Leveraged Dual Currency Investments

I have been advising people to avoid Dual Currency Investment for the past year. My views are stated in this FAQ: http://www.tankinlian.com/faq/duali.html

This type of investment allows you to bet on currency movements. You stand the chance of a big loss when the currency moves against you. You only get a small return (in the form of a higher interest rate) when currency moves in your favour.

Recently, the AUD dropped by 30%. Those who were "long" in AUD lost 30%. But those who were "short" in AUD did not gain 30%. They only gain 1% or 2% in higher interest. The bank keeps the remainder of the profit.

I learned to my horror that unsophisticated investors were asked to invest in "leveraged" dual currency investments. The bank lends them 4 times of their investment, so that they can take 5 times of the risk. If the currency drops by 20%, their total investment is wiped out (i.e. 20% X 5 times).

The relationship manager of the bank who sold the leveraged DCI earned 5 times of the commission on this product. But, it wiped out the total savings of the investors.

Someone told me that her mother lost $500,000 on this type of investment. Another retiree told me that he lost $150,000 in 2 months, out of the invested sum of S200,000.

Do not invest in any of these products. Be careful about the advice of the relationship managers.