EARNİNG İN EUROS BUT LOSİNG İN TURKİSH LİRA: THE MİSCONCEPTİON EXPERİENCED BY TURKİSH INVESTORS LİVİNG ABROAD

Earning in Euros but Losing in Turkish Lira: The Most Common Calculation Mistake Made by Foreign Currency Holders When Investing in Türkiye

Many Turkish investors living abroad show the same reflex when they see interest rates rising in Türkiye:
“Let me convert my euros or dollars into TL and earn the high interest.”

At first glance, this strategy appears quite attractive.
Because TL interest rates in Türkiye are often significantly higher compared to Europe.

While interest rates in Europe are around 2%–3%, in Türkiye they can reach 40%–50% in certain periods.

However, the calculation made here is often an incomplete investment calculation.

Because the real return of an investment should not be evaluated only by looking at the interest rate, but also together with exchange rate movements and inflation.

Interest Alone Is Not Profit

The real return of an investment consists of three main components:

Interest + Exchange Rate + Inflation

Many investors make decisions by looking only at the interest rate.

However, in the Turkish economy, the following cycle has historically been observed quite frequently:

• TL interest rates increase
• For a period, there is an inflow of foreign currency
• Then inflation and the exchange rate start to move again

For this reason, high TL interest can often be a temporary advantage.

In long-term investment strategies, exchange rate risk must always be taken into account.

A Simple Example

Let’s consider an investor who has 100,000 Euros.

Euro / TL exchange rate:
30 TL

TL obtained when Euros are converted:
3,000,000 TL

Annual interest rate:
45%

TL amount obtained at the end of one year:
4,350,000 TL

At first glance, this seems like a very good return.

However, if during the same period the Euro / TL rate rises from 30 to 45, the investment’s Euro equivalent becomes:

4,350,000 TL ÷ 45
= 96,666 Euros

In other words, despite earning interest, the investor would incur a loss in Euro terms.

This situation is one of the most common foreign exchange investment mistakes that many investors experience without realizing it.

The Cycle of the Turkish Economy

In Türkiye, high interest rates often mean the following:

The exchange rate is being suppressed for a certain period, but it has the potential to move again in the future.

For this reason, TL investments made by looking only at interest returns may not always deliver the expected results in the long term.

Especially for investors earning in foreign currency, the most important issue is:

In which currency the money grows.

For an investor earning in Euros, the real benchmark is:

Return in Euro terms.

A Healthier Investment Approach

This does not mean that investment should not be made in Türkiye.

On the contrary, Türkiye is a market that offers many opportunities in terms of real estate investments, tangible assets, and growing urban economies.

However, a more balanced investment strategy may be as follows:

• Not converting all foreign currency assets into TL
• Evaluating interest opportunities in a limited manner
• Preserving foreign currency-based assets
• Investing in real assets rather than purely TL-based instruments

Especially real estate investment can be a more balanced tool for foreign currency holders in Türkiye.

Because in the long term it can provide:

• Rental income
• Value appreciation
• Security of a tangible asset

The Real Question

When making an investment, one should ask:

“Am I earning in TL, or am I growing my Euros?”

The answer to this question can completely change many investment decisions.

High interest rates in Türkiye may seem very attractive at first glance.

However, investments made without considering exchange rate movements may not provide the expected return.

Therefore, in investment decisions, not only the interest rate but also:

• Exchange rate
• İnflation
• Asset value

should be evaluated together.

A true investment strategy requires not only focusing on interest income, but also correctly analyzing in which currency wealth is growing.

Mustafa Yılmaz

CEO – Anadolu Properties

Avrupa – Türkiye Yatırım Köprüsü