Multi-currency

Multi-currency portfolios: the exchange rate in your return

Your Apple position is up 30% since 2022, in dollars. In euros it might be up 22% or up 39%, depending on what EUR/USD did over your holding period. Until you check which of the two it is, you do not know your return.

Most people who own foreign assets have never seen their return in their own currency. The broker shows the position in dollars, the news reports the index in dollars, and the exchange rate does its work in between without appearing on any screen.

This article explains why every foreign position carries two returns, why the exchange rate of each transaction date matters, what that means for the benchmark, and which base currency answers which question.

Two returns in every foreign position

A European investor holding US stocks owns two exposures: the stock and the dollar. Together they make up the return in euros. Over short periods the currency part is small. Between 2022 and 2026, EUR/USD moved enough to change multi-year returns by double digits in either direction.

You either accept the currency exposure as part of the position, or you hedge it. That choice can only be made consciously if your tracker keeps the currencies apart.

Your home-currency return is the asset's local return combined with the currency's move against your home currency over the same period. When both go the same way, the effects compound.

When they go opposite ways, a good stock year can shrink to a mediocre one in euros, or a flat stock year can show as a gain that came from the exchange rate alone. Neither is visible on the dollar chart.

Where mixed-currency bookkeeping goes wrong

The errors are small and they accumulate. Three of them appear in most home-made portfolio files.

A cost basis recorded in dollars sits next to a market value converted at today's rate, and the resulting gain is partly a currency effect.
A dividend received in dollars is added to euro dividends as if they were the same unit.
A spreadsheet applies one exchange rate to five years of transactions, which restates every past transaction at today's prices.

Each shortcut moves your numbers a little. Add a second foreign currency, such as a UK stock in pounds, and the errors multiply. The result is a portfolio whose reported return nobody can derive, including its owner.

The base currency principle

Consistent tracking converts everything to one base currency, the one you live in, at historical rates. Your cost basis is the number of euros you paid at that day's rate, not today's.

Each dividend is converted at the rate on its payment date. The portfolio chart values your holdings in euros every day, so currency moves show up on the dates they happened.

Your broker does part of this, transaction by transaction. DeGiro's "Totaal EUR" column is an example. The portfolio-level view, how much of your gain came from the stocks and how much from the dollar, is something almost no broker shows.

The important words are historical rates. Converting everything at today's rate looks tidy and destroys information. It makes your past purchases cost what they would cost now, which is a different question from what they did cost.

Only conversion at the rate of each transaction date preserves the sequence of events: the euros that left your account on each purchase, and the euros each dividend delivered. Gains, cost bases and charts then all use the same unit at the moment it applied.

A worked example

Suppose you bought a US stock when a dollar cost about 95 euro cents, and today a dollar costs a little more than one euro. Convert that old purchase at today's rate and your recorded cost rises, which shrinks your apparent gain.

If the rate had moved the other way, the recorded cost would fall and the apparent gain would grow.

Neither distortion shows on screen, because the numbers still look plausible. A return that is off by a few points for a reason you cannot see feeds into decisions about rebalancing, hedging and position sizes.

Why a hedged share class does not settle it

A common objection is that the hedged share class of a fund removes the problem. Hedging is a portfolio decision, not a bookkeeping one, and it does not remove the need for base-currency tracking.

Hedging has a cost, it applies fund by fund rather than across all your holdings, and most investors hold some unhedged positions anyway, individual US stocks being the obvious case. Hedged or not, the question of what your money did in your own currency still needs an answer, and only consistent base-currency bookkeeping gives one.

Whether to hedge at all is a decision that starts with seeing how much of your past return was currency.

The benchmark has a currency too

If you compare your portfolio in euros with the S&P 500 in dollars, the comparison contains exchange-rate movements that affected one side and not the other. A fair benchmark converts the index into your base currency using the same historical rates applied to your own holdings, so both lines go through the same currency moves.

Over a multi-year period the currency term alone can flip the verdict on whether you're beating the index. A comparison that ignores it is wrong in an unknown direction.

Which base currency to look at

Which base currency is correct depends on the question. Your expenses are in euros, US stocks are quoted in dollars, and perhaps you are moving to London next year. The data is the same, and the currency you view it in is your choice.

Whether you can afford your expenses is a home-currency question. Whether you picked good companies is closer to a local-currency question. Whether to rebalance toward Europe is a question that benefits from both views. The common mistake is to treat whatever unit your broker displays as the truth.

BullBenchmark shows the dashboard in EUR, USD, GBP and other currencies, with one setting that your profile remembers, and applies historical conversion throughout.

In short

A foreign position has two returns: the asset's return in its own currency, and the exchange rate's move against your home currency. Your result in euros is the combination.
Historical conversion needs a full transaction history, because the euro value of a past purchase or dividend can only be rebuilt from the date and the amount.
One base currency for the headline numbers, applied to every account, keeps the figures comparable. That matters most when the money is spread across platforms, where multi-broker tracking adds to the currency problem.
A benchmark in a different currency than the portfolio is not a fair comparison.
Once a year, the split between the asset return and the currency return shows how much of the result was the exchange rate. In some years that part is small, and in other years it is a large share of the result.

BullBenchmark reads the transaction export from your broker and shows your return next to the S&P 500 and the Nasdaq 100, fed with the same deposits on the same dates, in your own currency. The first two weeks are free and no card is needed.