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Norbert’s Gambit at RBC Direct Investing

January 10, 2017 - 2 comments

US-listed ETFS are the most tax-efficient way to invest in foreign equities within your RRSP account. The funds also tend to have lower annual fees than Canadian-listed ETFs. However, they must be bought and sold in US dollars, and if you have to exchange your Canadian dollars for greenbacks, it can be extremely costly. Many discount brokerages charge about 1.5% - or a whopping $150 on a $10,000 conversion. If you’re going to use US-listed ETFs, you need to find a way to mitigate these high costs.

If you need to convert loonies to US dollars, I’ll show you a technique that can save you hundreds of dollars per transaction. At RBC Direct Investing, there is no need to even pick up the phone: the entire process can be completed online.

Introducing Norbert’s gambit

Savvy DIY investors have long used a technique called “Norbert’s gambit” to sidestep these steep currency conversion costs. The name comes from Norbert Schlenker, an investment advisor in B.C. who was the first to popularize it.

Norbert’s gambit with DLR and DLR.U

The simplest way to do Norbert’s gambit is with the Horizons US Dollar Currency ETF.  This ETF – which is equivalent to holding US cash – is available in two versions.  Both trade on the TSX, but the first, with the ticker symbol DLR, is bought and sold in Canadian dollars, while the second, DLR.U, trades in US dollars.

You can use these ETFs to exchange Canadian dollars for US dollars and then use the proceeds to buy US-listed ETFs. Norbert’s gambit can be confusing, so I’ve put together a video tutorial that you can follow along with. For more information on this strategy, please refer to our white paper.

 

By: Justin Bender with 2 comments.
Comments
  16/01/2017 8:27:49 PM
Justin Bender
@Geoff: Norbert's gambit is more complicated to implement at Questrade - here's a link to MoneyGeek's tutorial on how to do it: https://www.youtube.com/watch?v=4UQjz8ZoM0U
 
  15/01/2017 11:48:09 PM
Geoff
Hi Justin, does this work on Questrade just as easily as you demonstrated with RBC? Thanks.
 



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