# Can-US exchange rate favorable- ideal timing for US ETF's



## dcaron (Jul 23, 2009)

*CAD-USD exchange rate favorable- ideal timing for US ETF's*

Pardon the newbie question. With the Can-US exchange rate so favorable right now, is this the ideal timing to buy US ETF's such as those from Vanguard? I dont have a crystal ball, but I assume that the Can dollar can do one of two things, which is stay at PAR, or go back down at one point.

Im contemplating signing up for discount brokerage, to buy and hold (couch potato) Vanguard Index ETF's. My goal is to first open personal RRSP and LIRA accounts, and spousal RRSP account. Then I want to move my existing National Bank/Altamira Index Mutual Funds with MER of .63%, to various iShares and Vanguard ETF's. I also have my banking at NAtional Bank (mortage, HELOC, etc). Due to the "size" of my $175,000 portfolio, signing up for their National Bank NBDB discount brokerage would lower trade fees to $9.95 + currency conversion rate for trades > $25,000. Even if the fees are higher than most non-bank based brokerage firms, the impact to me is not so great since I am a buy&hold investor with yearly contribution and/or re-balancing.

Even if there are lower MER Canadian Funds out there such as TD e-Series, I think moving to another big-bank brokerage is pointless, since going forward, I would rarely contribute into these mutual funds anymore, if at all. As it stands now, it is more advantageous for me to contribute to my employer matching RRSP program, and "pay myself" directly from my gross pay. Then once a year, move this amount to my ETF's.

Does my strategy make sense?


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## slacker (Mar 8, 2010)

Make sure to check the cost of foreign exchange when buying USD at your brokerage. Most places charge 1.5%, which is about $2325 for your portfolio size. Consider using the Norbert's Gambit to reduce currency conversion cost to about $20.


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## larry81 (Nov 22, 2010)

dcaron said:


> Pardon the newbie question. With the Can-US exchange rate so favorable right now, is this the ideal timing to buy US ETF's such as those from Vanguard?


Yes it is, look at the CDN/USD exchange rate history to convince yourself


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## I'm Howard (Oct 13, 2010)

$U.S will go lower, I am looking at least $1.05.

Kommodities are King.


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## kcowan (Jul 1, 2010)

When we bought our condo in USD, the exchange peaked at 1.10 and this was November 2007.


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## larry81 (Nov 22, 2010)

http://www.xe.com/currencycharts/?from=USD&to=CAD&view=10Y


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## dcaron (Jul 23, 2009)

slacker said:


> Make sure to check the cost of foreign exchange when buying USD at your brokerage. Most places charge 1.5%, which is about $2325 for your portfolio size. Consider using the Norbert's Gambit to reduce currency conversion cost to about $20.


Yes this is the strategy. Im a buy&hold type investor for my SDRSP. Norbert's Gambit (NG) intimidates me, and I dont know how warm National Bank are to this scheme. Would the following attempt on NBDB work:

On my National Bank (NBDB) brokerage account stock order section, I have a choice to buy a stock on either the "Canadian" or "American" market. I looked up an interlisted stock, with trading volume over 1M shares/day, small bid-ask spread, and found RY, and TLM). Say I wanted to convert about $50KCAD inside my RSP account, can I simply place a limit order to buy say 1000 shares of RY-T (Canadian Market) that is close to the ask price, wait until the order gets executed, then immediately sell as much RY-N (American Market) with the cash from the previous trade? Can $USD be held inside RSP? Do I need a US$ Cash account opened first?

Please note that I dont have a $US account on NBDB as they do not offer this presently, but I have these four: CDN$ Cash, RRSP, LIRA, TFSA. 

Right now, I have assets in RRSP and LIRA only.


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## Eder (Feb 16, 2011)

If you dont want to use the CAN hedged etf's buy your USD from someone like Canadian Forex ....will be about .7% juice compared to ridiculous bank exchange rates.


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## dcaron (Jul 23, 2009)

Eder said:


> If you dont want to use the CAN hedged etf's buy your USD from someone like Canadian Forex ....will be about .7% juice compared to ridiculous bank exchange rates.


I doubt this can be used with registed account like I intend to do (inside an SDRSP) ...


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## slacker (Mar 8, 2010)

dcaron said:


> Yes this is the strategy I intend on doing, but Im new to trading. Ive educated myself on type of trades, and when to use market order versus limit order, etc. Im also a buy-hold type investor for my SDRSP.. Norbert's Gambit (NG) intimidates me, and I dont know how warm National Bank are to this scheme.
> 
> Would the following attempt on NBDB work:
> 
> ...


I wish there'd be a definitive source on which financial institutions and which types of accounts would work with NG. But no such resource exist currently.

I have personally done NG with TD Waterhouse RRSP account. I have heard of some success with TD Waterhouse non-registered account (but with minor hickups).


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## dcaron (Jul 23, 2009)

slacker said:


> I wish there'd be a definitive source on which financial institutions and which types of accounts would work with NG. But no such resource exist currently.
> 
> I have personally done NG with TD Waterhouse RRSP account. I have heard of some success with TD Waterhouse non-registered account (but with minor hickups).


RBC rocks with this dual currency in registered accounts ... http://www.rbcdirectinvesting.com/us...lan/index.html

Cant wait until other banks catch up ... Ive just finished opening my NBDB account and consolidating my assets, but haven't traded yet. Now, Im considering switching my SDRSP and SDLIRA accounts to RBCDI, even if this will incur another hit on my credit report.


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## 14dmoney (Jan 20, 2011)

dcaron said:


> RBC rocks with this dual currency in registered accounts ... http://www.rbcdirectinvesting.com/us...lan/index.html


I am assuming that you have to contact a RBC representative by phone to journal the Cdn holding over to the US side of the account. Can you then sell the US holding online for the $9.95 fee or does this have to be done through the RBC representative which would then cost $39 + $.07/share)? Can anyone who has done this with a RBC Direct Account post their experience with details of their transaction?


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## dcaron (Jul 23, 2009)

RBC brags about the first Canadian "big bank" providing this. I emailed National Bank today and included the RBC link with the USD RRSP offering. I asked whether they will eventually match this, while I decide if I will transfer my assets to RBCDI. I may stick with Canadian ETF's within National Bank Direct Brokerage. I simply want to switch my Index mutual funds to matching ETF's to reduce MER's, and maintain my RRSP+LIRA couch potato allocation ...


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## dcaron (Jul 23, 2009)

*Response from NBDB*

Just received this reply from National Bank Direct Brokerage (NBDB) to my email, regarding the dual currency support from RBCDI.

"Mr. Caron, we have received your e-mail dated March 14 and would like to thank you for taking the time to write to us. 

In response to your email, we wish to inform you that *National Bank Direct Brokerage does plan to offer registered accounts in US dollars in the future.* Please note however that we cannot confirm the date at which we will offer the new product. 

Should you require other information, do not hesitate to write to us again at the following address : [email protected] or to call one of our representatives at (514) 866-6755 (Montreal area) or 1-800-363-3511 (elsewhere in North America). Choose option 2 from the main menu followed by option 3, Monday through Friday from 8:00 a.m. to 8:00 p.m EST. 

We trust that you will find the above information helpful. 

Regards,


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## Financial Cents (Jul 22, 2010)

Given high CDN dollar, and moderate prices, I'm all over Vanguard ETFs right now.

I just bought VWO.

If I had more cash, I'd buy some VTI as well.

Couch Potato both Vanguard products for the next 30 years along with my XIU and XBB.


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## larry81 (Nov 22, 2010)

Financial Cents said:


> Given high CDN dollar, and moderate prices, I'm all over Vanguard ETFs right now.
> 
> I just bought VWO.
> 
> ...


Curious why you settled on XIU instead of XIC


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## dcaron (Jul 23, 2009)

*my targeted ETF allocation*

Im 49 and my wife is 41, and my horizon is ~15 years. These are the allocation scenarios Im contemplating, and #3 or #4 are more likely, if I decide to stick with National Bank Direct Brokerage. If I negotiate a decent preferred currency conversion rate, I will pick #1 or #2. I may reduce the Fixed Income ratio downwards. I may increase Canadian (love resources and financials) and Asia (oppurtunistic) exposure as in #4.


*Scenario #1 (mininal fees)*
Fixed Income 40% CLF (.15%MER)
Can Equity 20% XIU (.17% MER)
US Equity 20% VTI (.07%MER)
Eur/Pac Equity 20% VEA(.15%MER)

*Scenario #2 (greater diversity)*
Fixed Income 20% CBO (.25%MER)
Fixed Income 20% CLF (.15%MER)
Emerging Markets  5% VWO (.22%MER)
Eur/Pac Equities 15% VGK (.14%MER)
US Equities 15% VTI (.07%MER)
Can Equities 25% XIU (.17%)

*Scenario #3 (Canadian ETFs only)*
Fixed Income 20% CBO (.25%MER)
Fixed Income 20% CLF (.15%MER)
Emerging Markets  10% CBQ (.60%MER)
Eur/Pac Equities  10% XIN (.49%MER)
US Equities  20% XSP (.24%MER)
Can Equities 20% XIU (.17%)

*Scenario #4 (Canadian ETFs only, more Canadian bias)*
Fixed Income 20% CBO (.25%MER)
Fixed Income 20% CLF (.15%MER)
Emerging Markets  10% CBQ (.60%MER)
Eur/Pac Equities  20% XIN (.49%MER)
US Equities  10% XSP (.24%MER)
Can Equities 20% XIU (.17%)


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## Financial Cents (Jul 22, 2010)

@larry81 - I own XIU b/c it is cheaper than XIC. I'm also bullish on the TSX 60. If those big blue-chips aren't making money in this country, and dividends, then nobody is.

Sure, XIC is capped, avoids any future “Nortel effect”, but is less liquid.

What Canadian ETFs do you own?


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## Belguy (May 24, 2010)

You weren't asking me but I own XCV and XCS.

Value and smallcap stocks historically outperform over the long term.


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## larry81 (Nov 22, 2010)

Financial Cents said:


> @larry81 - I own XIU b/c it is cheaper than XIC. I'm also bullish on the TSX 60. If those big blue-chips aren't making money in this country, and dividends, then nobody is.
> 
> Sure, XIC is capped, avoids any future “Nortel effect”, but is less liquid.
> 
> What Canadian ETFs do you own?


I am an happy owner of XIC, XSB, XBB and XRE


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## Financial Cents (Jul 22, 2010)

Good iShares products guys. Love the cheap fees 

@larry81 - ever consider buying a few REITs outright? 

I've just started to do that, holding REI.UN and HR.UN. REF.UN is next on my list on a price dip. I want to own a few hundred shares of each long-term, enough shares to DRIP synthetically.


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## larry81 (Nov 22, 2010)

Financial Cents said:


> Good iShares products guys. Love the cheap fees
> 
> @larry81 - ever consider buying a few REITs outright?
> 
> I've just started to do that, holding REI.UN and HR.UN. REF.UN is next on my list on a price dip. I want to own a few hundred shares of each long-term, enough shares to DRIP synthetically.


i am starting to think about it... my REIT holding is 100% of my TFSA, i will add another 5k this year and i will analyse the benefit of holding REIT directly instead of through EFT like XRE/ZRE


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