# Undecided?



## kyboch (Dec 23, 2011)

I'm doing the couch potato style passive index investing approach. As part of my asset allocation I have 80,000 to invest in US and international equity ETFs. 

I can't make up my mind whether to go with the new currency hedged Vanguard Canadian ETFs, VEF, VEE and VUS or the US versions VTI and VXUS. The MERs of the US versions are much lower but I can't stomach paying 1.5% currency exchange fees at TD Waterhouse, (I know Questrade is.5% but I have heard too many bad reviews to trust them as a broker) and using Norbert's gambit to save on currency exchange seems kinda sketchy to me as I'm a newb at the whole discount brokerage thing.

Also when it comes time to rebalance I'd be losing on currency exchange again, but on the other hand the currency hedged funds also have a price to pay. I really want to keep my portfolio as simple as possible. I'm looking for some advice/suggestions?


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## leoc2 (Dec 28, 2010)

Here is info on hedging:
http://canadiancouchpotato.com/2010/10/29/to-hedge-or-not-to-hedge/
http://www.canadiancapitalist.com/currency-unhedged-portfolios-are-less-volatile/


Here is info on currency conversion:
http://www.canadiancapitalist.com/a-foolproof-method-to-convert-canadian-dollars-into-us-dollars/


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## larry81 (Nov 22, 2010)

i use VTI/VXUS and convert my USD with DLR/DLR.U.

Best of both world


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## larry81 (Nov 22, 2010)

I also want to point out that holding VXUS offer much better diversification than holding VEE/VEF.


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## kyboch (Dec 23, 2011)

leoc2 said:


> Here is info on hedging:
> http://canadiancouchpotato.com/2010/10/29/to-hedge-or-not-to-hedge/
> http://www.canadiancapitalist.com/currency-unhedged-portfolios-are-less-volatile/
> 
> ...


Thanks for the info. Wow, I have read the couch potato articles but the Canadian Capitalist one I've never heard of before. I really appreciate your help.


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## kyboch (Dec 23, 2011)

larry81 said:


> i use VTI/VXUS and convert my USD with DLR/DLR.U.
> 
> Best of both world


Man that is really great information. So when you did the DLR/DLR.U transaction did it go smoothly? How much do you think I would save in exchange fees on 80,000 if I did it this way. I don't mean to sound like a doubter but that is a helluva chunk of money for me and I'm completely green at the brokerage thing.

Also, let's say that you had 40000 in VTI representing 20% of your equity allocation and after a year or so it increased in value and represented 26%. At the same time your Canadian bond fund was down 5%. How would you go about balancing this out?

Again I'm a newb, in my fifties and used to bank mutual funds. Been doing a good ostrich impersonation until it finally dawned on me that the MERs are killing my investments so I am embarking on becoming a DIY investor. I really appreciate your help.
Thanks


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## Belguy (May 24, 2010)

I thought that the whole idea of the 'Couch Potato' approach was to keep it simple and not bother worrying about all of the potential complexities that exist out there. 

That said, I hold a mix of both hedged Canadian sourced ETF's and (unhedged) U.S. based funds (unduplicated) from mostly Vanguard which I purchased before they set up shop in Canada.

Beyond that, I just don't worry about it.

On the other hand, concerning the European and U.S. debt situations, I do worry.


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## larry81 (Nov 22, 2010)

kyboch said:


> Man that is really great information. So when you did the DLR/DLR.U transaction did it go smoothly? How much do you think I would save in exchange fees on 80,000 if I did it this way. I don't mean to sound like a doubter but that is a helluva chunk of money for me and I'm completely green at the brokerage thing.


Transaction when smoothly. With DLR/DLR.U there absolutely no room for 'surprise', unless you fat finger the transaction 



kyboch said:


> Also, let's say that you had 40000 in VTI representing 20% of your equity allocation and after a year or so it increased in value and represented 26%. At the same time your Canadian bond fund was down 5%. How would you go about balancing this out?


I personally prefer rebalance with 'new money' to avoid selling and trigger tax hit. So i would simply buy more bonds to bring this back to my initial asset allocation.



kyboch said:


> Again I'm a newb, in my fifties and used to bank mutual funds. Been doing a good ostrich impersonation until it finally dawned on me that the MERs are killing my investments so I am embarking on becoming a DIY investor. I really appreciate your help.
> Thanks


DIY is easy, fun and rewarding, there tons of good info/books available


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## uptoolate (Oct 9, 2011)

Good advice in Larry's posts. Norbert's gambit is pretty straightforward and well described. Use a smaller amount if you want to get the hang of it. It will only cost you an extra $20. The savings are large, especially since you will potentially use it in future buys and definitely when you repatriate the money.

I would go with unhedged but up to you. I initally had a bunch of USD earnings so no way I was going to convert it back to CAD and then buy a hedged product. I don't know where the USD is going but history would suggest that at some point in the future it is likely to be worth significantly more than the CAD.


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## humble_pie (Jun 7, 2009)

re gambitting: leo's link takes you to a core article introducing DLR & DLR.U.

since these articles were published, however, there have been some refinements. DLR.U is pegged, you see, so it won't vary. DLR, however, fluctuates with the CAD/USD pair.

what this means is that travelling CAD ---> USD using the DLR etfs is guaranteed, easy, dirt-cheap & foolproof. Luckily, this is the direction you wish to take at present.

however, there has been considerable discussion here in this forum (after the initial DLR news came out) about the fact that travelling USD ---> CAD in the DLRs subjects the trader to the full aforementioned currency fluctuation. This means that parties moving from US to canadian dollars should utilize an instant gambit (easy to do at bmo, more difficult to do at tdw) and should also utilize a highly liquid interlisted common stock as the transit medium.

fortunately you're not doing this yet, because a true gambit is a bit tricky. By the time you need to do one, you'll be a cmf forum guru & an investment whiz !

as for balancing, it's an excellent idea as others point out upthread to simply commit new funds to the laggard among the etfs.


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## gibor365 (Apr 1, 2011)

when I talked to TDW rep, I was told that DLR/DLR.U gambit is possible only in no-registered accounts and I cannot perform it in RRSP. Is it true?

If yes and If I want to buy into TDW RRSP US stock, in order to get US cash and not to pay FX fees, can I first buy for example BMO.TO, sell the same day BMO.N -> as I have US$ wash set , money from sell should go automatically to US MM, and than buy with this US MM US stock?


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## kyboch (Dec 23, 2011)

I want to thank everyone for all the excellent information and advice on this topic. You've all really helped me out a lot and I'm sure many others who have viewed this thread.


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## humble_pie (Jun 7, 2009)

gibor i only gambit w interlisted stock because i don't wish to pay horizons betapro even the few basis points they collect for running the DLR etfs.

the rrsp answer at td waterhouse is that, yes, one can gambit using common stocks instantly & online in tdw rrsp. (notice that one cannot gambit instantly online in non-registered at tdw, one has to phone a rep for the sell side.)

& yes you can use bmo as the transit stock, although i myself prefer td because it usually trades higher volume on new york. As you know, select an ultra-quiet day. No dividend X dates, no earnings announcements coming up.

i've gambitted several times in tdw rrsp. Usually it's a cascade of 5 trades, all done very rapidly, one right after the other. As in 1) sell canadian non-interlisted stock, 2) buy canadian interlisted stock on toronto, 3) sell same interlisted stock on new york, 4) buy US stock, & 5) sell call option on US stock.

as i recall, as soon as step 3) is accomplished, that is, immediately after the interlisted stock has been sold on US exchange, the tdw rrsp online platform will be able to proceed seamlessly with an order for step 4), which is buy US stock or etf.

make sure, though, that the USD proceeds of step 3) plus any US mmf you already have in rrsp are sufficient to buy the number of US shares that you wish to purchase. If not, ratchet down your US shares to fit.

at the end, you should wind up the proud new owner of US shares plus perhaps there will be some US cash left over. If already enrolled for autowash, tdw will put this cash into US mmf, although probably not until the following morning.

hint: while doing the buy & sell sides of the gambit, write down the numbers from each prompt during each transaction. This is important because tdw keeps rrsp figures mainly in CAD, as you know, whereas during these transactions you are going to have to stay strictly on top of all the US figures, just for a little while.


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## slacker (Mar 8, 2010)

Excellent details. I'd reiterate to keep track of how much actual $USD and $CAD and the # of shares you have, because the TDWH webpage would not give you an accurate readout on once your start doing the gambit (until settlement). At times it'd even show you negative amount of money. That is normal.


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## gibor365 (Apr 1, 2011)

humble_pie said:


> gibor i only gambit w interlisted stock because i don't wish to pay horizons betapro even the few basis points they collect for running the DLR etfs.


HP thank you for reply...

I understand that you are gambiting with interlisted stocks and not DLR/DLR.U, but in your opinion is it true that DLR/DLR.U cannot be done in TDW for registered accounts, ot TDW rep just wanted to get rid of me (I even sent her CC link that she studied for long time).

On the other hang, I think that US/CAD can fluctuate not less that interlisted stock, so are risks similar?

You mentioned that you prefer gambit TD,.... any other stocks that you consider good for gambit?

What time of the trading session is usually most quite (assuming there is no any big news)?

I just was practicing now and place TD limit sell on NYSE, I got warning " The currency of your account does not match the currency of the market. Your trade will be converted to the currency of your account.[41908]" ... is it OK?


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## slacker (Mar 8, 2010)

I don't expect TDWH to lift a finger to help you gambit. You're depriving them of valuable profit by doing the gambit. They'd much prefer you use the 1.5% currency conversion service.

The only reason why they don't haven't put a stop to this is because their system can't easily allow it, and not enough people are doing this yet.


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## gibor365 (Apr 1, 2011)

Just was thinking for conversion of what amount interlist stocks gambit worth hassle?
For example now TD.TO = $77.75 and TD.N = $75.95 , so assuming those prices , if I buy 100 shares TD.TO and sell as TD.N , from $7775 CAD at my US MM I'll get $7595 - $21 (commissions) = $7574 USD (and with this amount I can buy , let's say KMB).
Than what will be approximate amount in USD, if I just with $7775 buy US MM? 

Anyway to know what is current TDW gross FX rate (with all margin fees), except calling and asking?


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## slacker (Mar 8, 2010)

tdw charges ~1.5%


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## gibor365 (Apr 1, 2011)

slacker said:


> tdw charges ~1.5%


1.5% on what?
Meaning that if now exchange rare 1.0245, TDW will take 1.0245 * 1.5% = 1.0399% and from $7775 CAD I'll get ~7476 USD?


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## newbie (Dec 12, 2009)

gibor said:


> 1.5% on what?


hehheeh
do u ever sleep


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## slacker (Mar 8, 2010)

1.5% of the amount converted.

To convert $10,000. TDWH will charge you ~ $150 in fees. The amount will be "hidden" in the bid/ask spread of their provided conversion rate.


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## gibor365 (Apr 1, 2011)

slacker said:


> 1.5% of the amount converted.
> 
> To convert $10,000. TDWH will charge you ~ $150 in fees. The amount will be "hidden" in the bid/ask spread of their provided conversion rate.


So, its worth it if you need to convert more than 2K


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## gibor365 (Apr 1, 2011)

OK...first ever interlisted gambit.
Bought TD.TO at 77.5, sold TD.NYSE at 76.47


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## Beaver101 (Nov 14, 2011)

Gibor, was it seemless or did TDWH know what they were doing? Just asking/curious ... thanks.


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## gibor365 (Apr 1, 2011)

Beaver101 said:


> Gibor, was it seemless or did TDWH know what they were doing? Just asking/curious ... thanks.


I did everything online, checked real time prices on both, bought TD on TSX and right away placed sell TD on NYSE, both trades gots executed in less than minute. 
I have automatic US $ wash set at TDW, but to be sure I called rep who confirmed that money from sell will go to US MM and she said that I can buy any US stock right away and money will be taken from US MM


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## humble_pie (Jun 7, 2009)

isn't it wonderful.

welcome to the club gibor.


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## gibor365 (Apr 1, 2011)

humble_pie said:


> isn't it wonderful.
> 
> welcome to the club gibor.


Thanx HP! The problem that I can do it only in TDW, I have another accounts in CIBC and I cannot to set up US$ wash there... 
When several months ago I sold US stock and wanted to place money in US MM (to avoid conversion), I should've call them about 3 times, wait on the phone about 1 hour, rep was calling several times to their back office in order to ask to froze FX rate for my trades AAPL -> CAD and back to MM USD... At the end I got what I wanted , but with so much hassle I don't want to repeat it... The good thing with CIBC that they exchange commission much lower than at TDW


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