More Currency Investment Possibilities...
....with a twist!
I have to admit. Currency investments are interesting to me. Hey, maybe you think international investments are where it's at. Maybe you think the U.S. dollar will be/is in a long term decline. Maybe you think the European Union will get it's act together. Maybe you think China is the future, or that China will dump a significant portion of the dollars they hold.
CurrencyShares from Rydex are pretty straightforward ETFs. If you buy the ETF, you're buying the currenty. A purchase of the ETF creates an obligation for Rydex to hold euros/yen/British pounds.
The new investment vehicles from iPath (Barclay's) are ETNs. Did you catch that "N"? I hope so, 'cause it means these are different. They're not ETFs. It's tricky. You aren't buying currency. You're buying a debt obligation from Barclay's. That's right - youre essentially buying something like a bond. You're buying a promise from Barclay's to pay you when you sell the ETN. Barclays could default......
The currentcy ETFs/ETNs all have a 0.4% expense ratio.
The interest rates are competitive with each other:
ERO (iPath Euro vs. USD): 3.55%
FXY (CurrencyShares Euro Trust): 3.54%
GBB (iPath British pound vs. USD): 5.05%
FXB (CurrencyShares British pound sterling trust): 4.90%
JYN (Japanese yen vs. USD): 0.25%
FXY (CurrencyShares Japanese yen trust): 0.24%
Interest income is taxed as interest. CurrencyShares pays it monthly. Barclays prices it into the price of the ETN - which could reduce taxes on your investment.
Capital appreciation for currency investments is subject to ordinary income taxes. Except oh wait! Barclays believes that, based on previous ETN experience, their ETNs are pre-paid contracts. What does this mean? You only pay taxes on appreciation when you sell the ETN. And, when you do, you pay only capital gains taxes, which are much lower.
There are steps you have to take. What does that mean? I'm not sure. It's somewhere in this 186 page prospectus. Ok, ok, I found the section. It actually provides a couple of forms. You fill one out and keep it in your records. You fill the other out and file it with your tax forms.
This just goes to show you. Do your homework. You never know what weirdness you'll find.
I have to admit. Currency investments are interesting to me. Hey, maybe you think international investments are where it's at. Maybe you think the U.S. dollar will be/is in a long term decline. Maybe you think the European Union will get it's act together. Maybe you think China is the future, or that China will dump a significant portion of the dollars they hold.
CurrencyShares from Rydex are pretty straightforward ETFs. If you buy the ETF, you're buying the currenty. A purchase of the ETF creates an obligation for Rydex to hold euros/yen/British pounds.
The new investment vehicles from iPath (Barclay's) are ETNs. Did you catch that "N"? I hope so, 'cause it means these are different. They're not ETFs. It's tricky. You aren't buying currency. You're buying a debt obligation from Barclay's. That's right - youre essentially buying something like a bond. You're buying a promise from Barclay's to pay you when you sell the ETN. Barclays could default......
The currentcy ETFs/ETNs all have a 0.4% expense ratio.
The interest rates are competitive with each other:
ERO (iPath Euro vs. USD): 3.55%
FXY (CurrencyShares Euro Trust): 3.54%
GBB (iPath British pound vs. USD): 5.05%
FXB (CurrencyShares British pound sterling trust): 4.90%
JYN (Japanese yen vs. USD): 0.25%
FXY (CurrencyShares Japanese yen trust): 0.24%
Interest income is taxed as interest. CurrencyShares pays it monthly. Barclays prices it into the price of the ETN - which could reduce taxes on your investment.
Capital appreciation for currency investments is subject to ordinary income taxes. Except oh wait! Barclays believes that, based on previous ETN experience, their ETNs are pre-paid contracts. What does this mean? You only pay taxes on appreciation when you sell the ETN. And, when you do, you pay only capital gains taxes, which are much lower.
There are steps you have to take. What does that mean? I'm not sure. It's somewhere in this 186 page prospectus. Ok, ok, I found the section. It actually provides a couple of forms. You fill one out and keep it in your records. You fill the other out and file it with your tax forms.
This just goes to show you. Do your homework. You never know what weirdness you'll find.
posted by Stephen Drone at
3:51 PM
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