Why currency matters
Put €10,000 into a global ETF and add €500 a month for 20 years at 7%, paying 0.5% to convert each time. In euros, the result depends on what the dollar does:
- Dollar 1% stronger a year: about €340,407
- Dollar steady: about €297,850
- Dollar 1% weaker a year: about €261,136
Same fund, same contributions — a gap of about €79,271 from currency alone.
How this calculator works
- Each month, your contribution is converted into the fund's currency, minus the conversion cost.
- The fund grows at its return in its own currency.
- The exchange rate moves steadily by the yearly change you set, and the balance is valued back in your currency.
- Optionally, the conversion cost is charged once more when you convert the final balance home.
Ways to manage currency risk
- Accept it. Over very long periods currency moves often even out somewhat, and global funds spread exposure across many currencies.
- Hedge part of it. Currency-hedged share classes — common for bonds, like AGGH — remove most of the swing.
- Cut conversion costs. They're certain, unlike currency moves. Choosing a cheaper broker is one of the easiest wins.
Comparing two listings of the same fund, such as VWRA vs VWCE? The trading currency mainly changes your conversion costs, not your currency exposure.
Frequently asked questions
How do exchange rates affect my ETF returns?
If your money is in euros but the fund mostly holds US-dollar assets, your return in euros is roughly the fund's return plus the change in the dollar against the euro. A stronger dollar adds to your result; a weaker one subtracts from it.
Does the currency the ETF trades in matter?
Much less than you'd think. VWCE trades in euros and VWRA in dollars, but both hold the same global shares — mostly priced in dollars. What drives the currency effect is what the fund holds, not the currency on the price tag. The trading currency mainly affects conversion costs.
What is a currency-hedged ETF?
A share class that uses contracts to cancel most of the exchange-rate effect, so you get close to the fund's return in your own currency. Hedging has a small ongoing cost and is most common for bond funds, where currency swings would otherwise swamp the return.
I'm in the UAE — does this apply to me?
The dirham is pegged to the US dollar, so dollar-based funds carry little currency risk for AED-based investors. Conversion costs still apply each time you exchange money, so use a 0% currency change and your broker's conversion cost.
How can I reduce conversion costs?
Compare brokers' FX fees, convert larger amounts less often if your broker charges a fixed fee, or buy a listing in your own currency. Over decades of monthly investing, a difference of 0.5% per conversion adds up.