Currency risk and ETF

Jd.l

New member
Hi,

I now have one topic in my head that keeps my mind busy and I cannot find a good answer to my concerns. Currency risk and ETF.

Like being located in Switzerland, earning your money in CHF, but then exchanging CHF to USD and buying VT or VOO etc. I am worried about the potential impact of the USDCHF fluctuation and final returns of my ETF. As at the end of the day, if I stay in Switzerland or move to some country in the Eurozone, I will need to sell my USD against CHF or EUR. USDCHF went 11.24% down in 5years. Some change for exchanging USD back to CHF.

My initial thought was to have 2 more ETFs with mostly European / EUR and Swiss / CHF exposure, IMEU and CHSPI, but when I look at returns, it just feels like a lost opportunity against VT or better ETFs. Even if I want to keep like max. 20% of my investment in IMEU/CHSPI, the returns make me think about some other options. Then again the exchange rate and the tendency of CHF to strengthen its position.

So my second thought was to buy VUSD or VWRD that is a USD ETF located in Ireland, but both are traded in EUR and CHF. Creating some reserve in these 2 currencies and capturing the FX more broadly over time rather then to be just exposed to the USDCHF and taking any loss because the exchange rate at that time is at its lows.

So basically I am confused haha and trying to understand this topic better.

Maybe some of you have the same thoughts or better understanding of this topic.

Thank you!
 
So my second thought was to buy VUSD or VWRD that is a USD ETF located in Ireland, but both are traded in EUR and CHF. Creating some reserve in these 2 currencies and capturing the FX more broadly over time rather then to be just exposed to the USDCHF and taking any loss because the exchange rate at that time is at its lows.

The trading currency will not protect you in any way. It's being converted in real time based on stock price and exchange rate, sometimes plus a fee.

As pointed out by @Max, one tool would be to opt for currency hedging. Another tool is to increase your position in CHF, such as cash or CH real estate. Or even Swiss bonds. The problem with Swiss stocks is that they provide limited protection because some of these international companies may also suffer from a strong Swiss franc.

What really matters is that you are confident in your portfolio and that it lets you sleep at night. And that balance is not the same for everybody.
 
Thank you, Max and Baptiste. I think I just have a fear from overthinking this topic. A bit of worst case scenario prevention. But with some calculations I did, it feels less worrying at the end of the day
 
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