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Is Currency ETF Trading For You?

Jun 30, 2008
Over the past couple of years Commodity ETFs (exchange traded funds) have literally become a money game. It wasn't very long ago that commodity ETFs were made up only of things that could be derived naturally from the planet. This included energy, metals, and agriculture. A few years ago currency ETFs made their appearance in the commodities market.

Exchange traded funds are like mutual funds that are traded on the market. Currency exchange traded funds are dependent upon the values of the currencies. Currency ETFs include the dollar, euro, pound, yen, and franc, to name a few. Before ETFs were introduced for currencies, only the very wealthy were able to invest in them. Exchange traded funds have made currency trading available to the average Joe investor. But does Joe want to invest?

Experts are warning that currency ETFs are risky due to their volatility. They are difficult even for the most seasoned investors to predict. Based on the trend over the past decade, currency trading is not likely to offer a huge gain, not even currency ETFs. Experts tell us that even though average Joe can now afford to invest in currencies via exchange traded funds, he might be better off to leave them alone.

Most commodity ETFs rise and fall because of the supply to demand ratio. Currency ETFs, on the other hand, are dependent on the economic outlook of the country of origin of the currency. This outlook can be affected by many things, including the price of oil, the trade balance and inflation rate, their political leadership, war, and economic status as a whole. All of these things must be thought of when considering investing in currency exchange traded funds.

With currency ETFs it is possible to throw a mix of different currencies into the basket. Some investors are giving this a try in the hopes that the good ones will cancel out the bad ones, and then some, and be able to make a bit of profit from them. Then, if they are lucky, they will have more good than bad and be able to do quite well on them. These investors should not be surprised to find, however, that the world's economy as a whole seems sketchy at best right now.

Some commodity ETF analysts are advising that the investor be aggressive when trading currency exchange traded funds. Buy them with the understanding that they are going to be short term investments for quick trade. When the time is right, dump them and make your profit, then move that profit into more reliable commodity exchange traded funds. If this worked well for you, take your initial investment and try it again.

If you decide that you want to give currency exchange traded funds a try, do some research and know exactly what you are getting into. Currency ETFs might not be for you, at least if you want to listen to the experts. If you're the kind of investor who likes to try new things, then go ahead and give currency commodity ETFs a try.
About the Author
Ryan helps you understand commodity ETFs and shows you how to profit from currency ETFs.
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