Carry trade occurs when investors borrow money using one currency and invest money in another currency. This works in your favour if you are investing in a currency at high-interest rates and borrowing with low-interest rates. This currency is commonplace on the foreign investment market.
For example…
To successfully complete a positive carry trade, you have to borrow an asset with a low interest rate to finance the investment in an asset with a higher return. You may do this by borrowing at 3% and then investing the funds in an asset that pays 6%. Your financial advisor will be able to give you specific advice on this strategy.
