Could you help me to understand Degiro Currency P/L

[maxelcat]

If I click on any of my assets, I can see a breakdown on the ETF like the following:


My base currency in Degiro is CHF and the asset is trading in EUR. I don't understand what the Currency P/L of -832,31 means. I thought the currency in which I buy the ETF doesn't matter. Does the P/L refer to the change of EURCHF rate? Or does it refer to the underlying asset currency? In my spreadsheet, I see this position as a gain, I bought it for more or less 25,79, and now it's trading at 27,02. I'll get more EUR, I don't care about the CHF. Does it mean that I should migrate somewhere where my base currency is EUR? (If I see my far future spendings in EUR)

 

[evietheturtle]

@maxelcat Practically it means nothing. It's your "gains" from the currency trade, as if you never bought the ETF with the converted money. I don't know why Degiro even shows that... it literally only confuses people.

 

[kaytiedid]

@evietheturtle I think it is informative and correct info by degiro.

The OP’s base currency is CHF. The stock trades in EUR thus the OP converts CHF to EUR to buy shares.

This is a long current position essentially and can lead to currency P or L.

In this case the CHF has become stronger relative to EUR

 

[evietheturtle]

@kaytiedid Imagine if OP bought a CHF money market fund which is traded in EUR.

Would it still make sense to show that number?

In this case the CHF has become stronger relative to EUR

So? OP is not owning EUR! They own etf shares, that randomly and irrelevantly happen to be traded in EUR.

 

[cferr1992]

@evietheturtle You are right in that the denomination of the fund doesn‘t matter. However when buying a fund you are exposed to the currency (or currencies) of the underlying assets. Suppose i buy an ETF tracking the S&P500 index traded in euros. If the the euro depreciates by 50% against the US-Dollar, the fund's share price should about double in response. In that case you are not exposed to the euro. In this case however we are looking at an ETF tracking the MSCI World Index. Since the underlying assets have their headquarters in different countries it follows that investors are exposed to many different currencies. This is where the currency p/l comes from.

tldr What currency the ETF is traded in doesn‘t matter. What does matter is what currencies the underlying assets are traded in.

Further reading: https://www.justetf.com/es/news/etf/the-effect-of-currencies-on-etfs.html

 

[evietheturtle]

@cferr1992 I doubt that Degiro bothers to do those detail calculations for you. Also even if, you still own the asset (i.e. those real physical companies), and still not the currencies that they are traded in at their home stock exchange.