SIE: 7.5.3. Foreign Exchange And International Investing

7.5.3.  Foreign Exchange and International Investing

When making a foreign investment, it’s important to understand that unless currency hedging is employed, returns will depend not only on the performance of the investment, but also on the currency exchange rate.

For example, if a U.S. investor buys shares in an international bond fund, the investor may expect the fund to mirror the performance of the foreign bonds the fund has invested in. But that may not be the case because exchange rates play a large role in the actual returns that an investor will see.