If this 2.0 % tracking error is an implicit cost of insurance for hedging
away currency fluctuations between the U.S. dollar and the Canadian dollar, the additional drag may make it highly unlikely that a currency - hedged U.S. ETF will outperform an unhedged U.S. ETF over the long term.
And to meet that demand many fund companies are now offering versions of their funds that â $ œhedgeâ $
away currency fluctuations.
Not exact matches
Others may shy
away from international bonds because
currency fluctuations between the U.S. dollar and foreign
currencies can lead to higher return volatility.
There are two schools of thought on
currency hedging: one holds that
currency fluctuations «cancel out» for a long - term investor and the other holds that
currency fluctuations have a significant effect on equity performance and should be hedged
away.
Because investing internationally involves other
currencies, there is a certain
currency risk involved and
fluctuations with
currency can add to or eat
away potential returns.