Currency Diversification: A Smart Investor’s Shield

Introduction: When Currency Isn’t Just Currency — It’s Risk

For Canadians living and investing abroad, currency is more than just the money in your wallet — it’s the lens through which your entire financial future is viewed.

A 5% swing in CAD/AED or CAD/USD can make or break your investment returns, reduce your retirement income, or shrink your education fund overnight. And with global volatility rising, those swings aren’t rare anymore — they’re common.

According to a 2023 World Bank report, over 67% of cross-border investors underestimated the impact of currency volatility on their long-term plans.

So how can you protect yourself?

The answer: Currency diversification.

This article explores what currency risk is, why it matters for Canadians abroad, how it shows up in your life, and — most importantly — how Bassem Fawzy helps his clients shield their wealth using smart, globally oriented strategies.

What Is Currency Risk — and Why Should Expats Care?

Currency risk, also known as foreign exchange risk (FX risk), is the potential for your investments or income to lose value due to fluctuations between currencies.

For example:

• You earn in AED (United Arab Emirates dirham),

• Save in USD (U.S. dollars),

• But plan to retire in CAD (Canadian dollars).

Every financial decision you make has three currencies involved. That’s triple the risk if unplanned — and triple the opportunity if managed wisely.

Example: If the Canadian dollar strengthens 10% against the USD between now and your retirement, your USD savings could be worth 10% less in CAD terms — even if your portfolio performs well.

This isn't just theory. Between 2020 and 2023, CAD/USD swung by more than 20% — from 1.46 at its COVID peak to around 1.30 by mid-2023.

Real-World Example: The CAD/AED Swing

Consider this scenario:

• Fatima, a Canadian expat in Dubai, earns AED 50,000/month.

• She saves 25% of her income in local AED investments.

• Her retirement goal is to move back to Canada in 10 years.

If AED weakens just 5% against CAD before she retires, her retirement savings could lose 5% of their purchasing power — even if markets rise.

Now imagine a 15% swing — which has occurred historically. That could wipe out 1.5 years of income.

Without currency diversification, every market gain can be undermined by FX loss.

Strategy 1: Hold Multi-Currency Income and Assets

One of the best shields against currency risk is to build and hold wealth in multiple currencies — not just where you live.

That means:

• Earning in one currency (AED, SGD, USD)

• Saving in another (CAD, USD)

• Investing across several (multi-currency ETFs or portfolios)

This approach spreads your risk across different economies and FX cycles.

According to Morningstar’s Global Asset Report (2023), portfolios holding assets in 3+ currencies were 24% less volatile and had better long-term Sharpe ratios (risk-adjusted returns).

Bassem helps his clients:

• Open multi-currency investment accounts

• Use CAD/USD pairs to hedge repatriation

• Structure income across AED, USD, and CAD

“It’s not about predicting FX,” Bassem explains, “It’s about being prepared for any shift — so you’re never cornered by the market.”

Strategy 2: Use Currency-Neutral Funds and ETFs

Many investors don't realize that their ETFs and mutual funds are not hedged — meaning their returns are exposed to currency swings.

For example:

• A US stock ETF (like S&P 500) bought in CAD can underperform or overperform due to CAD/USD shifts.

• During strong CAD periods, even rising US stocks might bring lower returns when converted.

To reduce this risk, Bassem may recommend:

• Currency-hedged ETFs (e.g., XSP.TO instead of SPY)

• Dual-listed stocks

• Multi-asset portfolios with built-in FX controls

Currency-hedged funds may cost slightly more, but they provide stability — especially for short- to mid-term goals like tuition, down payments, or near-term retirement.

Stat: In 2022, currency-hedged global equity ETFs in Canada outperformed their unhedged counterparts by 5–7%, depending on the region.

Strategy 3: When to Convert — and When to Hold

One of the most common questions Bassem hears is:

“Should I convert my savings to CAD now or wait?”

The answer? It depends on your timeline.

• If you’re 5+ years away from needing the funds, it's often better to keep them in the currency where they’re earning returns, and hedge strategically.

• If you’re 1–2 years from repatriation, it’s time to start converting gradually — especially during favorable currency windows.

This is known as “phased conversion.” Instead of trying to time the market, Bassem helps clients create structured FX plans based on their future cash flow needs.

This avoids panic decisions like converting all your AED at once during a CAD rally — locking in losses unnecessarily.

Long-Term Impact: How Currency Strategy Protects Your Goals

Currency risk doesn’t just affect your savings — it affects:

• Your retirement lifestyle

• Your real estate buying power

• Your kids’ education budget

• Your business investment strategy

Imagine planning a $100,000 CAD education fund for your child. If your investment is in USD, and the dollar drops 8% before withdrawal — that’s an $8,000 shortfall.

Or, consider retiring to Canada with $1M USD. A 10% currency shift could mean losing $100,000 in real purchasing power.

With Bassem’s portal, clients can simulate these scenarios in advance — planning not just for returns, but for real-life conversions, timing, and purchasing goals.

You don’t control the market. But you can control your exposure.

Why Ignoring Currency Risk Is a DIY Trap

Many expats think currency planning is only for corporations or traders.

But for high-income earners, early investors, and globally mobile professionals, currency is one of the top 3 determinants of long-term financial success.

Still, too many people fall into the “DIY trap”:

• Holding everything in AED or USD while planning a CAD retirement

• Guessing on conversion timing

• Using outdated or local-only platforms

Bassem’s clients get:

• Currency-aware portfolio design

• Customized repatriation planning

• Professional-grade tools to model FX impact

Ready to Make Your Money Borderless?

Currency risk isn’t going away. But with the right plan, it doesn’t have to scare you.

With Bassem’s Financial Planning Portal, you can:

• Build your multi-currency strategy

• Simulate future goals in CAD, USD, AED

• Avoid unnecessary tax or timing surprises

• Get advice built for Canadians living abroad

Start your journey with clarity and confidence.

 Visit Bassem Fawzy's Portal

Register for your portal and consultation today.

Currency-smart planning starts now.