August 24, 2008

WisdomTree Currency ETFs

Another way to diversify your investment portfolio is through currencies other then the US dollar. These investments could help to offset some of the impact of the declining purchasing power of the dollar around the world.

Historically it has been difficult to invest directly in foreign currencies within a brokerage account. However recently, there has been numerous ETF offerings that now allow investors to purchase foreign currencies indirectly.

The WisdomTree line of currency ETFs not only offer exposure to foreign currencies, but also offer income generation through periodic dividends.

From WisdomTree's website -

The WisdomTree Dreyfus Currency Income Funds are exchange-traded funds (ETFs) that invest either in non-U.S. money market securities, or in a combination of U.S. money market instruments and instruments that are designed to provide
exposure to non-U.S. money market securities or rates. They seek to offer
investors current income reflective of foreign money market rates available to
U.S. investors, as well as exposure to changes in the value of a specified
currency relative to the U.S. dollar.

It is important to note that unlike traditional US money market funds that seek to maintain the $1 NAV, the WisdomTree ETFs NAV will fluctuate depending on a variety of factors.

WisdomTree currently offers the following 7 ETFs -
  • WisdomTree Dreyfus Euro Fund (EU)
  • WisdomTree Dreyfus Japanese Yen Fund (JYF)
  • WisdomTree Dreyfus Brazilian Real Fund (BZF)
  • WisdomTree Dreyfus Chinese Yuan Fund (CYB)
  • WisdomTree Dreyfus Indian Rupee Fund (ICN)
  • WisdomTree Dreyfus New Zealand Dollar Fund (BNZ)
  • WisdomTree Dreyfus South African Rand Fund (SZR)

The Euro and Yen funds plan on paying dividends quarterly while the other funds plan on paying dividends annually.