Hi gang, Too much time on my hands which is a dangerous thing so I decided to think about this topic especially from a “behavioural” perspective especially when one is nearing or in the earlier stages of retirement. I’ll use AUD / USD as an example in the following. So assume an investor who decides to invest a significant part of their portfolio in unhedged US S&P 500 (@oracle ). Personally I’ve favoured Unhedged International Shares mostly as a risk management strategy against a major long duration negative shock which is confined to Australia. That is, Home country risk. I suppose a Japan type scenario which is the favourite often used when discussing this subject. Not that I’m suggesting this would happen but managing risk is in part about looking at possible outcomes and the cost of insurance. Also fortunately our International holdings are surplus to our needs so hedging isn’t as much of a concern. Most may not be so fortunate though so I thought this might be an interesting topic for investors in general especially seeing holding unhedged international equities seems to be the favoured approach by forum members. Hedging over the long term is generally considered a wash and tax efficient. It’s also noticeably less correlated compared to Hedged and given AUD is often considered a risk on currency this can be valuable is lessening the pain when the market tanks. BUT now to BEHAVIORAL considerations if an investor is unlucky enough to RETIRE around 2001 and had significant UNHEDGED exposure to US Equities (becoming more popular nowadays with easy and cheap access to global equities): AUD / USD Chart: Ok now try to pretend this was you in the same scenario. How would you feel during the first 10 years of retirement and even now when the AUD is still well above where it was 17 years ago? Would you have stayed the course? Some will say the ASX did well during part of this time but it’s potentially likely that every time you look at your portfolio you won’t notice your Australian shares, attention will be firmly focused on your US holding will possible deep regret! It’s often mentioned that 50 / 50 (Hedged / unhedged) exposure to International Shares is the position of least regret. From memory I recall some research suggesteding that 50 / 50 provides 80% of the benefit of a fully hedged portfolio but obviously with the advantage of the unhedged component. Would the retiree in the above example be wishing they’d chosen the path of least regret? I’d love to hear others views and hopefully @dunno and @The Falcon being the deep thinkers will be kind enough to respond also.