From the Knowledgebase
Profit… but loss..?
How can it be possible to lose money on an investment, when the share price has increased?
This content is for educational purposes only and is not financial advice. Investment values can fall as well as rise, and you may get back less than you invest. This is one of the lessons that I learned later on in my investing education, and it's something you have to be aware of, particularly if you're interested in investing in 'foreign stocks / shares' that trade in their local currency – by this, I mean the very common scenario of anyone outside of the US deciding to invest in a US stock (as well as any other permutation of the scenario that you can think of). In this scenario, investors have to be aware of more than just the price of the stock when they invested, and the price at the time of selling – most importantly, both the foreign exchange rate (/FX rate) between the local currency and the currency the stock is traded in; and the FX conversion fee that your broker will likely charge. The currency that the stock trades in, is always shown at the point, just before committing to an investment; but you may have to do a little more digging to find the FX conversion fee that your broker charges. When investing in foreign stocks, it’s very possible that the profit or loss you initially calculated for the investment, may not be exactly what you thought, after looking back at your trading statements. In the most extreme cases, FX moves can turn a modest profit into a modest loss — but equally, a favourable FX move could enhance it. The point is, that trading foreign stocks, adds an addition variable of FX rates, you need to understand…
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