The Currency Lie: Why Your Spreadsheet Is Lying About International Stock Profits


 

If you’re a US investor who has dared to venture beyond the S&P 500 by buying shares in European, Asian, or other foreign markets you’ve likely tracked your performance in a spreadsheet. And unless you’ve implemented a very specific fix, that spreadsheet is telling you a profound and costly lie.

The lie is simple: The profit or loss you think you’ve made is often completely wrong.

The core flaw in most DIY investor models is comparing your original USD Cost Basis to the Current EUR Market Value and simply converting the difference at today’s exchange rate. This common mistake blends two separate investment outcomes into one deceiving number, leading to disastrous sell or hold decisions.

Here is the fundamental reason why that simple calculation is a fiction, and the only way to arrive at the truth.

The Core Deception: You Are Making Two Bets, Not One

When you, a USD-based investor, purchase a stock denominated in a foreign currency, say EUR (Euros), you are executing two distinct, simultaneous transactions:

  1. The Stock Bet (Price Risk): You are betting the value of the underlying company (in EUR) will increase.

  2. The Currency Bet (FX Risk): You are betting the Euro (EUR) will appreciate, or at least not decline, against your home currency (USD).

Your brokerage report and most simple spreadsheets mash these two results together into a single "Total Gain/Loss" figure. If you don't break them apart, you can't tell if you have a great stock that was torpedoed by a bad currency move, or a mediocre stock that was saved by a lucky currency swing.

The $550 Phantom Loss

Let’s look at a realistic scenario where the surface numbers hide the profitable truth.

Assume you, a USD investor, buy a German tech stock:

Metric

Local Currency (EUR)

FX Rate (USD/EUR)

Base Currency (USD) Equivalent

Purchase Date (Cost Basis)

         €10,000

$1.25

               12,500 USD

Current Date (Market Value)

         €11,000

$1.15

                12,650 USD

The Currency Lie Calculation: The flawed method simply takes the difference between the two USD equivalents:

                       Current Value - Original Cost = $12,650 - $12,500 = +$150 USD Gain

Wait... a $150 gain? This is better than a loss, but it doesn't make sense. The stock price went up by 10% from €10,000 to €11,000! Why is your total return so tiny?

The Answer: The Currency Lie is still masking the real performance. You need to separate the two sources of gain.

The Truth: Separating Price Gain from Currency Loss

The only way to truthfully assess your stock's performance is to use the principle of Base Currency Alignment. This means we must freeze the currency component to isolate the stock component.

Step 1: Calculate the True Stock Price Profit

To calculate the profit purely from the company’s performance, we take the stock’s current value (in $) and convert it using the original historical FX rate from the Purchase Date.

  1. Stock Price Change in EUR: €11,000 - €10,000 = €1,000 Gain

  2. Convert at Historical Rate: €1,000 times 1.25 = $1,250 USD Gain

This is the absolute, unvarnished truth: Your stock pick generated a real profit of $1,250. It was a fantastic investment decision.

Step 2: Calculate the Pure Currency Loss

Now we know the stock made $1,250. The difference between this and the $150 total gain must be the currency effect.

                                 Currency P/L = Total P/L - True Stock Price P/L 

                                 Currency P/L = $150 - $1,250 = -$1,100 USD Loss

The brutal truth is that your great investment was crushed by an unfavorable exchange rate movement. The Euro weakened from $1.2 to $1.15, costing you $1,100 in lost purchasing power.

Stop Making Decisions on False Data

The Currency Lie is not just an accounting nuisance; it is a risk management failure.

If you only saw the $150 gain, you might conclude the stock was only "okay" and not worth buying again, when in reality, the company was a monster performer. You might sell it, thinking the small gain isn't worth the trouble, when in fact, you should be hedging the currency, not selling the stock.

The solution is non-negotiable for serious international investors: you must enforce Base Currency Alignment on every single transaction to accurately track your True Cost Basis.

You need a portfolio tracking solution that is specifically designed to:

  • Log the Historical FX Rate for every buy transaction.

  • Split the Gain/Loss into two audited components: Price Gain and Currency Gain.

Anything less means you are flying blind, trusting a spreadsheet that is fundamentally lying about your success.

This is the necessary truth for global investing!

To accurately track that USD/EUR rate on the day of purchase, you need a precise, proprietary system. Next, we’ll explore The Historical FX Fix, which is the secret to getting your Cost Basis accurate and auditable for every single international trade. 

Read More:

https://www.moneymilestones.me/2026/01/the-zero-sum-game-why-your-budget-fails.html

https://www.moneymilestones.me/2025/10/401k-basics-why-starting-early-sets-you.html 

https://www.moneymilestones.me/2025/11/stop-using-broken-spreadsheets-multi.html

FAQs:

What is the Currency Lie in international investing?

The Currency Lie occurs when a spreadsheet or broker report blends stock performance and currency fluctuations into a single number, masking the true stock gain or loss.

Why is separating stock performance from currency effect important?

Separating them allows you to identify whether your investment performed well on its own merits or was helped/harmed by exchange rate movements—critical for making accurate buy/sell decisions.

How do I calculate the true stock profit in USD?

Convert the stock price change from the foreign currency using the historical FX rate on the purchase date, not today’s rate. This isolates the pure stock gain.

What is Base Currency Alignment (BCA) and why do I need it?

 BCA freezes the FX component at the purchase date to calculate an auditable Cost Basis in your home currency (USD), ensuring your P/L reporting is accurate.

Can a normal spreadsheet handle this calculation automatically?

 Not reliably. Most spreadsheets require manual FX input and tracking. Using a specialized multi-currency portfolio tracker with historical FX logging ensures accuracy and avoids the Currency Lie.

 

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