Diversified Carry Basket

  

A diversified carry basket mixes a 'lil risk with a 'lil safety on foreign exchange markets.

First, it helps to know what a "carry trade" is, which basically means you take out a loan with a low interest rate, then use that money to invest in something more profitable, so you can pay off the loan and make a tidy profit on the difference.

Carry trades also refer more specifically to currency carry trades, where investors try to make money off the difference between moving exchange rates between different currencies. To make carry trades doable and worth it, you have to be starting with a lot of money up front.

A diversified carry basket is a carry trade strategy: the investor will order multiple carry trades across foreign exchange markets at the same time. The diversification of the trades across various currencies reduces the investor's risk, just as with regular investment portfolio diversification.

To make sure they're being smart about it, investors will spend time researching which currencies to invest in and trade with, in order to try to get profits from buying low and selling high. If they guess wrong, they could end up owing money. Maybe a lot of money. Yikes.

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