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If I invest in securities denominated in a foreign currency, should I hedge my currency risk?
No.  This is too much for most individuals, even some small to medium businesses.  When you sell that investment, and take the cheque into the foreign bank and wire it back to the USA in US dollars, you will definitely obtain the final value of the investment, converted to US$. Thats what you wanted, right?  You'll get that.  If you also hedge, unless you have a situation where it is a perfect hedge, then you are gambling on what the currencies will do. A perfect hedge is unusual for what most individuals are involved in. It looks something like this:  you know ForeignCorp is going to pay you 10 million quatloos on Dec 31.  So you go to a bank (probably a foreign bank, I've found they have lower limits for this kind of transaction and more customizable than what you might create trading futures contracts), and tell them, "I have this contract for a 10 million quatloo receivable on Dec 31, I'd like to arrange a FX forward contract and lock in a rate for this in US$/quatloo."  They may have a credit check or a deposit for such an arrangement, because as the rates change either the bank will owe you money or you will owe the bank money. If they quote you 0.05 US$/quatloo, then you know that when you hand the cheque over to the bank your contract payment will be worth US$500,000.  The forward rate may differ from the current rate, thats how the bank accounts for risk and includes a profit. Even with a perfect hedge, you should be able to see the potential for trouble.  If the bank doesnt quite trust you, and hey, banks arent known for trust, then as the quatloo strengthens relative to the US$, they may suspect that you will walk away from the deal.  This risk can be reduced by including terms in the contract requiring you to pay the bank some quatloos as that happens.  If the quatloo falls you would get this money credited back to your account.  This is also how futures contracts work; there it is called "mark to market accounting".  Trouble lurks here.  Some people, seeing how they are down money on the hedge, cancel it.  It is a classic mistake because it undoes the protection that one was trying to achieve.  Often the rate will move back, and the hedger is left with less money than they would have had doing nothing, even though they bought a perfect hedge.