Should You Stop Investing in USD Due to Currency Fluctuations?
Recently, the US dollar has been falling against the euro. If you're like me and hold investments in USD, you've probably noticed the sting. You check your portfolio in euros, and it looks like your returns shrank, even if your investments went up. It's frustrating.
So, the question comes up: Should you stop investing in dollars?
Let's walk through this.
Currency Swings Are Normal
Right now, 1 USD gets you about 0.85 EUR. A few months ago, it was closer to parity. A few years back, the euro was much stronger. These changes happen due to interest rate differences, political events, market sentiment, and central bank policy. And they often reverse themselves.
Trying to guess where currencies are heading next is close to impossible. Even full-time professionals get it wrong.
A Simple Example
Imagine you invest $10,000 into a US ETF. It grows by 10 percent, so you now have $11,000.
But at the same time, the dollar dropped 5 percent against the euro. Once you convert it back, your return in euros is closer to 5 percent, not 10.
It's frustrating. But it's also short-term noise.
Should You Change Your Investment Strategy?
In my view, you should invest in the currency you earn and live in.
If you earn in euros, invest in euro-denominated assets. If you earn in dollars, stick with USD. This keeps things simple and aligned with your actual life expenses.
Trying to optimize both your portfolio and the currency layer on top of it usually leads to overthinking, overtrading, and lower results. Investing is already complex enough. No need to make it harder.
What About Long Term?
Currencies like the dollar and euro move in cycles. In 2008, the euro was above 1.50 to the dollar. Then it dropped below parity. Now it's back around 1.17.
Nobody can say what will happen next quarter or next year. But over time, both the dollar and the euro are relatively stable. Unless you are earning in a high-risk currency that consistently loses value (like the Argentine peso or Turkish lira), you are probably fine sticking with what you know.
If we eventually move into a world dominated by stablecoins, that will be another conversation. For now, stay focused on real assets and long-term value.
My Rule of Thumb
Invest in the currency you earn in. Build your wealth in real assets. Ignore the noise.
That mindset will serve you better than chasing currency fluctuations.
For more investing insights like this, check out my dividend investing guide or explore the best brokers for European investors on Match My Broker.
Risk Disclaimer: Investing in stocks, ETFs, and other financial instruments involves risk of loss. Currency fluctuations can impact returns. This content is for educational purposes only and should not be considered personalized financial advice. Always do your own research and consider consulting with a qualified financial advisor.
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