Currency risk, explained without the jargon
Why a share can rise 20 percent and still leave you poorer.
Two things move at once
If you live in Canada and buy a Nigerian share, your return has two moving parts: what the share does in naira, and what the naira does against the Canadian dollar.
A 20 percent gain in local currency and a 30 percent currency slide is a loss in the money you actually spend.
It is not one-directional
Currencies also strengthen, which magnifies gains. The point is not that local currencies are bad. It is that the exposure exists whether or not you thought about it.
What people actually do about it
Hold assets in more than one currency, so no single devaluation decides your outcome.
Match currency to purpose: money you will spend in naira can sit in naira assets; money for a Canadian house probably should not.
Lengthen the time horizon. Currency swings hurt most when you are forced to convert on a bad day.
The one thing to remember
Every cross-border investment is two bets. Decide consciously whether you want both.
