# Fell asleep in Economics 101

Yes of course I get that the moment that I sell, exchanging the currencies will give me the same amount of £.
But my dilemma was more basic than that.
I was just wondering which one’s share price will rise more.
I understand it is the currency that is being devalued obviously.

It was a question of principle, not of usefulness.

Also to take an extreme example,
If I buy the fund in currency A which is worth 0.7 of currency B, and then after a month something huge happens and currency A devalues massively to say 0.1 of currency B,
the share price of an asset fund in currency A will sky rocket.
If I cash out at that point, obviously the cash I receive when exchanged to B would be equivalent to simply having bought B in the first place.
But if I wait for currency A to recover I now have a lot more cash.

Please correct me if Im wrong, because I already feel I got it, just wasnt expressing myself well

I see what you mean. So if you think the dollar will decline, buy VUSD. It’s share price will rise more as a number than that of VUSA.

But I take issue with “wait for currency A to recover”. I think that expecting to profit in this way is a fool’s game. It is equally likely that currency A will decline even further while you are waiting.

If you pay taxes then these are determined by the exchange rates at the moments of purchase and sale. It begins to create a headache when you exchange currency at different moments than the taxes were calculated. You end up have the regret of “I owe UK capital gains tax of 20% tax on a gain of £1000, but oh dear, when I converted from USD to GBP, I realised a gain of only £980 but still owe £200 tax”.

1 Like

VUSA vs VUSD graph from google finance, both in gbp

That is incorrect on Google’s part. That is USD not GBP, even though it says GBP.

1 Like

I don’t get that surely tax takes place after the exchange is applied? On the flip side if the exchange rate strengthend then you’d be quids up and would have less to declare?

At least in the UK, HMRC requires you to use the exchange rate at the moments of stock purchase and sale to compute gains and losses. It is of no relevance to capital gains tax liability if you choose to convert the currencies at some different time points. (Gains and losses made due to currency exchange are not taxed.)

Of course you can make an extra gain or loss by delaying the point at which you change USD to GBP. But this will not then be the same number you must report for tax. This is why I say it produces something of a record-keeping headache as you have to keep track of what gain you would have had if you had converted currency at the same instant the stock was sold.

My guess is that if Trading 212 were to allow people to have mutiple currency accounts then a lot of people will compute their taxable gains incorrectly. That is not to say multiple currency accounts should not be rolled out despite this danger.

Incidentally, ISA accounts are not permitted to contain any currency except GBP, so multiple currency accounts will never be possible for ISAs.

3 Likes

Print screen from t212