Which currency should you invest in? You're asking about five different things.

Which currency should you invest in when you earn in one country and spend in another? The question hides five different currencies, and only two of them change your plan.

You are in Oslo, paid in kroner, and you have finally decided to start investing. You open your broker, search for a global index fund, and up come two of them. Same fund, nearly the same name, but one is priced in euros and one in dollars. Which do you buy? And underneath that: if you live in Norway, should you be putting money into dollars at all?

It is one of the most common questions expats ask, and it is genuinely confusing. Here is why. The word “currency” is quietly doing five different jobs in that one question, and most of them matter far less than they feel like they should. Once you can see the five apart, the question mostly answers itself.

The five currencies hiding in one question

Four of them wear the same three-letter codes, which is why it is so easy to feel you have made a big decision when you have only touched a small one. Only two of the five really reach your plan. Let us clear the other three out of the way first, so you can stop worrying about them.

The one people worry about most, and shouldn’t

This is the euro-or-dollar button, and the honest answer is that it barely matters. When the same global fund is sold in two currencies, both hold exactly the same thing underneath. Convert the two prices into one currency and they line up, give or take the small frictions of trading. Buying the euro version does not give you euro savings, and the dollar version does not put your money at the mercy of the dollar. You own the same companies either way.

The button changes one thing: what you pay to buy it. Your broker charges a little to convert your money and to place the trade, and that cost can differ between the two versions. So there is a right answer, and it is a boring one. Buy whichever is cheaper to trade from your account, and give the worry back.

The one that actually matters: what you own versus what you will spend

Here is the currency question worth your attention. A global fund is heavily weighted towards American companies, often around 60% of it. It is tempting to read that as “most of my money is in dollars,” but it is not that simple. Those companies sell all over the world and earn in many currencies, so what you really own is more spread out than the label suggests.

Still, there is a real gap to watch. Your savings move partly with currencies you do not spend, while your future life will be paid for in one currency. If that spending currency gets stronger over the years, a gain in your investments can shrink by the time you actually convert it to spend. That gap between what you own and what you will spend, not the button you pressed, is where currency reaches your plan.

How much it matters depends on when you will spend the money. Over a long time horizon, currency swings are small next to how much stock markets themselves move up and down. They start to matter more as you get close to living off the money. Whether to actively protect against that gap, what the pros call hedging, deserves its own answer. That is the next post in this series.

The two you cannot ignore: earning and spending

Earning in one currency and spending in another is the defining fact of a cross-border life, and it costs you in two quiet ways. First, every time you move money between your currencies, a bank or transfer service takes a cut. Second, every time exchange rates move, a good or bad month can make your progress look better or worse than it really was, even when you have not changed a thing.

So what do you actually do?

• Do not agonise over the euro-or-dollar button. Buy whichever is cheaper to trade and move on.
• For money you are leaving invested for years, a plain global fund is a sensible default. Whether to protect part of it against currency swings depends on the rest of your plan. That is the next post.
• For money you will spend soon, keep it in the currency you will actually spend. That way a bad exchange-rate month cannot force you to sell at the wrong time.
• Keep an eye on the gap between what you earn and what you will one day spend. That, not the fund’s label, is where currency really touches your plan.

How fjordFIRE keeps the five apart

fjordFIRE holds each of your accounts in its own currency and adds them up into one home total at that day’s exchange rates, so you are not pretending a Norwegian account and an Indian one are the same thing. And when that total moves, it shows you how much came from your actual saving and investing, and how much was just the exchange rate shifting under you. You get to see which of your currencies moved, instead of one blurred number that hides the answer.

Read next: Your savings rate is half FX. Here’s the version that isn’t. · What currency conversion actually costs you.

Companion tools: Currency Cost calculator · Savings Rate calculator.

Common questions