In Investing, Money

Investing Series: What does Currency Neutral mean?

Currency neutral just means that it takes into account or “hedges” for your invested currency (your dollar).

Hedging means it accounts for any major spike or drop in the currency exchange rates.

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So, currency neutral versus “regular” funds means that you get the same set of returns from both funds, but one is hedged for let’s say, the Canadian dollar dropping overnight.

You will be safeguarded against that.

You will notice that the currency-neutral index fund has a slightly lower rate of return as a result versus the “regular” one, but it is supposedly “safer”, although what that really means, is another discussion.

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