The Case for 50% Currency-Hedged ETFs

With ETFs making it easy to go global, more investors are adding international stocks and bonds to their portfolios than ever before. And there are plenty of reasons to do that. By opening up their opportunity sets, investors now have the ability to add some of the world’s largest multinationals and leaders in their respective industries to their portfolios. After all, global brands are all around us. You’re just as likely to drive a Japanese Toyota ( TM ) Camry or find British pharmaceutical firm GlaxoSmithKline’s ( GSK ) Tums in a medicine cabinet as you are a domestic product. However, going global does have some issues, and the biggest of all is probably currency risk. Most investors don’t realize just how much currency fluctuations can change their returns on international assets. So much so, that these gyrations can actually turn gains into losses. Luckily, a new breed of ETFs makes it easy for investors to hedge some of their currency risk away and keep their gains. The case for hedging 50% of your currency risk is strong.