Commodity ETFs: Currency ETF
Commodity ETFs (exchange traded funds) have over the past few years turned into a money game – literally. Not so long ago commodity ETFs were all commodities that were products taken from the Earth, like metals, agriculture, and energy. Recently, however, currency ETFs have dipped their feet into the commodities pool.
Exchange traded funds are baskets of funds that are traded on the exchange market. Currency exchange traded funds are based on the value of the currency. Some currency ETFs are the dollar, the euro, the pound, the yen, and the franc. Before ETFs, only the big dogs, the institutions and the very rich, were investing in currencies. Exchange traded funds have made it easier for regular guy to get a piece of the pie. But now that he’s got his pie, is he ready to spit it back out?
Currency ETFs, say many experts, are very volatile and very risky. It is too difficult to predict where the currencies are going to go. Even in the long term, you are not likely to make a huge gain, if you can gain at all. They say to leave the currency trading, in all forms including currency exchange traded funds, to the big players, those who aren’t risking as large a percentage of their assets, or who can afford the risk.
Where other commodity ETFs depend on supply and demand of the product, currency ETFs depend on the whole economic picture of the country. This picture can be affected by the cost of energy, political upheavals and wars, the country’s trade balance and rate of inflation, and even their political leadership’s popularity throughout the country and the world. There are just too many factors that have to be included when taking a chance on currency exchange traded funds.
Some investors are playing it safe in currency ETFs and mixing it up a bit. They are mixing several currencies in their baskets and letting them play against each other, or even one another out. This has worked for some people because they find a point at which they are getting returns on more of the currencies than they are losing on, but this is not always the case. Many investors are finding, however, that the state of the world is such that it is becoming more and more difficult to reap the rewards of currency investing.
Some industry advisors are saying to be aggressive with currency exchange traded funds and make short term investments, move them around a lot, and it is easier to see a decent return. Others are saying to just say no to currency ETFs.
Whatever you decide to do with currency ETFs, do your homework first. Make sure that you have a good understanding of currency investing because this is the most difficult niche in the market to understand and to predict. Currency exchange traded funds aren’t for everyone. If you listen to the expert advisors, leave currency trading to the big dogs. If you’re not really much of a listener, or if you are one of the big dogs and want to give these commodity ETFs a try, tread with care.
Filed Under Commodity ETFs, Commodity Exchange Traded Funds, currency etf |
Tagged With Commodity ETFs, currency etfs, etfs
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