Currency hedged or unhedged?

Currency hedged ETFs aim to reduce the impact of currency exchange rate fluctuations on the value of an investment. This is achieved by using financial instruments such as forward contracts or currency swaps to offset the impact of currency movements on the underlying assets in the ETF. On the other hand, unhedged ETFs do not use such financial instruments and the value of the ETF is subject to changes in exchange rates.

Whether a currency hedged or unhedged ETF is a better option for you depends on your investment goals and your view of the currency market. Some factors to consider when deciding between a hedged and unhedged ETF include:

1. Investment objective: If your primary goal is to generate returns from the underlying assets in the ETF, rather than from currency movements, a hedged ETF may be a good option. On the other hand, if you believe that the foreign currency will appreciate against your base currency, an unhedged ETF may be a better choice.
2. Risk tolerance: Hedged ETFs may be less risky for investors who are concerned about the impact of currency fluctuations on their investments. On the other hand, unhedged ETFs may be more suitable for investors who are comfortable with the added risk and are willing to potentially benefit from favorable currency movements.
3. Time horizon: The longer the time horizon, the more time there is for currency movements to potentially affect the value of an investment. If you have a longer time horizon, you may want to consider a hedged ETF to potentially reduce the impact of currency fluctuations on your returns.

It's always a good idea to do your own research and consider consulting with a financial advisor before making any investment decisions. They can help you understand your options and develop a plan that is tailored to your specific needs and goals.

Unhedge = investment volatility + foreign exchange volatility

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Hedge = investment volatility + cost to mitigate foreign exchange volatility.

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