Gyroscopic Investing

I'd appreciate your thoughts on a question about international stocks in my Australian PP.

In order to diversify from the relatively small (on a global market capitalisation scale) and concentrated (banks and miners) Australian economy, I have decided to split the stock component of my Australian PP between local and international stocks (12.5% each).

Now, should I use a hedged or an unhedged international stock fund?

MSCI World Ex AU ETF hedged to Australian Dollar (VGAD.AX)
or
MSCI World Ex AU ETF unhedged (VGS.AX)  ??

My current thinking would be that a hedged international stock component is more appropriate in the context of an Aussie PP. The Gold component in my PP should be a sufficient mitigation strategy against a potential decline in the Australian Dollar relative to the USD (as long as Gold remains level to the USD).

Do you think this holds true? Which international stock option would be the correct one to pick in the context of an Aussie PP, hedged o unhedged?

Hedging to a currency means wanting to subscribe closely to regional monetary policies, regional market performance, borrowing patterns, social policies, etc. So, by saying I don't want to hold only Australian market, you say I want to move away from regional dependence; and then by saying, I want to hedge this international market I'm buying, you are saying I really want to get back to the regional dependence. It makes no sense to me, so I'd say don't hedge. (If I were Australian, I wouldn't go with PP but with a standard, conservative 50-50 Bogleheads portfolio)

Another Aussie here....

Given a choice, I would go with the Unhedged International Share ETF . Had this same thought myself and after much research found that hedging doesn't make much difference with Shares anyway.

BUT, I think the question you should be asking is what about the Cash, Bond components. It is here that International exposure makes a large difference and hedging "Does" matter.

Perhaps have a look at the International PP thread.