Currency hedged ETFs

Hello🌻

Currency hedged ETFs do exist! Not that many…but they do.

Last time I talked about the impact of the currency risk when you are buying non-domestic ETFs.

https://samuraihinata.home.blog/2019/03/19/what-risk-am-i-i-taking/

If you don’t want to be exposed to the currency risk, you can look for a currency hedged ETF. For example, iShare has a S&P500 ETF with US$ hedged to GBP. If you buy this type of ETF, you are exposed to the risk of S&P500 share price movement, but not US$:GBP exchange rate movement.

The downside is that the choice of products is limited, especially hedged against GBP. Also the fee tends to be higher than the unhedged ETFs.

I guess most investors are happy to take some currency risks especially if you are investing for a long term. Then you can just look at the simple unhedged ETF products. In my opinion, simpler the better unless you really need to purchase more complicated products 😉

How does hedging work??? Let’s not go into that😅 At this stage, all we need to know is that with the currency hedged ETFs, you are not exposed to exchange rate risk.

Happy samurai life in London💫

Hinata