"I am an Indian citizen living in Dubai for the last 15 years. Almost 90 per cent of my savings are in fixed deposits and about 10 per cent in mutual funds investing in Indian equities. I will go back to India in the next few years. Can you please advise if it will be worthwhile for me to save in any other currency or investments?"

This is a common issue that expatriates here in Dubai face. What currency is best to save in? Should it be in the currency that you are paid in, or the one that you will ultimately spend the money in? Is it better to pay small currency transfer fees on a regular basis, or as a one off when you return home?

So let’s look at these issues in more detail. Firstly the currency to save in. This question can be very straight forward or difficult to answer. If you know where you are going to be spending the money, for example the UK or India, then you may elect to save in sterling or Rupees, as you know that you will be eventually using the funds in that currency, and so you are happy to pay a currency exchange fee each month to save in your currency of choice. However the amount that you save each month may well change as the currencies fluctuate.

On the other hand you could save in the local currency, removing any exchange rate costs while you are saving and know exactly what your contribution will be. With this approach you may win or lose when changing your accumulated fund back into your home country’s currency, dependent on how the currencies have moved relative to each other.

For the person who posed this question, they seem to be certain of returning back to India, so they are faced with exactly this dilemma. It they save in Rupees, then they are having to exchange a larger amount of UAE dirham, as this currency is fixed to the US dollar, and so has fallen in value. However you may prefer to increase the regular saving to insure that you know what you will have when you return to India. Alternatively you could save in Dirham. While the dollar is low at the moment it could have recovered by the time you leave the UAE, and then you can transfer to Rupees at an exchange rate that is beneficial to you.

These and many other questions are all concerns of the expatriate saver. As always, the answers to these questions will vary from person to people, and whatever conclusion you reach, as long as you are happy with it, is fine.

Should the investor be saving in other currencies or investments? Without knowing more about the person, their age and their goals, it is very difficult to comment specifically, but based on the details provided in the question you seem to have quite a cautious attitude to risk. 

Generally I believe that it would be worthwhile to consider diversifying your investments, to consider different geographical areas as well as different sectors. Geographically you can obviously consider any where in the world that you believe to offer the potential for good returns, or indeed look at a mutual fund that invests internationally. The selection of the fund is a whole article itself, and I would recommend reading the guides that have accompanied the last two issues of Moneyworks.  As to different currencies, this is also dependent on your attitude to risk, and where you think different currencies are going to move relative to each other. Over the last two years or so, the US Dollar has weakened significantly, and we are all seeing the effects of that here, as the UAE Dirham is worth significantly less against most currencies. These trends are usually cyclical and there is every chance that with a change of President and new policies the Dollar could well strengthen. This is of course just an opinion, but it has happened in the past, and may well happen again.

So if you were to buy Dollars now, and then the currency appreciated you could well make money, but equally if the Dollar as to slide further you could loose. This comes back to your appetite for risk, and how much of a gamble you are willing to take, as to whether you are willing to consider investing in other currencies.

In summary, whether you save in any other currency or investments will depend on how long you wish to invest for, your personal circumstances and your attitude to risk. Once these points are established you can then consider different investments and currencies, and the pros and cons of each.

As always we at Acuma welcome your questions and enquiries directly so please do not hesitate to contact us if you would like to discuss this or any other issue in more detail.