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  5. MISC: More than half my portfolio is US stocks or etfs valued in usd with very little fx hedging. [Miscellaneous]
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Q: More than half my portfolio is US stocks or etfs valued in usd with very little fx hedging. In recent history the usd/cad exchange rate has ranged from a low of about 0.95 in 2011 to a high of just over 1.40, and we are at 1.35 now, that is, close to the top end of the range. As I live in Canada, am I taking an outsized risk here based on currency alone? There seems to be a lot more downside potential at 1.35 than upside. If we move ever move to par again, that would be huge hit for me.
Asked by William on May 24, 2023
5i Research Answer:

There would be currency risk here certainly and what the right amount of foreign currency exposure is comes down to a bit of a personal decision and considerations such as level of expenses in other currencies/regions. So, there would be risk if the CAD saw strength relative to the USD but we also have a difficult time painting a picture where this happens in a sustained manner in the intermediate term. With a more sluggish Canadian economy that will be more weighted to a real estate market with higher property values (and lower odds of growth), we don't think a path to a stronger CAD is clear, outside of maybe a much stronger energy market. Regardless, ensuring one has the right FX exposure is the first step and moves in FX is not an area we would want to speculate in.