Before You Start
- Basic understanding of stock and ETF investing
- Awareness of how to use a European broker (e.g., Trade Republic, DEGIRO, Scalable Capital)
- Familiarity with EUR and USD as currencies
Time needed: 20–30 minutes to read and review your portfolio
What you'll need: Access to your broker account, calculator or spreadsheet, and (optionally) your broker’s FX fee schedule
Investing in US stocks or ETFs from Europe is easier than ever, but there’s a catch many overlook: currency risk. If you buy US shares in dollars but your wealth, expenses, and financial goals are in euros, swings in the EUR/USD exchange rate can quietly boost—or erode—your returns. In this guide, you'll learn how currency risk in US stocks for Europeans works, how to calculate its impact, and how to manage it using practical, step-by-step strategies with real European brokers.
Step 1: Understand What Currency Risk Means for Your US Investments
What to do: Recognise that when you buy US stocks or ETFs as a European, you’re exposed to two risks: the performance of the stock and the EUR/USD exchange rate. You make or lose money not just from share price changes, but also from how the euro moves against the dollar.
Why it matters: If the euro strengthens against the dollar after you buy, your USD-denominated gains may shrink when converted back to euros. If the euro weakens, your returns can be amplified. This is called currency risk, and it’s a crucial part of cross-border investing.
Example: Suppose you invest €10,000 in an S&P 500 ETF (like iShares Core S&P 500 UCITS ETF, ticker: CSP1) listed in USD. The EUR/USD rate at purchase is 1.10 (i.e., €1 = $1.10). You buy $11,000 worth of shares. If the ETF rises by 10% in USD (to $12,100), but the euro also strengthens to 1.20 by the time you sell, your $12,100 is now worth only €10,083.33 ($12,100 ÷ 1.20), meaning your euro return is just 0.8%, not 10%.
What can go wrong: Ignoring currency risk may result in unpleasant surprises—especially in volatile FX periods. Many investors focus only on the US stock’s performance, not realising they could lose money even if the shares go up, or vice versa.
Pro Tip
Don’t assume the ETF’s listing currency (e.g., EUR or USD) changes your currency risk. What matters is the underlying assets. A USD-denominated S&P 500 ETF listed in Germany still invests in US stocks and is exposed to USD risk.
Step 2: Calculate the Real Impact of EUR/USD Moves on Your Returns
What to do: Use a simple formula to see how currency changes affect your total returns. The combined return is approximately:
Total Return (%) ≈ (Stock Return in USD) + (USD/EUR change in %) + (Stock Return × USD/EUR change)
For most practical purposes, you can add the USD stock return and the percentage change in EUR/USD.
Why it matters: This helps you estimate “what if” scenarios. For example, if the S&P 500 rises 8% in USD, but the euro strengthens by 5% against the dollar, your euro return is closer to 3%—before fees or taxes.
Example calculation:
- Original investment: €5,000 at 1.10 EUR/USD = $5,500 in US shares
- ETF rises 12% in USD: $5,500 × 1.12 = $6,160
- EUR/USD at sale: 1.20
- Value in EUR: $6,160 ÷ 1.20 = €5,133
- Euro return: (€5,133 – €5,000) ÷ €5,000 = 2.7%
What can go wrong: Many brokers show portfolio values in EUR but don’t break out FX gains/losses. Always check both asset and currency performance to understand your real return.
Pro Tip
Track your investment’s value in both EUR and USD using a spreadsheet, or use a portfolio tracker like justETF (set your base currency to EUR).
Step 3: Choose the Right Broker to Minimise FX Costs
What to do: Select a European broker with transparent and low FX conversion fees. Compare how they handle EUR → USD and USD → EUR for both purchases and sales, as well as dividend conversions.
Why it matters: High FX fees can erode your returns, especially if you trade frequently or receive regular USD dividends. Some brokers also offer “multi-currency accounts” letting you hold USD directly, which can help you time your conversions.
Popular brokers and their FX fees (as of June 2024):
- Trade Republic: Converts automatically at spot rate, with a 0.25% FX markup. No multi-currency account.
- DEGIRO: Default is auto-conversion at 0.25% fee, but you can enable “Active” mode to hold USD and convert manually (for €10 + 0.25%).
- Scalable Capital: FX fee is 0.15% for EUR/USD conversions. No multi-currency account.
- Interactive Brokers (IBKR): Very low FX fees (typically 0.002%–0.03%). Fully supports multi-currency balances.
Example: Buying €2,000 worth of US shares on Trade Republic means you’ll pay €5 in FX fees each way (0.25%). Over time, these add up, especially with regular investing or dividend reinvestment.
What can go wrong: Some brokers convert all dividends and sale proceeds immediately to EUR, locking in FX rates at potentially unfavourable moments. If you plan to reinvest in USD assets, consider brokers that let you keep USD balances.
Pro Tip
If you’re investing large amounts or want more control over FX timing, consider Interactive Brokers for its multi-currency features and low FX fees.
Step 4: Decide Whether to Hedge Your Currency Risk
What to do: Decide if you want to hedge (protect) against currency swings. This usually means buying EUR-hedged ETFs or using FX products. Most European investors do not hedge, but it can be appropriate if you want to reduce volatility.
Why it matters: Hedged ETFs aim to deliver the US market return in euros, minimising the impact of EUR/USD moves. However, hedging can add costs and doesn’t eliminate all risks (such as tracking error).
How to do it: Look for S&P 500 or US equity ETFs with “EUR Hedged” or “EUR H” in the name. For example, the iShares S&P 500 EUR Hedged UCITS ETF (IUES) trades in EUR and hedges USD exposure.
- In Trade Republic: Tap Search → Type “IUES” → Select ETF → Tap Buy
- In DEGIRO: Search for “IUES” or “Invesco S&P 500 EUR Hedged” in the ETF list and place a buy order
What can go wrong: Hedged ETFs often have higher ongoing charges (TER) and may underperform unhedged versions if EUR/USD moves in your favour. Hedging isn’t “free protection”—it just reduces FX-driven swings.
Pro Tip
If your investment horizon is long-term (10+ years), many experts suggest not hedging currency risk for equities, as FX moves tend to “wash out” over time. But if you need short-term stability, hedged ETFs can be useful.
Step 5: Optimise for Dividends and Reinvesting
What to do: Check how your broker handles USD dividends from US stocks or ETFs. Some convert to EUR instantly (with FX fees), while others let you hold USD or automatically reinvest (“DRIP”).
Why it matters: Frequent small conversions can rack up FX costs and reduce your effective yield. If you plan to reinvest, see if your broker offers fractional shares or dividend reinvestment plans in USD, which can lower conversion losses.
Example: If you receive $100 in dividends quarterly, and your broker charges a 0.25% FX fee each time, you lose about €1 per year just on conversions for a single position.
- On Trade Republic: Dividends are paid in EUR after conversion. No DRIP for US shares.
- On DEGIRO: Same as above, unless you hold a USD balance in “Active” mode (manual conversion).
- On Interactive Brokers: You can keep USD dividends and manually reinvest or convert at your discretion.
What can go wrong: Small, frequent conversions at unfavourable rates add up. If your broker doesn’t support DRIP or multi-currency, consider accumulating ETFs (which reinvest dividends internally) to avoid these issues.
Pro Tip
For US equity exposure without dividend FX hassle, use accumulating ETFs (e.g., CSP1 or VUAA), which reinvest dividends automatically and avoid small, costly conversions.
Common Mistakes
- Ignoring currency risk entirely: Remember, even “EUR-listed” US ETFs carry USD risk unless specifically hedged.
- Overtrading and paying excessive FX fees: Each buy/sell or dividend conversion can eat into returns.
- Choosing hedged ETFs without checking costs: Higher TER and potential tracking error can offset the benefits.
- Assuming all brokers treat FX the same: Fee structures and currency handling vary widely. Always check your broker’s official documentation.
Next Steps
- Review your portfolio for US exposure and check how your broker handles currency conversion and fees.
- Decide if you want to hedge part of your US equity exposure using EUR-hedged ETFs.
- Consider using brokers with multi-currency accounts if you want more control over FX timing and costs.
- For a deeper dive into US equity investing from Europe, see Is the S&P 500 Still a Smart Buy for European Investors in 2026?
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.