Page 113 - Ultimate Guide to Currency Trading

Using currencies as an income strategy is basically a very long-term carry trade strategy. Most
bond mutual funds require a $1,000 minimum investment. Bond mutual funds that are set up for
income are usually called high-yield funds and can pay anywhere from 5-9 percent annually, plus
growth. In this example, if you took the same $1,000 and invested 20 percent in a carry trade such as a
long NZD/USD or long AUD/USD, you would earn the net interest difference.

This net interest difference at 50:1 margin would net you a yield of any-where from $400 to
$650 a year on your FX investment. This equates to a dividend of $33 to $54 per month on your
$1,000 deposit. Compare to a monthly dividend of $4 to little more than $7.00 per month with the
high-yield bond fund! Granted, the bond fund is safer than the FX investment, but with a little bit of
planning you can build an income portfolio of both high-yield bonds and income-oriented carry trades
to increase the overall monthly yield of your income bond portfolio.