digestVidSign in
summary

Ben Felix - Should You Currency Hedge Your Portfolio? | Common Sense Investment with Ben Felix

Thumbnail of the video “Ben Felix - Should You Currency Hedge Your Portfolio? | Common Sense Investment with Ben Felix”
Community upload. AI output has not been independently verified.
Author: Ben Felix
Categories: Personal Finance Psychology
Tags: finance, psychology
Views: 2 · Last viewed: 2026-10-16 10:04 UTC

Short Summary

Main recommendation: Ben Felix argues there is no evidence that currency hedging improves long-term returns or reduces risk, so the decision should be a consistent common-sense choice rather than a prediction-based one. If you hedge, he suggests hedging no more than half of your equity portion, since currency offers a diversification benefit. The biggest mistake, in his view, is switching strategies after the fact.

Key Points

  • Currency hedging is an ambiguous decision: research shows sometimes hedging wins and sometimes it loses, with no universal right answer.
  • Predicting currency movements to hedge tactically is active management, which the speaker says would add risk, cost, and taxes.
  • Dimson, Marsh and Staunton's 2016 essay found real exchange rates were volatile from 1900 to 2015 without a long-term trend, so no single currency consistently beat another.
  • Meyer and Staunton's 2004 study of US hedged and unhedged portfolios from 1988 to 2003 found nearly identical realized risk and return.
  • Hedging can keep some returns in the currency you will spend in, which matters because most Canadians consume mostly in Canadian dollars.

Details Worth Noting

  • Concrete instructions: If you choose to hedge, do not hedge all of your currency exposure; the speaker says he would not hedge more than half of the equity portion of the portfolio. If you choose not to hedge, that is also acceptable. Pick a hedging strategy and stick with it through good and bad periods; changing course is the worst thing you can do.
  • The speaker's example: a Canadian holding an S&P 500 fund that gains 10% while the US dollar falls 10% against the Canadian dollar earns roughly 0% in Canadian terms; a hedged fund would have captured the full 10%.
  • The speaker is discussing a long-term strategic hedge, not short-term market timing.
  • The speaker's common-sense approach is to pick either hedging or not hedging and stick with it consistently, since there is no clear evidence in either direction.

Bottom Line

Neither hedging nor not hedging has been shown to be the better choice, so the decision should be based on your consumption currency and risk tolerance, and then held consistently.