Currency Investment Strategies With Fidelity: A Beginner's Guide

Currency ETFs are a popular way to invest in foreign currencies. Currency ETFs are designed to track the performance of a single currency in the foreign exchange market against the US dollar or a basket of currencies. They can be used to hedge against the relative value of a particular currency and add to a portfolio's currency diversity.

Fidelity offers foreign currency transfer services and the ability to trade international stocks in 25 countries with the flexibility to settle in either US dollars or the local currency. You can also trade cryptocurrency with Fidelity Crypto.

Currency ETFs

• Portfolio diversity: Currency ETFs can add to a portfolio's currency diversity or be used as a hedging strategy.
• Lower transaction fees: Investors can gain exposure to the forex market without paying transaction fees for buying and selling currencies.
• Low management fees: Management fees tend to be low as most currency ETFs are not actively managed.

However, it is important to consider the risks associated with currency ETFs, such as volatile markets, rapidly fluctuating exchange rates, and the high cost of hedging, especially for leveraged and inverse ETFs.

Foreign currency wire transfers

Here's how the foreign currency transfer service works: The amount of currency you request is transferred in-kind (for example, euros to euros) between financial institutions. Transfers are processed as a wire through the SWIFT (Society for Worldwide Interbank Financial Telecommunications) system. While Fidelity does not charge a fee for this service, other financial institutions may charge a fee if they are involved in the transaction.

To transfer foreign currency from your Fidelity account to another institution, you will need to use the Outgoing Foreign Currency Wire Form and contact a Fidelity International Trader at 800-544-2976 to complete the transaction.

If you are transferring foreign currency from another institution to your Fidelity account, start the process at the financial institution holding the currency. Review the Incoming SWIFT Wire Instructions, select the institution you are transferring from, and choose the desired country and currency.

For future transfers using the same currency and account, you can set up Outgoing Currency Wire Standing Instructions on your account. Complete the Outgoing Foreign Currency Standing Instruction Form and return it to your local Investor Centre in person or by mail, along with a Medallion Signature Guarantee. Once you have established these instructions, call the International Trading Team at 800-544-2976 to initiate the transfer.

It is important to note that there are different types of transfer methods, such as bank wires and electronic funds transfers (EFTs), each with its own advantages and considerations. Bank wires are typically faster, while EFTs may be more suitable for smaller amounts and have no daily limit on the number of transactions.

Crypto trading

Fidelity Crypto® allows users to trade and secure cryptocurrencies like bitcoin, ethereum, and litecoin, starting with as little as $1. It is built into the Fidelity® mobile app, so you can manage both your traditional and crypto investments in one place.

Fidelity Crypto® is not available in every state, and it is important to note that crypto is for investors with a high-risk tolerance. Crypto is a highly volatile asset class that can become illiquid at any time. It may also be more susceptible to market manipulation than securities and is not insured by the Federal Deposit Insurance Corporation or the Securities Investor Protection Corporation.

Fidelity also offers two crypto funds—one for bitcoin and one for ether—allowing investors to add exposure to crypto in brokerage, trust, and IRA accounts. These funds are called the Fidelity® Wise Origin® Bitcoin Fund (FBTC) and the Fidelity® Ethereum Fund (FETH). They are spot crypto ETPs that provide indirect exposure to the price of cryptocurrencies through an investment product available on a traditional stock market exchange.

Fidelity's focus on education helps bring clarity to crypto trading, and their rigorous physical, operational, and cyber protection measures help keep your investments secure.

International stock trading

To get started, you must have a non-retirement brokerage account, and you can sign up for international trading by contacting the International Trading team at (800) 544-2976.

• International orders can be placed at any time but will only be executed during the local market hours for the security.
• International orders are limited to common stocks with specific restrictions, including day orders, market or limit orders, and cash trades only.
• International stocks must be bought and sold in the same market. For example, shares purchased in Germany cannot be sold in France, even if the company trades on multiple exchanges.
• There are additional specifications regarding share quantities, known as board lots, for exchanges in Canada, Hong Kong, and Japan. These orders must be placed in multiples of the board lot or standard trading unit.
• Limit orders must conform to tick requirements, which are minimum price increments that vary by market and are usually based on the previous session's closing price per share.
• You can choose to settle international trades in U.S. dollars or the local currency. If you settle in U.S. dollars, a linked foreign currency exchange order will be executed automatically.
• There are costs associated with international trading, including commissions, clearing and settlement costs, local broker fees, and potential additional fees or taxes specific to certain foreign exchanges.
• Currency exchange rates are quoted in pairs, such as EUR/USD or USD/CAD, with the U.S. dollar typically considered the base currency.

Currency trading

Fidelity offers various services and products to facilitate currency trading and investment. Here are some key points to consider:

Currency ETFs

Currency Exchange-Traded Funds (ETFs) are designed to track the performance of a single currency against the US dollar or a basket of currencies. They offer portfolio diversification, hedging opportunities, and speculative currency trades. Currency ETFs also provide lower transaction fees and management fees compared to buying and selling foreign currencies directly. However, they carry risks, including volatile markets, fluctuating exchange rates, and the cost of hedging.

International Stock Trading

Fidelity allows you to trade stocks in 25 countries and offers the flexibility to settle trades in US dollars or the local currency. You can exchange between 16 different currencies, providing the potential to capitalize on foreign exchange rate fluctuations. International stock trading carries additional risks, including political and economic instability and currency fluctuations, which may be more significant in emerging markets.

Foreign Currency Transfers

Fidelity offers foreign currency transfer services without any fees. The transfers are processed as wires through the Society for Worldwide Interbank Financial Telecommunications (SWIFT) system. Currently, Fidelity supports transfers in 16 currencies, including the Australian dollar, British pound, Canadian dollar, Euro, Japanese yen, and more.

Frequently asked questions