Adding FX to a traditional portfolio reduces risk and maximum loss, but it also increase the returns of the portfolio overall.
Over the past 25 years of floating or flexible exchange rates there is clear evidence that FX can be a source of long term systematic returns, at least equal to and possibly in excess of both equities and bonds.
Furthermore when taking investment risk into account, it is clear that FX actually provides superior risk adjusted returns compared to both equities and bonds, suggesting it should be one of the asset classes of choice for investors.
By adding FX to a traditional portfolio of equities, bonds & cash, not only does it reduce risk and maximum loss, but it also increases the returns of the portfolio overall.
