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How do fees for currency ETFs compare to an average cost ETF?

I'm interested in adding some Forex to my portfolio through ETFs, how do fees stack up for currency ETFs?

Feb 22, 2012 by Ramon from Stamford, CT in  |  Flag
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11 votes

The best site to use for this sort of question is XTF.com - they allow one to compare multiple ETFs at once across the most important metrics (like internal expenses, for example).

As a generalization, for a single currency ETF like FXA (the Aussie Dollar Index) you can expect to pay between 35 and 50 basis points (or .35 to .5%). A currency ETF involving the short side will cost you closer to 90 basis points (almost a full percent).

Go to the following link and select "currency" from the asset class menu followed by "single currency" for more detail:

http://xtf.com/Research/

Comment   |  Flag   |  Mar 09, 2012 from Manhattan, NY

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There are essentially three types of currency ETFs: ones that provide exposure to a single currency; ones that employ a multi-currency strategy; and the "leveraged/inverse" ones.

You should read a prospectus before investing in any of these, but typically the fees are approximately 0.40% for a single currency fund; 0.75% for multi-currency strategies; and 0.95% for the "leveraged/inverse" ETFs.

Comment   |  Flag   |  Feb 23, 2012 from Bryn Mawr, PA

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Don Level 19

Hi Ramon, I think Martin answered your question about fees. I would ask you to consider why you are interested in Forex exposure. If you are trying to hedge your dollar exposure because you think the dollar will decline in value over time (as many of us do), then you would likely be better off purchasing foreign stock and bond funds. The thing about foreign exchange is that it's a zero sum game and, after fees, it's a net loser for investors (but a big winner for the exchanges handling the transactions). If you are interested in speculating on short-term currency movements, I would suggest that unless you are privy to market-loving information that the experts are not, you are very likely to lose money, as most Forex investors do.

You're likely to be better off putting your money in assets that generate a return in foreign currency. As an example (not a recommendation), there's ELD, WisdomTree Emerging Markets Local Debt. It yields almost 4% and that yield will likely rise if the dollar depreciates against emerging market currencies. And you'll get paid a monthly dividend while you hold it.

Comment   |  Flag   |  Feb 23, 2012 from Middlebury, VT

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