Before You Start
- Basic understanding of ETF investing (what an ETF is, how to buy/sell).
- Awareness of your broker’s account base currency (usually EUR for European investors).
- Access to your broker account (Trade Republic, DEGIRO, Interactive Brokers, etc.).
- Calculator or spreadsheet for cost calculations.
Time needed: 20–30 minutes
What you'll need: Broker account, internet access, calculator/spreadsheet
If you invest in ETFs in Europe, you’ve likely noticed that many popular funds are denominated in USD, GBP, or CHF—not EUR. Each time you buy or sell such an ETF, you face a hidden cost: the currency conversion fee. This guide walks you through how currency conversion works for European ETF investors, how to calculate the true cost (including all fees and spreads), and actionable strategies to minimize your currency loss. We’ll use examples from Trade Republic, DEGIRO, and Interactive Brokers, and focus on EUR-based investors.
Step 1: Understand How Currency Conversion Works for ETFs
When you buy an ETF that’s denominated in a currency different from your account’s base currency (e.g., you have a EUR account and buy a USD-denominated ETF), your broker must convert your euros to the ETF’s currency. This isn’t free: brokers typically charge a combination of:
- Spread: The hidden markup between the real exchange rate (the mid-market rate) and the rate your broker gives you.
- Currency conversion fee: An explicit commission or percentage fee on the converted amount.
Why it matters: Even “small” conversion fees can eat into your returns—especially with regular investing or large transactions. Over years, these costs compound.
What can go wrong: If you ignore conversion fees, your ETF performance may lag behind expectations, and you may pay much more than you think, especially if your broker’s spreads are wide or fees are high.
Step 2: Find Out Your Broker’s Currency Conversion Fee Structure
Each broker handles currency conversion differently. Here’s how to check the fee structures for three popular brokers:
- Trade Republic: As of 2024, Trade Republic charges a 0.5% currency conversion fee on the total transaction value when buying or selling non-EUR assets. The spread is minimal and often not separately disclosed. See official fee table.
- DEGIRO: DEGIRO offers two methods: “AutoFX” (automatic conversion with a 0.25% fee) or “Manual FX” (flat €10 + 0.02% for manual conversion, suitable for large amounts). See DEGIRO fees.
- Interactive Brokers (IBKR): IBKR charges a fixed commission of $2 (or equivalent) per currency conversion, with spreads usually less than 0.01%. See IBKR's fee schedule.
Check your broker’s help pages or fee schedule for the latest details. Always confirm if both a spread and a fee apply.
Pro Tip
Some brokers let you hold multiple currencies (e.g., IBKR), allowing you to convert large amounts at once and minimize fees. Others (like Trade Republic) only allow EUR holdings, so conversion happens automatically on each trade.
Step 3: Calculate the Total Currency Conversion Cost (Examples)
Let’s walk through a practical example: You want to invest €5,000 in a USD-denominated ETF. The EUR/USD mid-market rate is 1.10.
Example A: Trade Republic
- Amount to convert: €5,000
- Fee: 0.5% of €5,000 = €25
- You receive $5,000 × 1.10 = $5,500 (before fees), but after the fee, you invest €4,975 worth (after conversion, minus fee)
Expected outcome: Your ETF purchase will be for approximately $5,472.50 (after accounting for the conversion fee and current EUR/USD rate). The fee is automatically deducted—you don’t need to take extra action.
Example B: DEGIRO (AutoFX)
- Amount to convert: €5,000
- Fee: 0.25% of €5,000 = €12.50
- You receive $5,000 × 1.10 = $5,500 (before fees), but after the fee, you invest €4,987.50 worth
Expected outcome: Your ETF purchase will be for approximately $5,486.25.
Example C: Interactive Brokers (IBKR)
- Amount to convert: €5,000
- Fee: $2 (approx. €1.82 at 1.10 EUR/USD)
- Spreads: Negligible (typically less than 0.01%)
- You receive close to $5,500, minus the $2 commission
Expected outcome: Your ETF purchase will be for about $5,498. You manually convert EUR to USD before purchasing the ETF (see steps below).
As you can see, the total lost to conversion fees varies significantly by broker.
Step 4: How to Actually Buy a Non-EUR ETF on Each Platform
Trade Republic
- Open the app and tap Portfolio.
- Select Savings Plan or Buy (for a one-off purchase).
- Search for your USD/GBP-denominated ETF (e.g., iShares Core S&P 500 UCITS ETF, ISIN: IE00B5BMR087).
- Enter the amount in EUR.
- Confirm the trade. The 0.5% conversion fee is applied automatically—you’ll see the expected cost.
Outcome: You should see your ETF purchase confirmed. The amount invested will be slightly less than your input due to the currency conversion fee.
DEGIRO
- Log in to your DEGIRO account.
- Search for your desired ETF (e.g., Vanguard S&P 500 UCITS ETF, ISIN: IE00B3XXRP09).
- Before buying, decide if you want to use AutoFX (default, 0.25% fee) or Manual FX (convert EUR to USD/GBP manually for a flat fee).
- For AutoFX: Buy as normal, and DEGIRO handles the conversion.
- For Manual FX: Go to Account → Currencies, convert EUR to USD/GBP, then use the foreign currency balance to buy the ETF.
Outcome: Your ETF purchase is completed. The confirmation shows the conversion fee and the final amount invested.
Interactive Brokers (IBKR)
- Log in to your IBKR account (Client Portal or Trader Workstation).
- Go to Menu → Transfer & Pay → Convert Currency.
- Convert EUR to USD or GBP (commission: $2 per conversion).
- Once the conversion is settled (typically instant), search for your ETF (e.g., Invesco QQQ UCITS ETF, ISIN: IE00BGV5VM77).
- Buy the ETF using your USD/GBP balance.
Outcome: Your ETF purchase is confirmed, with minimal currency conversion cost.
Pro Tip
If you plan to invest regularly, consider converting and holding larger currency amounts at once (where possible) to reduce per-transaction costs—especially on platforms like IBKR or DEGIRO with manual FX options.
Step 5: Compare Common ETF Base Currencies and Their Impact
Most European investors default to EUR-denominated ETFs, but many popular funds—especially US equities—are only available in USD or GBP.
- EUR-based ETFs: No conversion fee when buying/selling, but the ETF itself may still hold USD assets (internal conversion risk).
- USD-based ETFs: Direct exposure to USD, full conversion fee applies when buying/selling.
- GBP/CHF-based ETFs: Same as USD; conversion fees apply unless your account is in GBP/CHF.
Check the ETF factsheet for “Base Currency.” For example:
- iShares Core MSCI World UCITS ETF (EUR) – IE00B4L5Y983: EUR base currency, trades in EUR.
- iShares Core S&P 500 UCITS ETF (USD) – IE00B5BMR087: USD base currency, trades in USD.
Why it matters: Choosing EUR-based ETFs eliminates direct conversion fees, but you may still face indirect currency risk if the ETF holds non-EUR assets. However, you avoid repeated conversion fees and can more easily automate investments.
Step 6: Strategies to Minimize Currency Conversion Losses
- Prefer EUR-based ETFs when available. This avoids conversion fees entirely and is simpler for regular investing. See Building Wealth With Small, Regular ETF Investments: EUR-Based Success Stories for more on this approach.
- Use brokers with low conversion fees. For large or frequent transactions, IBKR’s manual FX is often the cheapest for European investors.
- Batch your currency conversions. Convert larger amounts less frequently to reduce the percentage impact of flat fees (e.g., DEGIRO manual FX or IBKR).
- Monitor exchange rates. If you have flexibility, convert when rates are favorable, not automatically at purchase time.
- Check for “multi-currency” accounts. If your broker supports holding multiple currencies, use this to your advantage.
Pro Tip
Watch out for promotional “zero commission” offers—they often exclude currency conversion fees, which can be far more significant than the trading fee itself.
Common Mistakes
- Ignoring conversion fees: Assuming all ETF costs are in the TER (Total Expense Ratio) and forgetting about broker currency charges.
- Confusing ETF base currency with trading currency: Some EUR-listed ETFs still have USD as their base currency. Check both factsheet and broker info.
- Overtrading in small amounts: Frequently buying small lots of non-EUR ETFs increases cumulative conversion costs.
- Assuming all brokers are equal: Fee structures and spreads vary widely between platforms.
- Not checking the latest broker fee tables: Brokers update fees—always double-check before large transactions.
Next Steps
- Review your current ETF holdings and check their base currencies.
- Calculate the true cost of previous and planned ETF trades using your broker’s published fee tables.
- Consider switching to EUR-based ETFs if you want to automate regular investing and avoid hidden costs.
- Explore brokers with more transparent or lower conversion fees if you invest in non-EUR assets regularly.
- Read more about smart beta ETFs and how new EU fintech rules impact brokers and ETFs.
Disclaimer: This article is for educational purposes only and does not constitute financial advice. Always do your own research and consider consulting a qualified financial advisor before making investment decisions.