I really don't know the answer to any of your questions.BRUTE wrote: @IlliniDave:
regarding the currency risk: is it not better, from a diversification standpoint, to hold the majority of one's assets in a currency different from one's place of residence? brute certainly didn't want to be a russian holding russian assets when the ruble tanked. of course many currencies are highly interrelated. but isn't a currency linked even more to the assets denominated in that currency, which are usually located within the economy using that currency?
maybe it's smart to diversify across currencies as well? or is the advantage outweighed by the cost, tax issues, and inconvenience?
For an equity investor in the US, when the dollar rises relative to other currencies it tends to lower returns on non-US investments and when the dollar falls relative to other currencies, it tends to raise returns of non-US equities. That's usually what is meant when people talk about currency risk relative to equity investments, and is probably true for bonds as well. Most (maybe all) US investors buy and sell in dollars, and receive income distributions in dollars, even when the equities are non-US and the companies operate with different currencies. Dollars relative to the various foreign currencies are another layer of volatility, and I don't know if there is much of a risk premium associated with taking on that additional "risk".
I don't actually own any foreign currency except a little residual pocket money leftover from a trip to Canada a number of years back. I don't know all the pros/cons of holding different currencies. I suppose the trick for a US investor would be finding some that share the reliability of the USD that would be immune to/decoupled from some sort of cataclysmic problem with the USD. I suppose citizens of a smaller sovereignty with a bit more flimsy of a local currency might want to have a reserve of Euros or USDs if they can legally do so.
Perhaps if I lived somewhere where the local currency was not USD I would have given this more thought. It will be interesting if anyone more knowledgeable on currency investing/hedging decides to add anything.