at 4:14 PM on October 1, 2005

My impression of Forex was that it was more for people who wanted to dabble in short-term leveraged currency trading --- something not for the weak of heart. Everbank is more for the buy-and-hold types who think that the fundamentals point to large devaluation of the dollar over the next few years but don't want to try to guess what the next few days or weaks will hold.

Other options are mutual funds that invest in international stocks and/or bonds and do not hedge these investments against currency fluctuations (i.e. they give you currency exposure on top of the equity or bond investment). That can be a wiser course than just putting a big wad of cash into a Euro account where it is going to earn money market rates [i.e. very low if not zero] over years and years.

It is much easier now than it was a year ago to find out whether mutual funds provide currency exposure or whether they hedge against this. With all the talk about the dollar imploding last December, they realized it could be a selling point.

If you are investing inside a retirement account, I can specifically recommend Evergreen International Bond Fund (ESICX). This is only applicable in retirement accounts, though, because otherwise their minimum investment is $1,000,000. In your IRA, 401K, etc, the minimum is only $2,500.
posted by alms at 6:44 PM on October 1, 2005 [1 favorite]

Goodness, is the dollar expected to go down against the Euro more than it already has?! I thought this particular bandwagon had left the station some time ago.
posted by Goofyy at 9:38 PM on October 1, 2005

Actually right now the dollar is rebounding due to some problems in the EU unity as well as various other factors that are anybody's guess. It has stabilized at around $1.20 per euro for quite a few months. Presently living in Europe with my savings in dollars, I wished it would be a better exchange but this is fine for now.
posted by JJ86 at 1:26 PM on October 2, 2005