When investing in US ETFs, you sometimes have the choice of picking a Canadian hedged version of the ETF versus buying the US ETF directly in US currency. Currency hedging is protecting your investment from foreign currency fluctuations.

Understanding the Impact of Currency - RBC Global Asset Management

Currency hedging is used when the holdings are offered to you in your home currency but the investments are in a foreign currency. I am no expert in assessing the performance of currency hedged ETFs but it would appear that both Dan Bortolotti and Andrew Hallam are not in favor of the hedged ETFs.

The extra cost takes away from the performance of the index ETF and it stops following the index performance which understanding currency hedging what you wanted in the first place.

The small percentage difference mentioned by Dan and Andrew is not seen in the Vanguard prospectus as both VFV and VSP have the same MER. Unfortunately, there is only 1 year of data in Google for VSP to get an idea of the long term errors.

As others have said, I think that purchasing the index should be sykes work at home pay at in the following order:.

At the end of the day, you are buying an index which beats buying actively managed mutual funds but if you are going to invest for a very long time, the small added costs will impact your performance. Understanding Currency Hedging Jul. What is Currency Hedging? A perfect example is to compare the same index ETF to visualize currency hedging. Would you expect all of the 3 investments to perform the same? Which performs the best?

Foreign exchange hedge - Wikipedia

Why is it the best? Should You Buy Currency Hedged ETFs?

A Beginner's Guide To Hedging

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