Expat Financial Advice: How do I manage currency risk?

When we live back in our home country, managing currencies is all pretty straightforward. 

We are paid in our home currency, we pay your bills in our home currency, and most of our investments are likely in our home currency. 

In this case, we generally have very little currency risk. 

The problem we have as expats, however, is that we have too many choices. 

There is our home currency, the currency where we live and work, and then there is the currency of our future expenses, such as retirement, a holiday home, or our children’s university education.

Fortunately, managing our currency risk doesn’t require exotic currency hedging tools.

By following a few simple principles, you can eliminate much of the currency risk from your finances and avoid torpedoing your financial plans.

5 tips for managing expat currency risk

1. Determine your base currency. I.e., the currency of the future liability you intend to fund—whether it is retirement, a home purchase, or education funding

2. Match the currency exposure of the assets intended to fund each of your goals with the goal’s base currency. For example, if you intend to retire to a country in the Eurozone, try to make sure that your pensions and investments are denominated in Euro. 

3. Make sure that you understand your real currency exposure. 

Don’t assume it’s the currency on your investment statement or the currency the investment is traded in. 

This may require you or your financial adviser doing a bit of research.

4. Fixed income investing: It is important to hedge the cash and fixed income portion of your portfolio since currency movements can have a big impact on the long-run returns of these types of investments. 

5. Equity investing: The data shows that currency volatility does not have as great an impact on the long-run returns of an equity (stock) portion of a portfolio. 

Generally, it’s best to maintain diversification across most equity asset classes, industries, and geographical regions with perhaps a slight bias to the future currency liability.

6. Minimise forex costs. When you do transfer funds from one currency to another, use an online service like Wise or Revolut. They will give you a much better rate than your bank.

Finally, what if you don’t know what currency your future liabilities will be denominated in? 

For example, you’re not sure where you will retire or where your child will attend university. 

In this case, you should focus on building a portfolio that is well diversified.

This preserves your flexibility without making a large bet on one particular currency region. Once you’ve made a final decision, you can rework the portfolio.

Further reading

The danger of home-country bias and how to avoid it

Talk about it?

Adverse currency moves can be seriously detrimental to your financial plans.

To find out how we can help you develop a strategy that future proofs your retirement, get in touch. Email contact@rossnaylor.com.


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I use it to answer common (and not-so-common) questions that they have about pensions and investments.

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About Ross

▪️Ross has been a financial adviser for the past 26 years.

▪️He specialises in working with British expats over age 50 who are looking to optimise their finances for retirement.

▪️He is qualified as a financial adviser both in the UK, as a Chartered Financial Planner®, and in the EU, as a European Financial Planner®.

▪️Ross has been an expat himself for 22 years and currently lives in Warsaw, Poland with his wife and 2 children.