Canadian Capitalist Logo Dark
No Result
View All Result
Sunday, May 11, 2025
  • Login
  • Register
  • Home
  • Economy
  • Investing
  • Markets
  • Real Estate
  • Retirement
  • Tax Savings
  • Trivia
  • Resources
Subscribe
Canadian Capitalist Logo Light
  • Home
  • Economy
  • Investing
  • Markets
  • Real Estate
  • Retirement
  • Tax Savings
  • Trivia
  • Resources
No Result
View All Result
Canadian Capitalist Logo Mobile
No Result
View All Result
Home Uncategorised

Save on Canadian Dollar to US Dollar Conversions (and vice versa)

by Ram Balakrishnan
March 17, 2010
Reading Time: 3 mins read
134 4
0
is insurance financial services
158
SHARES
2k
VIEWS
Share on FacebookShare on TwitterShare on Linkedin

Typically, the biggest cost involved in buying stocks or ETFs listed in the US markets is the foreign exchange fees. Discount brokers typically charge 1.5% or more for converting Canadian dollars into US dollars or vice-versa. If you want to convert $10,000 Canadian into US Dollars, it will cost you at least $150 at your discount brokerage. It is not charged as a separate fee but is hidden in the exchange rate at which the conversion is done.

A Canadian Money Forum member shared a neat trick for converting loonies into greenbacks and vice-versa for little more than the cost of two stock trading commissions, the buy-ask spread and a tiny amount of market risk. The idea behind the trick is to buy a highly-liquid stock that is listed in the Toronto Stock Exchange and sell the same stock in the US markets (or vice-versa if you want to convert US dollars into Canadian dollars). I’ll illustrate how to execute this trick at TD Waterhouse (read my review here) with TD Bank’s stock as an example but it should also be possible at other discount brokers and other inter-listed stocks such as Research in Motion (TSX: RIM, NASDAQ: RIMM), BCE or Potash Corporation (POT). Note that you may not want to try this strategy with a stock you already own unless you want to trigger capital gains or losses.

TD Bank trades on both the TSX and NYSE under the ticker symbol TD. To convert $10,000, first buy TD on the TSX at the current ask in your Canadian dollar account. If TD is trading at an ask of $74.58, you’ll buy 134 shares for a total cost of C$10,003.72 (assuming a $10 commission). Then you’ll call your broker and ask to “journal” TD Bank stock over to the US dollar account and sell it there at the current bid price. If TD is trading at a bid of $73.75 on the NYSE, selling 134 shares will gross $9,882.50 (USD). Since the transaction was done through a broker, TD Waterhouse will charge $39 plus 8 cents per share for a total commission of $49.72 (US), leaving you with a net of $9,832.78 (US).

You can also use the same method to convert US dollars into Canadian dollars by buying an inter-listed stock in the US markets and selling it on the TSX. The effective cost for converting to Canadian dollars to US dollars using this method works out to 63 basis points. But since the fee is more or less flat, you can save substantial amounts in conversion charges for larger sums of money. It should be pointed out that this method involves taking on the risk that the market moves sharply against you between the time you bought the stock on one exchange and phoned in the order to sell the stock in another exchange. Of course, the stock could move higher, which results in a lower conversion cost or perhaps, even leave you with a profit.

Updates

This strategy is popularly referred to as “Norbert’s Gambit” and is detailed on the Financial Webring Forum website.

Intelligent Speculator reports that this strategy is possible at National Bank Direct Brokerage (NBDB).

See the comments section below for how Charles in Vancouver saved on foreign exchange using “Norbert’s Gambit” at Credential Direct.

As I wrote in this post, the Horizons BetaPro US Dollar Currency ETF (DLR, DLR.U) offers a foolproof way to implement the Norbert Gambit.

Related posts:

  1. C. D. Howe’s take on TFSA versus RRSP
  2. Sleepy Portfolio 1Q-2010 Report Card
  3. Sleepy Mini Portfolio Q2-2010 Update
  4. Book Review: Pensionize Your Nest Egg
Share63Tweet40Share11

Get real time update about this post categories directly on your device, subscribe now.

Unsubscribe
Previous Post

Tracking error in TD e-Series Funds, Part 2

Next Post

This and That: Dragon Profiles, the Pain in Spain and More…

Ram Balakrishnan

Ram Balakrishnan

Related Posts

Why you cant afford a house in Canada

Why You Can’t Afford A Home In Canada?

January 24, 2022
558
investing benefits
Investing

Finding a Financial Advisor, Part 1

June 19, 2021
2.2k
investing in bitcoin

Is it time to invest in Bitcoins again?

May 13, 2019
2k
when do reits liquidate
Uncategorised

Performance of Currency-Neutral S&P 500 Index Funds

January 19, 2014
2k
is mortgage interest tax deductible
Uncategorised

The 2013 Sleepy Portfolio Report Card

January 12, 2014
2k
how to buy individual stocks in canada
Uncategorised

Asset Class Returns for 2013

January 5, 2014
1.9k
Next Post
does stocks count as income

This and That: Dragon Profiles, the Pain in Spain and More...

Please login to join discussion
Canadian Capitalist

© 2022 Canadian Capitalist

Navigate Site

  • Home
  • Disclaimer
  • Privacy Policy
  • Advertisement
  • Contact Us

Follow Us

No Result
View All Result
  • Home
  • Economy
  • Investing
  • Markets
  • Real Estate
  • Retirement
  • Tax Savings
  • Trivia
  • Resources

© 2022 Canadian Capitalist

Welcome Back!

Sign In with Facebook
Sign In with Google
Sign In with Linked In
OR

Login to your account below

Forgotten Password? Sign Up

Create New Account!

Sign Up with Facebook
Sign Up with Google
Sign Up with Linked In
OR

Fill the forms below to register

*By registering into our website, you agree to the Terms & Conditions and Privacy Policy.
All fields are required. Log In

Retrieve your password

Please enter your username or email address to reset your password.

Log In
This website uses cookies. By continuing to use this website you are giving consent to cookies being used. Visit our Privacy and Cookie Policy.
two man and woman standing on doorway
The man who does not read has no advantage over the man who cannot read - Mark Twain