investing

4 exotic investments for diversification

Currencies
Next
4 of 6
Back

The U.S. Dollar Index, which measures the greenback's value against six major currencies, recently fell to a 14-month low. That move provided hefty profits for investors in other currencies. There are several ways to invest in foreign currencies.

The safest would be to invest in a diversified foreign stock or bond fund that doesn't hedge its currency risk. You can use a standard mutual fund or an ETF. Because the fund is unhedged, when the currencies of the assets in the fund rise against the dollar, you should experience a positive effect on your return by the same amount.

You also garner whatever returns (or losses) are achieved by the underlying assets.

More advanced investors can consider ETFs that are based on foreign currencies themselves. These funds invest in foreign money markets, but you shouldn't view them as the equivalent of U.S. money-market funds.

The returns of these currency funds will depend upon interest rates overseas, and the dollar's move against whatever currencies are being used in the fund. If the currencies rise against the dollar, the funds will have positive returns. If the currencies fall against the dollar, you will lose money, unless the dividends you earn from the underlying fund assets exceed the currency loss.


 

 

advertisement

          Connect with us
advertisement
CD & INVESTING NEWSLETTER

Learn the latest trends that will help grow your portfolio, plus tips on investing strategies. Delivered weekly.

CDs and Investment

How should my teen invest $150K?

Dear Dr. Don, My son will turn 18 years old in December. He has $150,000 from a settlement now sitting in the bank. What is the best plan to pursue for investing this money? Is investing in precious metals a good way to... Read more

advertisement

Blog

Dr Don Taylor

Earnings season, investing and you

Should individual investors try to anticipate financial results in an earnings report?  ... Read more

Partner Center
advertisement

Connect with us