Currency risk
When you buy a foreign asset, your return has two parts: how the asset moved in its own currency, and how that currency moved against yours. A great year for the S&P 500 in dollars can become a bad year in euros if the dollar weakens enough. Over decades and across diversified holdings, the effect tends to wash out; over short periods, it can dominate.
In 2022 the S&P 500 fell ~19% in USD but only ~14% in EUR, because the dollar strengthened. In 2003 the same dollar weakening went the other way.
Currency risk
This term appears in a longer lesson, where the idea gets the proper treatment with examples and a working visualization.
Read the lesson →Trade-offs
Risk
The chance that an investment loses value, and how much it could lose.
Read →Volatility
How wildly an investment's price moves up and down. High volatility = bigger swings.
Read →Diversification
Spreading money across many different things so no single one can sink you.
Read →Bull & bear market
Long stretches of rising prices (bull) or falling prices (bear). Both end, eventually.
Read →