Most of my assets are in the US, but I already hold about a million in Euros. I’m considering moving another $3–5 million into foreign currencies or overseas accounts as a hedge against instability in the US. Should I focus on a few specific countries or take a broader approach?
Weighing the Risks of Currency Diversification
It’s natural to think that moving assets overseas reduces risk. But what’s really happening is a swap—you’re exchanging exposure to US risk for exposure to another country’s risk. That can make sense, but it needs to be done thoughtfully.
If you already hold significant Euro exposure, adding $3–5 million more to foreign holdings isn’t unreasonable, depending on your overall portfolio. The key question is: what exactly will those assets be invested in?
Holding Cash vs. Investing Abroad
Simply parking funds in another currency may serve as a store of value, but it comes with tradeoffs. Cash held abroad typically earns little interest, and without active trading, it can lose value to inflation over time.
This is why most high-net-worth investors who want foreign exposure do so through:
- International bond funds – offering currency diversification with income and stability.
- Selective international equities – though globalization has reduced the diversification benefit compared to 30+ years ago.
If you’re thinking only of “currency as a hedge,” it’s worth remembering that currencies fluctuate heavily, and maintaining proper weights across multiple countries requires active rebalancing.
The Problem with Concentrating in One Country
Historically, investors seeking safety flocked to the Swiss Franc. But even Switzerland, long considered stable, has seen unexpected pressures—like recent tariffs—shake financial markets.
This illustrates the risk of concentrating in just one or two countries. Instead, a more balanced approach would spread exposure across five to ten developed economies. Doing so reduces “idiosyncratic risk,” the country-specific shocks that can hit unexpectedly.
Developed vs. Emerging Markets
Some investors look to emerging markets for independence from US trends. While it’s true these economies are less tied to US decisions, they carry their own risks: weaker financial systems, higher volatility, and political instability.
For most investors, diversification through developed-market currencies and bonds offers a better balance between stability and growth.
Practical Next Steps
If you’re considering moving millions into non-US assets, here are steps to think through:
- Clarify the purpose – Is this about hedging inflation, earning return, or creating liquidity outside the US?
- Spread the exposure – Avoid concentrating in one or two countries.
- Consider funds instead of direct currencies – International bond funds and ETFs simplify management.
- Limit your allocation – For liquidity purposes, 5% of a portfolio in non-USD cash equivalents can make sense.
- Work with the right platform – Make sure your custodian supports multi-currency trading and reporting.
Final Takeaway
Diversifying into foreign currencies can provide peace of mind and add resilience to a portfolio. But rather than chasing one “safe haven,” a diversified, fund-based approach across developed economies often makes more sense than direct currency holdings alone.
It’s not about escaping risk—it’s about reshaping it thoughtfully.
This post was adapted from a recent episode of the Scholar Wealth Podcast. For more insight, listen to the full episode.