[p0pularopinion]

I find the S&P500 to be interesting as a demonstration for currency risk. Denoted in US, it went up ~18% or so. For me as an EUR investor, it went up just 4.6% when accounting for the loss of the USD. Comparing that to indicies that usually do not perform that well, Euro Stoxx 50 is up ~22% and MSCI Emerging Markets ~21%.

[baxtr]

I noticed this as well. I haven’t found a good cure for this other than diversifying globally.

[dottjt]

I could be misunderstanding this, but you know that you can buy ETFs that are currency hedged?

Taking Vanguard for example, VGS is global equities, but VGAD is global equities that are AUD-hedged (my home country).

The only downside is that you pay more in fees (and they're less tax efficient). People generally don't bother with it though, because on a long enough time-line currencies usually revert to their long-term average, so if you're holding for retirement there's generally little point.

[hahahahhaah]

Everyone wants to park some money and have other people work hard to increase the real value of said parked money. Not everyone can win big. Storing value is actually pretty amazing thing and that it can be profitable is magic. Of course the environment and poorest pays some of the free lunch.

[Rastonbury]

There is no 'cure' per se as a non-US investor currency risk is just something to accept (or swap return for a hedge but then it ends up being a wash mostly), for example if you invest in a World equities ETF, it's a bit pointless to be hedging exposure to all the currencies. Even if you decide to slant away from the US, it's likely a majority of non-US large caps have USD exposures.

It's more a psychological thing, you see absolute USD return and think you could've made that but there's not the actual return, your actual return is post conversion, if you'd have hedged you wouldn't have that abosulte return either, so you've never had it.

Additionally, if you're like most people and investing regularly or DCA-ing from now on you can buy at lower USD

[dgb23]

Many global indexes are also traded in USD.

Ironically last year has been good for those who held EUR based or CHF based indexes.

[swexbe]

> indicies that usually do not perform that well

MSCI EM has outperformed MSCI US since it's inception in 2001 if you look at total return.

[epolanski]

Small caps and emerging markets in the long run should outpace advanced high cap markets as they have more room to grow.

There's also some other interesting aspects of emerging markets specifically: they never went more than 4.5 years before recovering from a crash to ath, whereas it took the SP500 12 years and EU 600 index 14 to recover from the 2000 one.

[miroljub]

That logic is flawed. The end value and ROI for S&P500 is the same regardless of the currency used to display it.

It's the same as complaining that the temperature increased more in Fahrenheit than in Celsius.

EDIT: The total value is the same regardless of the fluctuations of currencies used to represent the value. Those are two independent issues.

Currencies fluctuate even if you keep them in checking accounts without investing them.

And yes, if you measure distance in feet, your son will go every year further away than you because his feet keep growing, while yours stay the same.

[lbreakjai]

The logic isn't flawed. If you are a European investor, then you care about the returns in your currency, and the fact is your pile of money only grew by 4%.

Inversely, as a US investor, if you invested 100€ in the eurostoxx 50, your pile of money would have grown to about $140 (20% index growth, 15% dollar debasement). It absolutely makes a difference, that's $20 more in your pocket compared to the index.

Your comparison with temperatures is wrong. Celsius and Fahrenheit are fixed units, whereas the value of currencies fluctuate.

[cjpearson]

It makes sense if you're looking at it from the perspective of a European investor. e.g. You start with 1000 EUR, convert and buy into an S&P500 fund, wait a year, sell and convert back to EUR.

Celsius and Fahrenheit doesn't work as an analogy because the rate does not change over time as it does with currencies.

[ciconia]

This analogy is flawed. The conversion formula between Fahrenheit and Celsius is fixed. Not so for currencies.

[dranudin]

The roi is unfortunately not the same if you earn your money in euros and need to pay your taxes in euros. At one point one has to do a forex trade and that will be a loss for the euro investor

[jacquesm]

> That logic is flawed. The end value and ROI for S&P500 is the same regardless of the currency used to display it.

> It's the same as complaining that the temperature increased more in Fahrenheit than in Celsius.

No, that logic is flawed. Fahrenheit and Celsius are pegged to each other, the Euro and the USD are not.