Inverse Currency

Inverse currency mutual funds and ETFs are designed to offer a fixed... Inverse currency mutual funds and ETFs are designed to offer a fixed inverse multiple of the daily returns of a particular currency. The fixed multiple can range from 1x to 3x. For example, if the British Pound falls 1% on a given day, a 1.5X inverse ETF linked to the Pound should rise 1.5%. On the other hand, if the Pound rises 1%, this same fund should decline by 1.5%. To achieve their objectives, inverse currency mutual funds and ETFs usually enter into derivative contracts with banks and other financial institutions. It's important to note that these funds are only meant for very-short term trading. Because they are rebalanced daily depending on market fluctuations, inverse funds may not produce the same result if held for weeks, months or longer. In fact, it’s quite possible that an inverse fund may fall in value over a longer period, even if the underlying currency falls. As a result, inverse currency mutual funds and ETFs are attractive for short-term traders with a large appetite for risk. Last Updated: 12/08/2023 View more View less

Inverse currency mutual funds and ETFs are designed to offer a fixed inverse multiple of the daily returns of a particular currency. The fixed multiple can range from 1x to 3x. For example,... Inverse currency mutual funds and ETFs are designed to offer a fixed inverse multiple of the daily returns of a particular currency. The fixed multiple can range from 1x to 3x. For example, if the British Pound falls 1% on a given day, a 1.5X inverse ETF linked to the Pound should rise 1.5%. On the other hand, if the Pound rises 1%, this same fund should decline by 1.5%. To achieve their objectives, inverse currency mutual funds and ETFs usually enter into derivative contracts with banks and other financial institutions. It's important to note that these funds are only meant for very-short term trading. Because they are rebalanced daily depending on market fluctuations, inverse funds may not produce the same result if held for weeks, months or longer. In fact, it’s quite possible that an inverse fund may fall in value over a longer period, even if the underlying currency falls. As a result, inverse currency mutual funds and ETFs are attractive for short-term traders with a large appetite for risk. Last Updated: 12/08/2023 View more View less