Morningstar Minute - When to buy U.S.-dollar funds

If part of your savings is in U.S. dollars, buying a fund’s USD version may be better than going with currency-hedged, says Morningstar’s Wendy Stein.

Morningstar Canada 28 July, 2017 | 5:00PM
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Wendy Stein: Funds that invest in U.S. securities expose Canadian investors to not only the ups and downs in the prices of those securities but also the ups and downs of the value of the Canadian dollar against the U.S. dollar. This is because a U.S. equity fund that you buy in Canadian dollars must first convert to U.S. dollars before the fund manager can buy securities on a U.S. stock market. The reverse happens with performance: The daily price of the fund is converted back into Canadian dollars before the return is calculated. Currency, of course, can either help or hurt performance. A falling dollar boosts the returns of your U.S. investments, and a rising dollar does the opposite.

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