Macro
Intermediate4 Min Read
Investing in Dollars and Currency Risk
An investor buying US stocks from Türkiye is actually making two bets at once.
When you buy a US stock, you haven't just invested in that company. You have also invested in the dollar. Your portfolio's return is the product of those two bets, and they move independently of each other.
The Two Layers
Two multipliers determine your return:
Total return ≈ (1 + the stock's dollar return) × (1 + the currency move) − 1
Which Currency Should You Think In
The answer differs by person, and what decides it is the currency of your spending.
- If all your spending is in lira, your real return is in lira. You can gain 8% in dollars and still lose purchasing power in lira.
- If part of it is in foreign currency (tuition, travel, FX debt), measuring in dollars makes sense.
The percentages on screen are always in dollars. If your broker shows you a lira figure, that number has merged the two effects.
Country Funds: the Same Problem, Mirrored
Country ETFs trading in the US (TUR, EWG, EWJ, EWZ) are denominated in dollars, but the stocks inside them trade in local currency. The two layers exist here too — just pointing the other way:
If the local index rises while the local currency falls, the dollar-denominated fund can end flat or even down.
That is the most important thing to remember when reading the World Markets card: the percent you see is not the local market's move — it is the dollar return. More: What Is an ETF?
What Drives the Exchange Rate
In the long run, the inflation gap and the real-rate gap between two countries dominate. In the short run, capital flows, geopolitics and risk appetite take over — meaning it is no easier to predict than stock prices.
The practical conclusion: the currency is a serious component of your return, and you have no control over it. What you can control is how much of your portfolio is in foreign currency.
Where You'll See It on This Site
All prices and percentages here are in dollars; no currency conversion is applied. The note under the World Markets card exists precisely to remind you that the card shows dollar-denominated country funds, not local indexes.