Calculating Return Reflecting the Exchange Rate
You were happy that a U.S. stock rose 10% in dollars, but when you convert it into won, the gain is smaller or you may even have a loss. This is because overseas investing adds one more variable: the 'exchange rate.'
Overseas investment returns come in two layers
When you invest in dollar assets using won, the return splits into two elements: (1) the asset's return in the local currency (dollar) terms, and (2) the movement of the won/dollar exchange rate. These two multiply together to become the final won-denominated return.
Expressed as an approximation, won return ≈ (1 + local return) × (1 + FX change) - 1. If the asset rises and the won also weakens (the exchange rate rises), the return grows; if the asset rose but the won strengthens (the exchange rate falls), the return is shaved down.
The FX effect in numbers
For example, suppose a U.S. stock rose +10% in dollars.
(1) If, over that time, the won/dollar rose +5% (won weakness): (1.10)×(1.05) - 1 ≈ +15.5%. The exchange rate boosted the return.
(2) Conversely, if the won/dollar fell -10% (won strength): (1.10)×(0.90) - 1 = -1%. You made money in dollars but lost in won.
As you can see, the exchange rate can shake overseas investment returns significantly.
The exchange rate can boost a return or shave it down. Rather than leaving it as a 'hidden variable,' you should include it in your profit-and-loss calculation from the start.
It changes if you hedge the currency
If the currency's movement feels burdensome, you can choose currency hedging (fixing the exchange rate). Then the FX-movement element shrinks and the return moves closer to the local-asset return.
However, currency hedging is not free. A hedging cost equal to the interest-rate difference between the two countries applies, and this cost eats into the return. Conversely, if you don't hedge (unhedged), you take on the gain directly when the exchange rate moves favorably and the loss directly when it moves unfavorably. Neither choice is the right answer, and the important thing is to decide in advance how you will handle the exchange rate.
よくある質問
Q. Isn't calculating with the exchange rate too complicated?
To be precise, you have to reflect the exchange rate at each buy and sell point, but roughly, you can get a feel by multiplying 'how much the won/dollar changed over the investment period' by the asset's return. This site's simulator separates out the FX effect and shows it alongside.
Q. Is the exchange rate always a bad variable?
No. When the won is weak, it can play a cushioning role by boosting the won return on overseas assets. During a crisis, if the safe-haven currency (the dollar) strengthens, the FX gain on dollar assets can partly offset a decline in domestic assets. The exchange rate is both a risk and, at the same time, a source of diversification benefit.
📋 結果は過去のデータに基づくものです。過去のリターンは将来のリターンを保証しません。
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