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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Finance: What is a Diversified Mutual Fu...20 Views
finance a la shmoop what is a diversified mutual fund? all right people
listen up it's lots of investments stocks bonds exposure to risk and reward [Risk and reward punch man in face]
everywhere energy, telecom, insurance, real estate, banking, chemicals, tech, retail not
enough diversity yet well those are just sectors or industries and there's a
whole bunch of them what about geography geographic diversity the US, Russia, China
Europe someday maybe Mars Elon what do you think well maybe exposures to [Elon Musk floating in space]
different currencies or commodities cycles as the diversity you seek hmm
well that's diversity Benetton eat your heart out so the bigger question is why
would you want such diversity? well the idea is that you mitigate risk by being
diverse the don't put all your eggs in one basket thing if one investment goes [Value of investment graph appears]
bust well at least you have plans B C and D to fall back on and if this is
grabbing you check out our videos on efficient markets theory for more on the
subject or maybe diversify your knowledge and watch all of our finance
videos food for thought and you know please click on the ads that we got to [Man holding begging sign]
eat around here
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