I have no prior experience with ETFs so please forgive me if this is a dumb question but I don't even know what to try googling. Two days ago I purchased 7 shares in VBR, at $119,28 each. I put €711,35 into it. Today I log in and I see this: link to trading screenshot

What has happened? Apparently the share price increased to $120,83 but my total value has gone down to €709,33? Why does it say I lost -€2,01 if the stock price actually went up?


Specific to this case

According to your post, you bought seven shares of VBR at $119.28 each on August 23rd. You paid €711,35. Now, on August 25th, VBR is worth $120.83. So you have

$120.83 * 7 = $845.81

But you want to know what you have in EUR, not USD. So if I ask Google how much $845.81 is in EUR, it says €708,89. That's even lower than what you're seeing.

It looks like USD has fallen in value relative to EUR. So while the stock price has increased in dollar terms, it has fallen in euro terms. As a result, the value that you would get in euros if you sold the stock has fallen from the price that you paid.

Another way of thinking about this is that your price per share was €101,72 and is now €101,33. That's actually a small drop.

In general

When you buy and sell in a different currency that you don't actually want, you add the currency risk to your normal risk. Maybe that's what you want to do. Or maybe you would be better off sticking to euro-denominated investments.

Usually you'd do dollar-denominated investments if some of your spending was in dollars. Then if the dollar goes up relative to the euro, your investment goes up with it. So you can cash out and make your purchases in dollars without adding extra money.

If you make all your purchases in euros, I would normally recommend that you stick to euro-denominated investments. The underlying asset might be in the US, but your fund could still be in Europe and list in euros.

That's not to say that you can't buy dollar-denominated investments with euros. Clearly you can. It's just that it adds currency risk to the other risks of the investment. Unless you deliberately want to bet that USD will rise relative to EUR, you might not want to do that.

Note that USD may rise over the weekend and put you back in the black. For that matter, even if USD continues to fall relative to the EUR, the security might rise more than that. I have no opinion on the value of VBR. I don't actually know what that is, as it doesn't matter for the points I was making. I'm not saying to sell it immediately. I'm saying that you might prefer euro-denominated investments when you buy in the future. Again, unless you are taking this particular risk deliberately.

  • Thank you very much for your explanation! Just a follow up: by the same token, if I purchase the shares in EUR, am I not exposed to the same currency fluctuation risks only on the euros side ? Meaning - even if the underlying stock rises, if the euro goes down relative to the dollar, do I still incur in a loss ? – ETFVBR Aug 26 '17 at 11:22
  • 1
    What you did is you bought a dollar-denominated stock in euros. If you did that again, then you'd still have the same issue. The alternative is to buy something that lists in euros (euro-denominated) in euros. Such a fund might still own US stocks. I have about 10% of my 401k in a dollar-denominated international fund. The underlying securities are presumably in euros, yen, etc. but I don't know what they are, so I don't care. The fund price is reported in dollars. I presume that there are European equivalents of VBR that either invest domestically or internationally. – Brythan Aug 26 '17 at 15:10
  • @Brythan Even if your international fund reports in USD, if it is investing in foreign countries, then it inherently does take on foreign currency risk. You may see it reported as USD, but if your fund invests in a Japanese company based in Japan, holding Yen-based assets, then a weakening of the Yen will ultimately decrease your USD value. – Grade 'Eh' Bacon Aug 28 '17 at 13:38

Your Answer

By clicking “Post Your Answer”, you agree to our terms of service, privacy policy and cookie policy

Not the answer you're looking for? Browse other questions tagged or ask your own question.