What Is a Currency ETF?
When it comes to investing, currency ETFs are an excellent choice because they let you diversify your portfolio without having to deal with the hassle of individual trades. They also have a lower management fee than other types of investments, so you can invest in multiple currency pairs without worrying about incurring high transaction fees. In addition, they do not require any special knowledge or experience, and you don’t have to worry about losing money on investments that may not work out as planned.
Not just a regular index fund
A currency ETF is not just a regular index fund. Some are designed to provide access to the foreign exchange market and give investors an inexpensive and seamless way to invest. Another major difference between currency ETFs and other types of ETFs is their structure. While many of them function just like an index fund, currency funds use long and short futures contracts. As such, they can pair different currencies for a specific purpose.
The key differences between these types of funds are in the structure. Some are short dollar, which means that they make money when the US dollar depreciates relative to their holdings. Other currencies ETFs have a ‘long dollar’ strategy and vice versa. The structure of the fund determines the risk, upside potential, and tax considerations. The investment strategy and tax considerations will also influence the selection of a currency ETF