hey guys it's Adrian here the Canadian in a T-shirt and today I'll be breaking
down how to buy US stocks in Canada I'll go over the benefits of investing in the
United States the currency conversion factors you have to consider the reason
why you should use Questrade for u.s. investments over something like WealthSimple
and stick around until the end where I'll do a step by step walkthrough
on how to buy US stocks in Canada using Questrade so why should you bother
investing in US stocks? we live in Canada we earned Canadian dollars and we have
some of the best companies to invest in right here that's true but the United
States is by far the largest economic power in the world the US has over ten
times the population of Canada and its economy is well over ten times that of
Canada plus most of the largest companies in the world are in the United
States if you only invest in Canadian companies you are missing out on the
largest market in the world another huge reason why you should invest in the u.s.
is diversification remember in my past video on ETFs I stressed the importance
of diversify your portfolio don't put all your eggs in one basket and so you
don't want invest all your money in one company one industry or even one country
I love investing in Canadian companies but if you look at the Canadian market
it is dominated by the financial industry the energy sector materials and
industrials the US market has all these industries plus significantly more
exposure in healthcare consumer staples and most importantly technology all the
biggest companies in the world right now are tech companies Microsoft Amazon
Apple Google Facebook and all of them are US companies Canada's tech sector is
growing but right now there are very few big tech players in Canada such as
Shopify and Blackberry investing in the US market gives you exposure to every
single industry especially the tech sector whereas if you invest only in
Canada you're limited to three or four main industries okay so how do we
actually buy US stocks in Canada US stocks and ETFs are traded in American
exchanges the New York Stock Exchange or the Nasdaq and so they are traded in US
dollars if you already have US dollars then buying US stocks is exactly the
as buying Canadian stocks and Canadian dollars if you're using Questrade as
your online broker just follow the steps I cover in my Questrade walkthrough
except now you're buying in US dollars and so the Commission fees will also be
in US dollars but if you're buying ETF using Questrade as before you won't
be charged any Commission when you buy ETFs whether you're buying them in
Canadian or US dollars so click the link in the top right to follow these steps
and to learn why Questrade is my favorite online broker so if you already
have US dollars it's really easy but most Canadians only have Canadian
dollars so what do we do well we're going to have to convert our Canadian
dollars into US dollars to buy these US stocks and there are two ways to do this
most online brokers will automatically convert your currency when you buy a US
stock but they will charge you a currency conversion fee which is usually
around 2% the great thing about using Questrade is that they only charge you
a one-time fee of 2% when you convert the Canadian dollars into US dollars and
then for the rest of time you can hold those u.s. dollars in Questrade that
means now once you've converted into US
dollars you can do whatever you want with this US money you can buy stocks
sell stocks collect dividends and it will always remain in US dollars and
Questrade will never charge you any fees for this you only pay that one-time
2% conversion fee when you convert between US and Canadian dollars this is
a huge benefit of Questrade over other brokers like wealth simple trade I'll be
making a whole video comparing wealth simple and Questrade very soon and even
though I think that WealthSimple is a great platform for Canadian investments
do not use Wealth simple for US investments and here's why. Wealthsimple
trade does not allow you to hold anything in US dollars all of your cash
and investments are always converted back into Canadian dollars and every
time they do this conversion they charge you a 1.5% conversion fee so
whenever you buy a US stock you pay a 1.5 percent fee
whenever you sell a US stock you pay a 1.5 percent fee and even worse every
time you receive a u.s. dividend you pay a 1.5 percent fee if you have stock that
pays monthly dividends you're paying this conversion feed twelve times every
year over the course of years you would have paid this conversion fee hundreds
of times costing you thousands of dollars in fees to WealthSimple whereas
if you had make the exact same investment in Questrade
you only would have paid a one-time fee of 2% I'll go into more
details on why I prefer Questrade over Wealth simple in my upcoming review but
the take-home message is this if you really want to use Wealth simple trade
ONLY use it for Canadian companies if you're investing in US companies avoid
Wealth simple and use Questrade so using Questrade to buy US stocks is
very easy it's almost the same process as buying Canadian stocks but with one
or two extra steps let's say you want to invest a thousand Canadian dollars into
a u.s. stock Questrade will automatically convert this amount into
US dollars using the u.s. Canadian exchange rate at the end of the day so
if today one Canadian dollar is worth 74 US cents then one thousand Canadian
dollars is worth seven hundred forty US dollars but we also have to account for
the two percent conversion fee we're converting a thousand Canadian dollars
so our conversion fee of two percent will be twenty Canadian dollars that
means that we only have nine hundred and eighty dollars Canadian or 725 US
dollars to invest in now we know our US cash amount and the rest of the steps
are very simple and I'll go over them in just a minute but first I want to talk
about the currency conversion fee in this example we invested a thousand
dollars and so our 2% conversion fee was only twenty dollars which isn't a lot
for most of my u.s. trades I'm fine with paying ten to twenty dollars in
conversion fees but what if you were investing $10,000 at once now your 2%
conversion fee is two hundred dollars and that is too much
whenever you're investing in large sums of money over three thousand dollars and
you want to invest in US stocks instead of paying Questrade that two percent
conversion fee I suggest you use an advanced technique called Norbert's
gambit using this technique you avoid paying
any currency conversion fees but you will have to pay up to ten dollars more
in Commission fees and most importantly it will take about three to four
business days for your trade to execute that's why this technique is only
worthwhile for large sums of money I don't want to get into the details of
Norbert's gambit in this video I'll save that for a later video but here is my
overall strategy whenever I'm buying a small amount of US
stocks less than a thousand dollars I buy directly through Questrade I pay a
two percent conversion fee but the trade happens instantly if I'm buying a larger
amount of US stocks above $3000 then I use Norbert's gambit to
avoid paying this 2% conversion fee but I do hav to wait up to
three to four business days for my trade to execute if you'd like to get started
with Questrade click my referral link in the box below and you'll get $50 in
commission free trades when you sign up that basically means that your first ten
stock trades would be commissioned free that saves you $50 plus I'll get a small
referral bonus as well so now let's jump into a step by step
walkthrough on how to buy US stocks in Canada using Questrade so we start at
the Questrade homepage we click on the login button we enter our credentials we
land on the homepage where we see a summary of our accounts and we're going
to click on the green trade button to take us to the trading platform so I
land on the balances page of my RRSP account if I go to the top right I can
choose the different account types between my TFSA and my RRSP in this video
I'm going to be buying US dividend stocks which I only hold inside my RRSP
if you recall for my earlier tax video I only hold us dividend stocks in my RRSP
to avoid paying us withholding taxes if I hold these US stocks in my TFSA I
won't be paying Canadian taxes but I will be paying a 15% u.s. withholding
tax on these u.s. dividends so for this video I'm only going to be buying these
US stocks inside my RRSP here in my balances page you can see that I own a
combination of equity both in the Canadian dollars and in u.s. dollars
this is something that you can't do with Wealth simple they always convert
everything back into Canadian dollars looking at my cash amounts in the second
row I have 1,000 Canadian dollars in cash and $10.90 in US dollars in cash
today I'm going to buy US stocks when I do that I first spend whatever it
available US cash I have ten dollars and then the remaining amount required would
be converted from my available Canadian cash so in total my available cash to
invest with is 1014 Canadian dollars or 780 US dollars Questrade
automatically calculates the conversion for you but just as a sanity check let's
confirm with Google search Canadian two US dollars I'll enter this Canadian
amount here 1014 and at this moment this equals 780 US dollars which matches the
amount that Questrade gives me so now I know that I have
780 US dollars to invest with and I want to buy the US stock nordstrom. Nordstrom
is a luxury fashion retailer which has been expanding successfully into Canada
the past few years their ticker symbol is JWN so I searched it here and here I
can see JWN Nordstrom incorporated and it's traded on the New York Stock
Exchange so that tells me that all the numbers on this page will be in US
dollars I don't want to go into why I'm buying the stock but real quick it has a
generous dividend yield of 3.6 percent and if I go into the financials it has a
dividend payout ratio of only 35% that's great that means that only 35% of its
profits go out to dividends leaving 65 percent of its profits to grow the value
of the company itself another good thing is that since the share price is pretty
low at $40 it doesn't require very much to qualify for a drip in fact if I do a
quick calculation 40 times 40 divided by the dividend amount which is 37 cents
that means I only need four thousand three hundred and twenty four dollars
invested in Nordstrom to qualify for a DRIP just so you know I recorded the
session over a month ago before the market dropped last week so now the
price of Nordstrom is considerably lower than what you see here giving us a much
higher dividend yield of 5.1 percent using these newer numbers you actually
only need $2215 to qualify for a DRIP to
buy the stock I click the green buy and sell button and it brings up this panel
I already covered all these details in my previous Questrade walkthrough so
make sure you check out that video first right here I can select either a limit
order or a market order limit order means that I select the maximum price
that I am willing to buy for the stock the trade doesn't execute unless the
price reaches this limit value I have no idea how long it will take for this to
happen so I'm gonna choose a market order which means I want to buy the
stock immediately and I will pay whatever the current market price is at
this moment so I'm doing a market order in my RRSP account and let's scroll down
to confirm the amount of cash I have I have 1,000 Canadian dollars if I select
US I have $10.90 in US cash giving me a grand total I select all in USD I
have a total of 780 US dollars available to trade so as before I pull up my
calculator I enter my available cash 780.73 and right off the bat I
subtract the 5 dollars of commission that I pay when I buy stocks in this
case I'm paying five US dollars in commission so I subtract 5 and I have
seven hundred and seventy five dollars available to invest with but remember
most of this cash is currently in Canadian dollars I need to account for
the currency conversion fee that Questrade charges to turn this into US
dollars for a small amount this 2% fee will be between ten and twenty dollars
so I'm okay with that as I mentioned before if I was investing with five
thousand dollars I would use a Norbert's gambit to avoid
this two percent fee and I'll cover this technique in a later video but for today
I want to execute the trade immediately so I'll pay the two percent fee after
Commission I have seven hundred and seventy five US dollars to invest with
but I need to take away a two percent conversion fee so I will multiply by
0.98 and you can see that I've lost about fifteen dollars that's the
currency conversion fee that I pay so now after I've paid Commission fees and
the two percent conversion fee I have seven hundred and sixty US dollars to
buy Nordstrom stock with let's scroll back up I'll click the circle to refresh
the current price and let's see how many shares I can afford so I will divide my
available cash by the asking price thirty nine point nine zero that gives
me nineteen point zero five I can't buy a fraction of a share so I have to round
down to 19 this means I can afford 19 shares of Nordstrom so in quantity I
enter 19 shares I'm buying them at market price in my RRSP account
let's click buy this takes me to the confirmation window and let's confirm
these amounts I want to buy 19 chairs of Nordstrom at market price in my RRSP
account it will cost me $758 us to make this trade plus it will cost me a $5
u.s. Commission fee you can see that these values are in brackets that means
a negative I click send order and I see a pop-up confirming that my
order was filled I bought 19 shares let's confirm this so let's go to
account and orders and you can see the two orders I executed today earlier
today I bought some Brookfield property and just now I bought 19 shares of
Nordstrom at a price of $39.91 per share
going into my positions let's confirm that I actually only stocks now and I
can see that I own 19 shares of Nordstrom stock now let's go into my
balances page and here is where things are a little different than before when
I bought Canadian stocks I expect to see my cash amount decreased to almost zero
but in this case I bought US stocks using Canadian cash now you see then I
still have a thousand Canadian dollars in cash but I have a negative 752 u.s.
dollars you may be wondering what's going on here why do I have a positive
Canadian amount and a negative US amount the way Questrade does currency
conversions is that it will wait until the end of the day to convert the
currency so that it is balanced with no more negative values so at the end of
the day when the markets close Questrade will convert the necessary amount
of Canadian cash to get my us amount to zero so tomorrow morning I will log in
and I should see that both my Canadian and US cash amounts are positive and
near zero since I spent almost all of my available cash in this trade so now I
have just logged in the next morning and I can see that Questrade has
automatically converted my Canadian cash to balance out my negative u.s. amount
so now I have zero dollars in my US cash account and I still have 17 dollars left
over in my Canadian cash account ready to invest with next time so there you
have it that's how you buy US stocks in Canada using Questrade other brokers
will have a very similar process but I definitely recommend Questrade because
of their super low commission fees and conversion fees those fees really do add
up over time again if you're investing over three thousand dollars a once I
suggest using Norbert's gambit to avoid conversion fees and I'll show you
exactly how to do this in an upcoming video and again if you
want to get started with Questrade click my referral
link in the box below and you'll get 50 dollars in commission free trades
when you sign up plus I'll get a small referral bonus thanks for watching guys
and be sure to LIKE comment and subscribe if you found this video
helpful every thumbs up and comment really does
help me build this channel and hit that Bell icon to notify them on new videos
every week and if you'd like to follow me on Instagram or Facebook @CanadianTShirt
click the link in the box below or click the links on my home page be
sure to tune to my next video rather breaking down what is an RRSP and
how to invest in your RRSP to minimize your tax bill and maximize your
long-term growth thanks everyone and I'll see you guys on the next episode of
the Canadian in a T-shirt bye guys