Stock Strategist (ETF Edition): Investors Have Failed to Time Currencies With Hedged ETFs

[Morningstar Logo]( [Company Site]( [Company News]( [Membership]( [Portfolio]( [Stocks]( [Options]( [Funds]( [ETFs]( [Markets]( [Tools]( [Personal Finance]( [Discuss]( Stock Strategist (ETF Edition) Investors Have Failed to Time Currencies With Hedged ETFs Attempting to time changes in foreign-exchange rates hurts long-term performance. [tab_bar] by Daniel Sotiroff | 5/15/2019 2:30:00 PM Edwin Lefevre's classic tome, "Reminiscences of a Stock Operator," chronicles the career of Jesse Livermore, an infamous trader from the early 20th century. The book is often cited by traders and investors alike for the many lessons gleaned from Livermore's stock market trials--a mixed series of successes and failures. While his exploits may impart some teachable moments, they often overwhelm the larger message, which can best be summarized through the following quote from the book: "There is nothing like losing all you have in the world for teaching you what not to do." Livermore apparently never took his own advice. His speculations made and lost several fortunes over the course of a career that spanned decades. If there's one lesson that investors should take away from his story, it is that trading and speculation are risky to one's wealth. Really risky. But Livermore's experience, and others like it, haven't stopped us from trying. Cash flows for mutual funds and exchange-traded funds appear to confirm that investors are still engaged in bad-for-their-wealth behavior--moving in and out of funds at the wrong time. While there is a smorgasbord of strategies available to examine, the detrimental impact of timing one's exposure to a given asset is particularly noticeable among funds that hedge their currency risk. The primary objective of currency-hedged strategies is to eliminate currency risk from their foreign stock or bond exposures--the additional volatility that comes from changes in foreign-exchange rates. For long-term investors this is a reasonable strategy, as currency risk typically isn't compensated. But a closer look at currency-hedged funds shows that these strategies hang an enticing carrot in front of those willing to speculate. And investors, collectively, haven't been able to time currency fluctuations using these funds. To read more, click [here](. Sponsored Links [Buy a Link Now]( New: ETF Managed Portfolios Center On [MorningstarAdvisor.com]( Tap into the industry's best source of information on ETF strategies for financial advisors. See key performance data, screen for specific strategy attributes, and learn more about this fast-growing area of the investment marketplace. [Click to get started](. Free Issue | Morningstar's Stock Newsletter >> Morningstar StockInvestor is celebrating more than 10 successful years of high-quality stock investing. Its two real-money portfolios have outperformed the S&P 500 since 2001. [Get new ideas for the core of your stock portfolio]( ). Search Most Recent Articles [Highland Global Allocation Fund Failed Shareholders]( [If Hot Hands Do Exist, What Then?]( [How to Spot a Bargain IPO]( Latest Analyst Reports [Wells Fargo Target 2025 R6]( [Franklin Rising Dividends A]( [Wells Fargo Target 2060 R6]( [Wells Fargo Target Today R6]( [Wells Fargo Target 2045 R6]( ABOUT OUR EMAIL TO UNSUBSCRIBE this email address to the Stock Strategist newsletter, please click "reply" and then click "send." This will unsubscribe only this email address to this specific newsletter. All subscription changes will take effect within one business day. Replies are not read by individuals, so please do not use this for queries about Morningstar.com. If you have questions about Morningstar.com or your membership, send a note to [joe@morningstar.com](mailto:%20joe@morningstar.com). ABOUT OUR PRIVACY POLICY Please [click here]( to learn about Morningstar's privacy policy. (c) Copyright 2019. Morningstar, Inc. 22 West Washington Chicago, Illinois, 60602 All rights reserved.