For the global investor, currencies may present an attractive option as a stand-alone asset because of potential high returns, but there are pitfalls.
Chief among those is a need to avoid excessive foreign-country redundancies in investors’ portfolios by buying equity and currency assets from the same place. Advisors should guard against assuming that a nation’s currency value will move in the same direction as its equity assets but, at the same time, avoid overly complex hedges for unsophisticated clients.
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