For a single investment with no interim cashflows, base-currency return combines the investment’s local return and the exchange-rate change; it is not just their sum.
Write the exchange rate in one direction
In this example, the rate is MYR per USD: 4.50 means USD1 is worth MYR4.50. Start and end rates must use that same direction. Investor.gov explains that currency changes can increase or reduce an international investment’s return, including offsetting an increase in its local market value.
Background source: Investor.gov — International Investing
Worked example: a 10% rise, but a MYR loss
Assume a USD1,000 purchase at MYR4.50 per USD, costing MYR4,500. Later the holding is worth USD1,100, a 10% price gain. If the exchange rate is now MYR4.00 per USD, its value is MYR4,400. Relative to the MYR4,500 starting amount, the change is −MYR100, or approximately −2.22%. These are invented rates, not current or historical quotations.
Use multiplication, not addition
Base-currency return = (ending foreign value ÷ starting foreign value) × (ending FX ÷ starting FX) − 1. Here that is 1.10 × (4.00 ÷ 4.50) − 1 = −2.22%. The price-only break-even exchange rate is MYR4,500 ÷ USD1,100, approximately MYR4.0909 per USD. This threshold ignores fees, taxes and dividends; it is not an exchange-rate forecast.
| Ending FX (MYR per USD) | USD1,100 in MYR | Return on MYR4,500 |
|---|---|---|
| 4.50 | MYR4,950 | +10.00% |
| 4.20 | MYR4,620 | +2.67% |
| 4.00 | MYR4,400 | −2.22% |
Check what the displayed number means
Changing the base currency in a portfolio dashboard changes the unit of display; it does not exchange money. In DividenNote, reference-rate conversion is useful for a current overview, while recorded settlement information helps distinguish actual cash movements. Do not read a cost converted using today’s reference rate as your original MYR cash cost. Keep the original broker and bank records for reconciliation.
Know when this simple example no longer fits
The example assumes one initial purchase, no later purchases or sales, no dividends and no charges. Multiple deposits, withdrawals, reinvested dividends or different settlement dates require a dated cashflow calculation. Record those events individually instead of forcing them into this two-value formula. For planning, try several hypothetical end rates; none is a promise of the eventual outcome.
Put it into practice
When recording the next purchase or dividend, keep the native currency and actual settlement rate where available.
Review your portfolio currencies