Carry trade can take several forms, from foreign exchange (Forex) strategies to credit card-related tactics.
Examples of carry trade
To use the carry trade strategy, you can borrow money through your credit card and invest it in a savings account.
Of course, the credit card should either have an interest rate of zero percent, or at least a really low interest rate during the time of borrowing. This is important so that the investment in the savings account will still be higher than the amount to be repaid.
Carry trade is sort of a nicer name for what other people refer to as stoozing. You may also make use of the carry trade strategy by borrowing low-yielding currencies while lending high-yielding currencies at the same time.
Pros and cons of carry trade
In reality, carry trade is more than just stoozing. The investment goes to investments that are much less secure than a savings account.
Though carry trade can produce high returns with smaller investments, that would all depend on luck and a lot of skill and knowledge in investing.
There is the danger of the two currencies involved in the investment changing status. So, though carry trade can produce steady returns, it can also cause great losses.
