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How does Forex fluctuations affect one's over all portfolio?

Mar 22, 2012 by Michael from Carlsbad, CA in  |  Flag
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Don Level 19

Hi Michael, whether you are affected at all depends upon your portfolio's holdings. If you directly own foreign currencies or funds that invest in futures contracts, then the impact is obvious. If you own commodities that are priced in dollars, as most are (e.g., oil, gold), these tend to go up in price as the dollar weakens. If all you own are US stocks and bonds or funds that own only these then currency fluctuations do not impact the value of your portfolio (at least as expressed in dollars). If you own foreign stocks and bonds, then you may have some exposure to currency movements, depending on whether your asset is priced in dollars or the foreign currency. For funds it's a little more complicated as many funds take steps to hedge their portfolios against currency movements, while others do not. You need to read your fund's prospectus to understand this. In general, when you have exposure to foreign currency the value of those holdings goes up when the dollar weakens and goes down when the dollar strengthens (all else equal).

Comment   |  Flag   |  Mar 22, 2012 from Middlebury, VT

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