Converting Foreign Currency

I had an uncle who absolutely insisted I buy VND as the currency would sky rocket in the near future.

After doing some research I’m not convinced, but I thought what the hell and bought $20 worth which is about 400,000 VND.

Now if my uncle is right and it turns into a 1:1 ratio.

How would an average Joe go about converting a large (for an average person) amount of foreign money?

Where/How did you buy your currency? You should be able to do it through that source.

Sorry, are you expecting your $20 worth of dong to ever be worth anything much different from $20?

Well, ya gotta start small, no?

I’ve never done anything with Forex before, I don’t really know how wild currency swings. For $20 I figure the reward outweighed the risk enough to go for it.

Purchased at the international airport in the area…but I’m sure they don’t keep half a million in USD stashed there do they?

The dong doesn’t swing that much. :frowning:

Seriously but, forex trading has transaction costs that only make it potentially worthwhile for sums that are quite a few orders of magnitude more than your 20 bucks. The best investment advice for very small amounts is just stick it in a savings account and don’t touch it - keep it for a rainy day.

My forex shows $20 to be worth about 180,000 VND. The graph shows a downward slope since a bit of a peak in 2014. So far you are about $2 down on the deal. More with the charges of course.

How much did your uncle buy?

Scared to ask, he isn’t as reserved and cautious as me.

Go to an online trading platform like oanda.com, and “try a free demo”, and buy and sell some forex currencies. See what happens, no risk, then plunge in with real money if you like it.

Considering that around here the people/organizations flogging… er, pushing… er, pumping up… the Dong (siddown and shuddup, all of ya in the peanut Gallery), are the same ones that were doing likewise for the Iraqui Dinar in the late 00’s, I would not be counting on any sort of major capital gains with an affordable buy-in. The way FOREX investment normally works it’s more along the lines of having *thousands *dollars or euro worth of the exotic currency so you can make a few thousand off a few percent oscillation in value. You buy at US$100,000 and sell at US$115,000.

It is NOT normal for modern fiat currencies to appreciate by whole orders of magnitude without a revaluing. As the country in question becomes more properous the currency becomes “harder” (I said, shuddup!!) i.e. more secure in value but it’s not that the same fistful of banknotes that once bought a week’s groceries now buys a furnished apartment that would mean a massive price deflation and be a very very bad thing for their economy. What would be more likely would be that somewhere along the way the People’s Bank of Vietnam do a general re-valuation of the currency whereby ten thousand Old Dong convert to one New Dong, or to a unit of a new currency (the Nike?).

Not sure if you Uncle is delusional or you are. There have been countries that have gone through massive devaluations in currency where they end up printing bank notes in the trillions that are worth less than 1 USD. There has never been a case where a countries currency has appreciated in value as much as you suggested.

If Vietnam has an absolutely amazing growth spurt of 10 percent a year for the next 10 years, then that $20 of VND might be worth $50 in 10 years (before commissions) and that would be considered an amazing investment.

What’s your uncle’s advice when the government of Vietnam decides to revalue their currency? How are you going to exchange “cũ đồng” for “mới đồng”?

Among the ASEAN, Vietnam is classified among the emerging member countries, along with Myanmar, Cambodia, and Laos. Vietnam is the biggest economy in this group and will likely reach “developed” status soonest. The “big” economies are the ASEAN ‘6’: Indonesia, Thailand, Singapore, Malaysia, Brunei, and the Philippines. The Philippines is the smallest but is growing fastest.

This is the worst part of your uncle’s thinking. There is nothing magical about the size of the US dollar that a “good” unit of currency should be about that size. If a country switches from a bad fiscal policy to a good one, their currency might change from “rapidly depreciating” to “stable”, but it won’t magically become worth something about the size of a US dollar.

I think it’s safe to say that you won’t have to worry about something like that.

The good news is that Forex markets might not be completely efficient. The bad news is that they’re probably pretty efficient just the same.

An efficient market is one where everyone knows everything about how to value commodities on the market, either instantly or very, very quickly, and a market where commodities get revalued based on current knowledge, either instantly or very, very quickly. It’s impossible to beat an efficient market except by chance, because there’s no arbitrage opportunities: You can’t buy low and sell high because there’s nobody to buy low from because they already sold high before you bought low so the price of that commodity is now high.

If you think of information as heat, you can almost imagine this in a thermodynamic fashion, where arbitrage is heat transfer, which heat engines (investment firms) rely upon to run, and an efficient market is an idealized perfectly tepid mass where all the heat’s done been transferred already.

So, a buy-and-hold strategy is the best you can do in an efficient market unless you’re willing to play for keeps and look for momentary inefficiencies you can arbitrage the Hell out of and still lose money in the process because your computers were a whole foot farther from the exchange than your competitors’ were. That said, you’re never going to be holding $40,000 worth of dongs unless you stumble on some really rare pornography or get friendly with men who have very interesting insurance policies.

Maybe this is Uncle’s plan! Vietnam decides to save money on ink by removing three zeros from its currency (similar to France removing two zeros from their francs in 1960). Once these new dongs are created, Mrdeals simply has to find a daydreaming teller who decides his banknotes are new dong, and blithely gives him $10,000 for a pile of old dong worth only $10. Bravo!

Good one, septimus! On top of that, I just discovered that the Vietnamese money is pegged (“crawling peg”) to the US dollar. That doesn’t seem to bode well for it being the “new & improved” method of making millions of dollars (unless you’re talking about Zim dollars).