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International Index fund relative to U.S. dollar
Old 12-15-2008, 04:37 PM   #1
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International Index fund relative to U.S. dollar

I guess I don't really understand how currency fluctuations effect the holding of shares in these funds..
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Let's say I buy a share of a particular international index fund and at the time of my purchase it costs $10.00. Later on I want to sell that share and it is still at the same value for every other currency that it was at the time I purchased it, except the dollar, and the dollar has dropped in value 20% to every other currency. How many dollars will I receive for that share? I would think I would receive $12.00 but I'm told that's not correct..Can someone tell me how many dollars I would receive ?
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Old 12-15-2008, 05:08 PM   #2
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Who told you that you are not correct and why?
Also, is the fund in your example hedged or not?
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Old 12-16-2008, 08:43 PM   #3
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You buy a share that costs 10 euros when 1 euro = $1 USD.

When you are ready to sell, the share is still 10 euros but now 0.8 euro = $1 USD (80% of the original 1 euro). That 10 euros is now worth 10/.8 = $12.50 USD. So you were close enough for investing...
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Old 12-16-2008, 09:06 PM   #4
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Quote:
Originally Posted by Animorph View Post
You buy a share that costs 10 euros when 1 euro = $1 USD.

When you are ready to sell, the share is still 10 euros but now 0.8 euro = $1 USD (80% of the original 1 euro). That 10 euros is now worth 10/.8 = $12.50 USD. So you were close enough for investing...

That's what I would think...However, in recent days I've had two "experts" tell me differently..Something to do with with even though it may be a company in another country that uses other currencies that most "buys" and "sells" by mutual funds are not done that way..I was told exchange rates are not really a factor when I'm buying and selling using the USD..Your explanation makes sense to me..Theirs doesn't..
Thanks
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Old 12-16-2008, 09:08 PM   #5
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It depends if the fund uses currency hedges or not.
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