Made Profit On Google Shares But Made Loss on Currency Fluctuation

LAhmad82pkn on 05/09/2021 - 01:26
Last edited 05/09/2021 - 08:22 by 1 other user

Guys, I am new to stock trading. I want to know if it's actually beneficial to buy US companies stocks from Australia? I am feeling it's a loss game, here is why.

I bought 6 shares of Google through nab trade for US$2755 each, date 21/08.
Now I sold them on 03/09 for US$2877 each.

Now on surface of it, I thought I earned US$2877 - US$2755 = US$122 each share. $122*6 share = US$732 profit.

But when I did some deep dive, I am negative. I lost money.

Because on 21 Aug, AUD conversion rate for 1 Google stock was AU$3887. On 3 Sept AUD conversion rate for 1 Google stock was AU$3843.

Apparently AUD currency got stronger to US dollar during my buy and sell date.

So $3843-$3887= -44 each stock means AU$264 loss.

(Lets forget about buy/sell cost and tax for now)

So above trade was done using nabtrade, which apparently do currency conversion on each trade.

Now with some research I found Selfwealth and Superhero only do currency conversion once you transfer money from AUD to USD along with some point percent fee. Ok that's good that I will not incur conversion hit on every trade, BUT. let's say in a year my USA stock gains 30% and in same year AUD get 30% stronger than USD. Then my net profit is again zero. Am I correct? Hence original question, what's the benefit of investing in US stocks from Australia.

Any suggestions would be helpful. Or I am missing something?

Financial

Comments

  • USER DC on 05/09/2021 - 01:33
    -2

    Stake/etorro are probably best for US stock trading I think.

    A lot of youtubers recommend using ShareSight for the full portfolio recording (aka recording all the values, buy/sell value, currency fluctuations, etc.)

  • rektrading on 05/09/2021 - 02:02

    I bought 6 shares of google through nab trade for 2755 usd each, date 21/08.
    Now i sold them on 03 sep for 2877 usd each

    The gross PnL on this trade was 4.24% over 2 weeks. High risk and low return.

    Why would anyone bother risking $16,530 when the upside is so low?

    • mrham on 05/09/2021 - 12:31
      +3

      Guys, I am new to stock trading.

    • adam on 05/09/2021 - 13:56
      +2

      4.24% over 2 weeks is high return. Buying google shares would be considered low risk. So this is a low risk high return investment, completely the opposite of what you suggest.

      • brendanm on 05/09/2021 - 14:55
        +3

        Well for op, it was actually a negative return.

  • watwatwat on 05/09/2021 - 02:46
    +1

    in same year AUD get 30 % stronger than USD

    You are not going to see wild swings not in your favour all the time like this.

    I am feeling its a loss game

    It is when you use a sh*t broker and day trade.

    • Ahmad82pkn on 05/09/2021 - 11:06

      Agree. But even if i invest for 2 years. Still would be loss game if aud get stronger in same time frame? Right. Just trying to understand it better. Or get others viewpoint.

      • brendanm on 05/09/2021 - 14:55
        +1

        Could be the opposite if the opposite happens. If if if if.

  • Bafranz on 05/09/2021 - 03:50

    GME to da moon?

  • ronafios on 05/09/2021 - 05:55
    +2

    Not financial advice, but you might be better off considering a currency-hedged ETF, which is designed to deal with these kind of issues.

    For example, BetaShares HNDQ gives you exposure to Apple, Microsoft, Amazon, Alphabet, Facebook, Tesla etc. and is currency hedged. In Superhero you can buy ETF's brokerage free.

    E.g. if you'd bought $16530 of HNDQ on 20/8 ($33.13 - 21st was a Saturday) and sold on 3/9 ($34.75) you'd be up $880 (or 4.9%) including brokerage with no currency conversion fees. Your risk would have also been spread across other companies and you would have been currency hedged. As per above, day trading through an expensive broker is a quick way to lose money.

  • Baysew on 05/09/2021 - 08:10
    +2

    what's the benefit of investing in US stocks from Australia?

    Let's say in a year my USA stock gains 30% and in same year AUD gets 30% weaker than USD.

  • SF3 on 05/09/2021 - 09:23
    +2

    If you are a day trader, statistically the odds are stacked against you.

    • One study of Brazilian futures traders found 97% of day traders lost money over a period of 300 days.
    • Another study of day traders in Taiwan between 1995 and 2006 found only 5% of day traders to be profitable.
    • A study by the U.S. Securities and Exchange Commission of forex traders found 70% of traders lose money every quarter on average, and traders typically lose 100% of their money within 12 months.
    • A study of eToro day traders found nearly 80% of them had lost money over a 12-month period, and the median loss was 36%.
    • redfox1200 on 05/09/2021 - 10:07

      because the majority of these people are not professional day traders, mainly hobby day traders.

  • rektrading on 05/09/2021 - 10:10
    -1

    OP isn't day trading. They FOMO at the top on Aug 21, panic sold on Sep 3 and got mildly rekt.

    That trade was a lesson that there is no free lunch in trading. Learning to trade full-time takes both time and resources.

    There is plenty of free material online teaching people how to use TA, FA and SA. People that want to trade should at least take the time to learn one of those to a competent level. It will help them to stay on the right side of the 33% of traders that make money.

    • tharlow on 05/09/2021 - 10:16
      +1

      TA, FA and SA

      These are abbreviations for tightarse, fatarse, and… yeah I don’t know what that last one is.

      • Pelicannn on 05/09/2021 - 10:38
        +3

        In my job, it means Situational Awareness… which probably makes sense as OP had none.

    • Ahmad82pkn on 05/09/2021 - 11:05
      -2

      I am just doing swing trading. I have been self studying stocks for 6 months and can predict swings easily. For week to a month cycles.
      But looks like this currency conversion will not let me make money( though it can double it as well in other direction) Or atleast this variable is a big factor in over all calculation, which i wasnt fully aware.
      May be asx is better option then.
      Still researching and thats why posted here to get feedback from valuable community.

      • brad1-8tsi on 05/09/2021 - 11:36
        +7

        I am just doing swing trading. I have been self studying stocks for 6 months and can predict swings easily. For week to a month cycles.

        yet you still lost money. That's hilarious

        • SF3 on 05/09/2021 - 12:38

          Always.

          Win in simulation, but IRL… the past is not a accurate predictor of future!

        • Ahmad82pkn on 05/09/2021 - 13:49

          Well. I did made money. If we just see usd dollars to us dollars comparison. Though i did start my thread by saying, i m new to investment, so wasnt fully aware how much impact currency exchange can have on it.
          I did paper trading for few months and my win rate is also good. I am here to just get others experience to increase my knowledge and see how others are managing this situation.

          Thank you for your reply.

      • Devils Advocate on 05/09/2021 - 11:54
        +5

        I don't want to dampen your spirit, but if you don't know about currency risk then you are in the first 1% of your education journey.

        No investor in the world can "predict swings easily" so that also shows that you are too early into your education to be trading on those levels.

      • brendanm on 05/09/2021 - 14:58
        +1

        I have been self studying stocks for 6 months and can predict swings easily

        Dunning-kruger

    • mrham on 05/09/2021 - 12:25
      +1

      You are on the money. Its a common theme (esp. here) that people seem to neglect the work it takes to be in that 33% of the pros.

      Too many jump in with big trades thinking they know what they're doing and will hit it big (or potentially worse jump in and get lucky leading to overconfidence).

      I wouldn't make one trade before getting to that competent level you mentioned and even then start with only small ones in low risk assets to help practically understand markets, risk, their psychology and emotion. At least when mistakes are made its only a small tuition fee for the lessons learned.

      My motto: the trade takes seconds, the knowledge takes years.

  • JimmyF on 05/09/2021 - 10:28
    +1

    Apparently AUD currency got stronger to US dollar during my buy and sell date.

    Thats the joy of buying in a different currency. Sometimes the stock is 'up' in that currency but not in yours. The reverse can also happen to. The stock can be flat or down, but thanks to a shift in the USD/AUD dollar you can be 'up'

    I had something similar with amazon a while ago, purchased and the shares went up, but the dollar went down, so I was under water on them for a while.

    So above trade was done using nabtrade, which apparently do currency conversion on each trade.

    Correct, NAB trade settles each trade back into AUD in your account based on the rates for the day of buy/sell.

    Now with some research I found Selfwealth and Superhero only do currency conversion once you transfer money from AUD to USD along with some point percent fee. Ok that's good that I will not incur conversion hit on every trade

    Even with these companies, you still 'lost' money on the trade, as the USD/AUD changed between buy and sell.

    It also makes it a bit harder for 'tax' time, as least with NAB trade you have the buy/sell con notes in AUD to do simple calcs on profit/loss.

    I don't believe you can ignore the trades in SW/SH and only count money in/out of these companies.

    • Ahmad82pkn on 05/09/2021 - 11:01

      Even with these companies, you still 'lost' money on the trade, as the USD/AUD changed between buy and sell.

      I think no? Because these broker keep your money in usd. So as long i dont transfer money back to aud account. It will stay in usd account and i can re invest. Loss will happen when i transfer back to aud.

      Somewhat better than nabtrade but still a variable.

      • JimmyF on 05/09/2021 - 13:17

        I think no? Because these broker keep your money in usd. So as long i dont transfer money back to aud account. It will stay in usd account and i can re invest. Loss will happen when i transfer back to aud.

        So if you did the 'google' share trade on the SW/SH platforms instead of nabtrade that keep it in USD, would you be reporting a $732USD aka $980AUD profit on your tax return then for this sale?

        • Ahmad82pkn on 05/09/2021 - 13:53

          Thats a good question. I think you are right. It will be a loss.
          Thats why i think usd investing from aud is kind of hard. Hence this thread to get opinion and suggestion.

          • JimmyF on 05/09/2021 - 13:57

            @Ahmad82pkn:

            I think you are right. It will be a loss.

            I am, even though is a USD profit, its a AUD loss :)

            Thats why i think usd investing from aud is kind of hard. Hence this thread to get opinion and suggestion.

            From a tax reporting viewpoint the ATO will view these trades at the AUD 'value' the time the trade took place.

            The only 'pro' of leaving it in USD is you don't get hit with the currency conversion fee on each trade.

            • Ahmad82pkn on 05/09/2021 - 14:01

              @JimmyF: So no point of investing in usd Stocks in your opiinion?
              Thats what i am concluding and looking for suggestion, how it can be profitable.
              Else i think asx or hedged etf would be the way to go?

              • JimmyF on 05/09/2021 - 14:24

                @Ahmad82pkn:

                So no point of investing in usd Stocks in your opiinion?

                Not at all. I've made some good money from the US market. It is all about understanding the cost/value of the stock.

                Thats what i am concluding and looking for suggestion, how it can be profitable.

                The USD/AUD moves around a lot. Sometimes for the better sometimes for the worse.

                You just need to be aware of your 'true' costs when buying and selling as like you have found out, a USD stock going up while the dollar goes down, might mean a loss. The flip side, is a USD stock staying flat while the dollar goes up might mean a profit too.

                I have a spreadsheet I use to track USD stocks, basically you need to think of them in 'AUD' and not USD.

                ie AUD cost price to buy them, compared to the value of the shares today in AUD today. That is your true metric for profit/loss when playing in the USA stock market, not the USD increase.

                Sometimes the dollar is down, so you need to wait before selling

                • Ahmad82pkn on 05/09/2021 - 18:49

                  @JimmyF: On your answer. Can you clarify me one thing.
                  If i invest 10k usd and make 11k usd on stock after a year. So profit is 1k usd.
                  Now if i keep that money in sf or sh usd account and dont transfer it to aud. Will i still need to report 1k gain to ato? Or i only need to report it when i transfer it to aud.
                  Like if i reinvest 11k from usd account and make its 12k next year and keep it doing for 10 years. Will i report to ato after 10 years? The total gain?

                  • JimmyF on 05/09/2021 - 19:28

                    @Ahmad82pkn:

                    Now if i keep that money in sf or sh usd account and dont transfer it to aud. Will i still need to report 1k gain to ato? Or i only need to report it when i transfer it to aud.

                    As above, from a tax reporting viewpoint the ATO will view each trade that happens in the fund at the AUD 'value' the time the trade took place.

                    It is not as simple as, I put $15k AUD into a overseas share fun, and took out $20k AUD in 6 months. So $5k is taxable.

                    Each trade within the funds is normally a tax event just like it is for AUD shares.

                    So if you put $15k AUD into the fund. That is a nothing event to to the ATO. But when you buy $5kUSD of stock, that is. When you sell that stock, the ATO want to know what you made/loss on it etc.

                    • Ahmad82pkn on 05/09/2021 - 19:33

                      @JimmyF: Cool. Make sense

                      • JimmyF on 05/09/2021 - 19:50

                        @Ahmad82pkn: Sorry I don't have 'better' news.

                        I suffer the same issues as you and looked into these companies as well. While on the face value trading purely in USD looks better upfront, it is a mess come tax time as you have to keep track of each trade and what the exchange rate was doing on the day of the trade.

                        • Ahmad82pkn on 05/09/2021 - 22:41

                          @JimmyF: I was thinking that. Lets say i wasnt using nabtrade but selfwealth or stake or superhero where my 732 usd profit would be deposited in usa trading account. Which is 264 aud loss that day as per currency exchange. So as you said every buy and sell is tax event for ato. So with that i will report 264 loss to ATO for that year.
                          Now if i keep money in my usd account of selfwealth and cash out later after lets say a year when currency rate of aud is good and i get for example 1000 aud against 732 usd. So i made 1000 aud actual profit in reality. Is it kind of a hack to avoid capital gain tax ? Or i am just thinking mad.

  • Jimothy Wongingtons on 05/09/2021 - 10:49
    +2

    Well at least you got a net loss to claim against when you inevitably get hooked on crypto day trading.

  • Seraphin7 on 05/09/2021 - 11:08
    +1

    I lot going on in OP's post, but when you but OS stocks, you are effectively buying two things … the stock and the OS currency.

    The movements in either of them will effect your overall net return.

    It's that simple, but unfortunately many "dummies' guides" don't even clearly tell you that.

  • tommohawk on 05/09/2021 - 11:26
    +2

    Currency fluctuations are part of the risk when investing in overseas shares. Keep in mind that it goes both ways - you've lost on the forex this time, but if the AUD drops against the USD, you make a gain on the forex.

  • brad1-8tsi on 05/09/2021 - 11:34
    +2

    You are dabbling in small amounts and selling way too early.

    You also need to look at the wholistic picture of both equities movement and currency movement.

    If you want to take currency out of the equation then invest in a hedged ETF.

    Why not start with simple investments locally rather than the added complications of foreign tax withholding, currency fluctuations, etc?

    BTW: I think you are wrong.

    • Ahmad82pkn on 05/09/2021 - 13:55

      I studies asx but i felt it dont build momentum. Lots of short sellers in asx. Who kind of break trends before it become long. But my observation could be wrong. But in us stocks when stock goes long it do pretty good run usually.
      But i think to avoid this currency conversion loss. Time to re evaluate asx

  • nfr on 05/09/2021 - 11:44

    Yes there tends to be an inverse correlation but it's not going to be linear 1:1. If FX risk is a big deal you can always short some USD on the side.

    Use a real broker like Interactive Brokers (or Charles Schwab I heard they are pretty good too).

  • Ahmad82pkn on 05/09/2021 - 13:58
    +1

    Just want to add here. Everyones comments are really helpful. Appreciate your time.

  • TEER3X on 05/09/2021 - 19:33

    Why would you sell them?

    Never sell!

    • Ahmad82pkn on 05/09/2021 - 19:37

      I think thats the way to go for usd stocks. Read few books on swing trading. May be thats why was trying that. That strategy would suit on asx more.

      • watwatwat on 05/09/2021 - 19:44

        I think thats the way to go for usd stocks.

        Really…. really……….

        Look at the 10 year graph for google and you tell me why selling was ever a great idea.

        • Ahmad82pkn on 05/09/2021 - 22:43

          Agree bro, unless someone invested in amazon at start of the year and still after 9 months no actual gain. Thats why swing trading make sense in some scenario. Where you exit out and jump back stock to-stock. Unless if its acting as google then it doesnt make sense.

          • watwatwat on 06/09/2021 - 00:22
            +1

            @Ahmad82pkn:

            Thats why swing trading make sense in some scenario. Where you exit out and jump back stock to-stock.

            No, it's doesn't, really. And judging by the questions you're asking and the platform you're using, it doesn't seem like you are a very good l33t day trader.

            Just the short term capital gains tax alone will be crippling.

          • malich on 07/09/2021 - 20:19

            @Ahmad82pkn: Swing trading is glorified gambling. People do make money from it, but it's highly risky and stressful.

            No matter how good you are, picking where to 'sell out to buy in lower' is hellishly hard.

            With USD stocks, as many choose to retain and reinvest profits instead of paying dividends, you miss out on a lot of benefit of compounding by selling.

            Perhaps read a book on currency hedging before going too much further.

  • [Deactivated] on 08/09/2021 - 01:45

    You are betting on 2 things:
    1. The equity; and
    2. FX.
    Kinda like leveraging your bet twice - first on equity, second on fx movement.

    Might as well do margin lending to buy aussie equity. Easier.

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