Really dumb newbie question...
First of all, I should say that I know next to nothing about futures and foreign currency trading. I'm comfortable with stocks and equity/index option trading.
I've asked a similar question on the Interactive Brokers thread, though I didn't ask about "equivalents".
I just funded a largish retirement trust account at IB. It's currently 100% cash. (This didn't come from another account - it was my 2002 contribution to a Defined Benefit Plan that was started in 2002.)
I intend to invest this in a dollar-cost-averaged manner over the next 12 months.
In the mean time, though, I am losing the difference between the paltry interest rate that IB pays (about 0.8%) and the paltry interest rate that my credit union pays (1.84%).
The rate that IB pays in Australian dollars looks awfully tempting, though. About 4.5%.
Now, I know that there is currency risk. But perhaps that could be put-off with a futures contract or options. On the other hand, I suppose the futures contract/options cost would factor-in the interest rate. :(
I'm unclear as to whether IB will pay me interest on AUD held in my account at the AUD rate or at the USD rate. Their chart mentions "base currency". That would imply that they pay at the USD rate.
Is there a way to do this synthetically? That is, just with currency contracts or options? Is there a way to capture the higher rate of interest available on AUD while avoiding the currency risk?
I suppose I am asking the impossible, eh? I mean, hey, if I could do that, next think I'll want the rate of Brazillian currency...
Any other ideas as to what you would do with funds awaiting investment in equities that will not be invested for several months?
IB doesn't offer mutual funds, or it would be easier - I could get a money market fund.
I guess I could open an account at Schwab or some other broker that offers funds and transfer over funds every month.
My credit union can't do a trust account. Actually, I opened an account at a bank, and got so p*ssed off at them when they couldn't figure out how to do a wire transfer (and wanted $30 to boot) that I just had them write a cashier's check to IB for the entire account balance. Then I realized how much lower IB's credit interest is. :( |
