Multi-currency portfolio: how exchange rates change your return

You live in one currency and invest in several. A European stock in euros, a Canadian fund, savings from a few years abroad, a family loan in another currency. Each one has its own price and its own exchange rate, and your total depends on both.

This guide explains how a multi-currency portfolio really works: why the same holding can show two different returns, how to convert costs and values correctly, which currency to measure in, and why every exchange rate needs its date.

Why one holding can show two returns

Every holding keeps its own currency. A US stock is priced in dollars, an Amsterdam stock in euros, a Borsa Istanbul stock in lira. To add them up you need one currency for the total, and that is where the timing of the rate matters.

The correct way is:

• Cost is converted at the rate of the day you paid it.
• Today’s value is converted at today’s rate.

Done this way, your result includes what the currency itself did. That is not a distortion; it is part of what happened to your money.

How currency moves change your return

Your return in your home currency combines two returns: the holding’s return in its own currency and the currency’s move against yours.

Home-currency return = (1 + holding’s return) × (1 + currency’s move) − 1

Example: you buy €10,000 of a European stock when €1 costs $1.05. You pay $10,500.

Scenario	Stock in euros	Rate	Value in dollars	Return in dollars
Euro strengthens	€11,000 (+10%)	$1.15	$12,650	+20.5%
Euro weakens	€11,000 (+10%)	$0.95	$10,450	−0.5%

Same stock, same 10% gain in euros. In one case you made about 20%, in the other you lost a little.

It can go further. A Borsa Istanbul stock up 60% in lira over two years, while the lira lost 40% against the dollar in the same time, is roughly 4% down in dollars (1.6 × 0.6 = 0.96). Both statements are true. They answer different questions: “how did the company do?” and “how did my money do?”

Which currency should you measure in?

Usually the one you will spend in. If your rent, groceries and retirement will be in dollars, a total in dollars tells you what matters. This is your base currency.

Looking at each holding in its own currency is still useful. It shows how the company or fund did on its own, separate from the currency. If you hold foreign stocks to spread risk, the currency is part of that spread, for better and worse.

If you move countries, or your spending will shift to a new currency, you can change the base and look at the same history through it. Nothing about the trades changes; only the lens does.

Why every exchange rate needs its date

Suppose you bought that European stock three years ago and kept only today’s exchange rate. Your tool would convert both the old cost and today’s value at today’s rate. The currency’s whole contribution, positive or negative, would vanish from the result.

So keep each rate with its date. At minimum, record the rate on the day of each buy and sell. Many brokers show it on the trade confirmation. Between those days, a rate typed once a week or once a month is enough for the total.

The same rule matters for tax. When you sell a foreign holding, tax authorities usually want the gain in your home currency, which means cost at the rate of the purchase day and proceeds at the rate of the sale day. The tax season checklist covers what a sale books.

The same idea in your budget

Several currencies show up outside investing too: a freelance client paying in euros, a family loan in dollars, a card used on a trip. The rule is the same. An entry uses the rate of its own day, so last spring’s income keeps last spring’s value. A plan for the coming months uses the latest rate you have.

Common mistakes

• Converting old costs at today’s rate. The currency effect disappears.
• Comparing a foreign holding’s local return with a home-currency index. Put both in the same currency first.
• Forgetting the conversion cost. The spread between buy and sell rates is a fee, even if it never shows as one. See what fees cost you.
• Mixing currencies in one total without saying which one it is in.

How Money Kit handles several currencies

In Money Kit, every holding, account and budget line keeps its own currency, and totals, charts and reports are shown in the one you choose in Settings → Currencies. Rates are typed by you, or pasted from any chat assistant on the Prices page, and each is kept with its date: an old cost converts at the last rate on or before its own day, today’s value at today’s rate. When there is no direct rate between two currencies, the kit goes through your base currency, the US dollar or the euro. Switching the base needs one rate between the old and the new and rewrites nothing, and anything with no rate on file is flagged with a warning strip.

This article is general education, not personal financial advice.