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If for example, I invest in an ETF for the S&P 500 or USD Treasury Bond ETF, from the UK with £1000, will this automatically be converted into USD? Then if USD grows stronger against GBP, will this mean my investment appears to grow stronger to me (since I'll always be viewing my investments in GBP), even if the S&P 500 hasn't grown in USD?

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It depends on what you buy:

  • if you buy an USD ETF, you pay in USD, and when you sell, you get USD. Either you have to convert your money, or your broker does it for you. Any gains or losses at the currency exchange are yours.

  • if you buy a derived asset provided by your broker, it could be traded in your currency. Typically, any exchange rate changes would reflect in the assets price, and your broker will take some fee for providing the derivate service.

The former is much more common.

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It doesn't matter.

You buy ETF shares. You own a fraction of whatever the ETF is worth. You can measure that worth in dollars or pounds or lira or whatever.

Since it's a US ETF it owns shares in US companies. All of those US companies have assets in USD, liabilities in USD, pay taxes in USD, and they physically exist in the US so if they are liquidated they are most likely to sell their stuff to other US residents or companies in exchange for USD. For these reasons it makes most sense to use USD to measure the value of the companies. But you don't actually own any USD - you own (indirectly) the companies.

If a company owns a USD 50,000 truck, and the USD appreciates to 25% more, and the truck is still worth USD 50,000, then the truck is now worth 25% more, and its value measured in GBP goes up 25%. If the truck is only worth USD 40,000 now, that's actually the same value, and its value measured in GBP is the same.

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