How to Use the Hedged vs Unhedged ETF Calculator
When investing in foreign ETFs, currency exposure can significantly affect your returns. A hedged ETF eliminates currency risk but charges a hedging cost (typically equal to the interest rate differential). An unhedged ETF keeps full currency exposure — a bonus when foreign currency strengthens, a drag when it weakens.
Enter your investment amount, period, ETF return, current exchange rate, and hedge cost. The calculator shows returns under three scenarios: foreign currency weakens 10%, stays flat, or strengthens 10%.
How It's Calculated
Unhedged: Principal × (1 + ETF return%)^n × (end rate / start rate) − Principal. Hedged: Principal × (1 + (ETF return% − hedge cost%))^n − Principal.
Frequently Asked Questions
No. The hedge eliminates currency risk but not investment risk. Your return still varies with the underlying assets' performance.
Over very long periods (10+ years), currencies tend to mean-revert, reducing the net benefit of hedging. Short-to-medium term investors with specific currency views benefit more from choosing the right strategy.
Look for ETFs with "hedged," "H," or "currency hedged" in their name. For example, many international equity ETFs come in both hedged and unhedged versions. Check the fund prospectus for hedging methodology and costs.