Time to step back from the hedge + MORE Mar 18th

If you make regular trips to the U.S. or overseas, the recent decline in the Canadian dollar has probably cost you money. However, it’s been a boon for investors who diversified their investments outside Canada. Since February 2013, the loonie has plunged relative to the U.S. dollar, the euro, British pound and Chinese yuan. So if your portfolio included foreign equities during last year’s bull market, your stocks went up and these currencies appreciated relative to the Canadian dollar. This would have boosted your returns—but not if your funds used currency hedging.
Currency hedging is a strategy many mutual funds and ETFs use to reduce the impact of foreign exchange rates on investment returns. Whenever Canadians hold stocks or other assets denominated in foreign currency, they take on two types of risk. First is the risk the value of the asset itself will fall. A second is that the currency will decline relative to the loonie. Assuming you measure your returns in Canadian dollars, that would result in a loss even if the price of the underlying asset were unchanged…

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Achille and Heidi Correggia of Brantford, Ont. want to fully fund their three kids’ post-secondary educations. (Photograph by Jennifer Roberts)
The current situation
Achille and Heidi Correggia of Brantford, Ont., have three children—Kyle, 6, and three-year old twins Sophia and Noah. The couple has been contributing $2,500 annually per child into a family plan RESP starting the year each was born. ($2,500 is the maximum annual RESP contribution per child that is eligible for a 20% government grant.) “We want to be able to pay the full cost for all of their university educations, no matter where they choose to go,” says 38-year-old marketing specialist Achille. His wife shares that goal. “Both our parents paid for much of our educations,” says Heidi, a 37-year-old physiotherapist. “We want to do the same.”
However, the couple worries rising tuition rates may thwart their efforts. “If we keep saving $2,500 per child until each turns 17, will we have enough to fully fund their educations?” asks Achille…