Page 113 - Ultimate Guide to Currency Trading
P. 113

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.
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