Impact of currency exchange rates on your portfolio

[PhilMongoose]

Maybe an easy way to see things clearly is to set all investments values into local currency values. This way you see exactly the value in your local currency and don’t need to manually re-calculate the value or have any unexpected surprises.

[Mirager]

@PhilMongoose

This way you see exactly the value in your local currency and don’t need to convert or have any unexpected surprises.

That’s my point, what you see vs what you get. I’ve set to show me CHF too, but some assets will give USD when sold, so conversion will be necessary if I don’t intend to use the USD for anything.

[Abs_max]

But even if you get USD, you can exchange them. Maybe you lose 0.05 - 1% depending on bank/broker you use to convert

[Tony1337]

@Mirager

I recall there were many posts on reddit CH PersonalFinance in 2023 asking “where did muh gainz go?” as people would see eg 20% gain in VT on yahoo finance (in USD) but get 10% in their own accounts (in CHF) (don’t nitpick the numbers/dates, talking about the sentiment). It sounds simple but I don’t judge, this stuff is not taught at school (sadly).

What also needs to be taken into account is local inflation. In 2023 USD/€ inflation was like 10%, while swiss inflation was 3%. That would mitigate that 10% difference to only a remaining 3% effectively with these numbers.

[jks21]

Although I understand the confusion, I am always a little bit surprised when I see people being disappointed or even angry becouse someone “stole” their money when they realize that they are not getting the nominal USD return in CHF.
FX changes are mainly influenced by interest rate changes which are mainly influenced by inflation differences. (ok there are other factors but these are the main ones)

If VTI goes up 100% in X years in USD and the inflation difference between US and Switzerland was 20% at the same period, it is normal to expect a ~80% performance in CHF.
At the end of the day, in principle, both Swiss and US residents will have the some real (after inflation) performance.
If you got 100% in CHF that means you got more real value than the actual real performance of the ETF. Doesn’t make sense.

How to “protect”?

• You can hedge. That will protect you short term from big unexpected FX changes. Long term though doesn’t make a big difference as hedging is not free. (Typically you pay extra the difference in interest rates)
• You buy stocks/etfs of companies that do their business strictly inside Switzerland with no exposure to the outside world → Concentration risk & not many options. Maybe you can have a small home bias with SLICHA but still …

Long story short, we shouldn’t look at the nominal performance in USD, always tick the CHF box :).
Not many things we can (and maybe should) do differently as Swiss.

EDIT: that wasn’t intended to be a reply to Abs_max. Accidentally replied to his post

[Mirager]

@jks21

I am always a little bit surprised when I see people being disappointed or even angry becouse someone “stole” their money when they realize that they are not getting the nominal USD return in CHF.

Edited for propriety, not to anger our benevolent mods, I understand, I feel similar.