I've noticed many of you invest in VWRL ETF. Why not a hedged equivalent?

VWRL seems to be a staple of the passive ETF crowd around here, but it seems I don’t read about hedged ETFs such as IGWD as much.

What is your reasoning for using a non-hedged ETF over a hedged one?
Would it make sense to invest 50/50 in both?


What’s the benefit of hedging?

Most people will ride out the losses over time, and a reason to invest in ETFs like VWRL/P is to sit on it for long term investments, where people won’t be concerned about the immediate short term losses.

I think hedging has more value over in bonds rather than stuff like VWRL/P etc.

Also, I think most people passive investing won’t really know about hedging, or won’t really need to know much about it. It is all about keeping it simple no?

Those are the reasons I think come into play.

Currency market fluctuations are more or less random, over the long term. When the pound rises, your overseas investments drop in value, and you’ll wish you were in the hedged version of the fund; when the pound falls, your overseas investments rise and you’ll get an extra tailwind if you’re in the un-hedged version of the fund. You win some, you lose some, and over the long term, the gains and losses roughly cancel out. Also, the amount that currencies go up and down (a few percentage points) is relatively small compared with the movements of stock prices, so the cost of hedging currency exposure probably isn’t worthwhile. On the other hand, there’s a school of thought that says that if you are investing in bonds, it’s worthwhile hedging those because bond returns are quite small, so a currency swing could easily wipe out your bond returns, where it will only mildly dent your stock returns.

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There is no perfect hedge. That implies that there is an easy way to manage currency risk and there really isn’t.

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A hedged ETF doesn’t remove currency risk but it moves it onto the other currency

It’s a different kind of currency risk

Is it fair to say same :poop: different smell?!

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Does a hedged equivalent to VWRL (i.e. whole world) even exist?

I know about IGWD, but that’s only developed world.