Hi,
I plan on regularly purchasing US ETFs. My base currency is in AUD, and I would prefer to hedge against changes in the USD. Since I have to convert AUD to USD to purchase US ETFs, I am aware I can hedge by buying AUDUSD CFDs for the same amount as my initial investment. However, if the ETF makes profit/loses money, I am suddenly hedging more/less USD than I own.
To be more concrete, say I am buying $3000 USD worth of ETFs, I can also sell $3000 USD equivalent in CFDs (to buy the equivalent AUD). But then if my ETF goes down and is worth $2500 USD, I am still selling $3000 USD - more than I own, and so the hedge is no longer a hedge.
TL;DR. How do you hedge when the investment fluctuates?
Submitted August 14, 2020 at 07:46PM by lesrequin https://ift.tt/2DSOODm
