Hedging in AUD

Here is another tip for investing overseas in local currency. In this case it is Australian Dollar but tips work for any currency. There are times the currency is high, compared to other currencies, and this happens often with Australian Dollar because it is closely related to the price of commodities, mostly mining ore.

During these periods it is a good idea to buy units in funds that invest in international shares, unhedged. This way we are using the high position of AUD to buy more units in local currencies.

When times change and AUD is low, relative to other currencies, the opposite applies. Buying units in funds that are hedged for AUD variations provides more value. This way, when AUD goes up again the price of the fund portfolio will grow automatically with the currency.