Hello, I’m Justin Bender, Portfolio Manager at PWL Capital in Toronto.
In my previous video, I showed investors how to cheaply convert their Canadian dollars
to US dollars within their RRSP account.
In this video, I’m going to show you how to purchase US-listed foreign equity ETFs
with your US dollar cash.
Holding US-listed foreign equity ETFs within an RRSP account can reduce your product fees
and foreign withholding taxes by about 0.30% per year, relative to holding Canadian-listed
foreign equity ETFs.
For more information on foreign withholding taxes, please refer to our white paper on
the subject.
In my initial DIY investing video, the foreign equity ETFs that we purchased traded on the
Canadian stock market.
For this video, we’ll be purchasing similar ETFs that trade on the US stock market.
As the US-listed ETFs trade in US dollars, we’ll need to adjust our desired Canadian
dollar purchase amounts into US dollars prior to calculating the number of shares to buy.
After reviewing our account information, we find that there’s about 4,500 US dollars
available for investment within the RRSP account.
You’ll also note that 1 US dollar is currently equivalent to about 1.3259 Canadian dollars.
Please make a note of this exchange rate, as we’ll require it when calculating the
number of shares to purchase.
We’ll begin by hovering over the ‘Place an Order’ tab at the top of the screen,
and then selecting ‘Stocks & ETFs’ from the drop-down menu.
This will bring us to the ‘Stock Order Entry’ screen.
First, we’ll select the US dollar RRSP account, and then choose ‘Buy’ as our action.
We’ll enter VTI as our symbol, and select ‘US’ as our market.
We’ll then click on ‘Show Quote’.
We’ll convert our 3,000 Canadian dollars to US dollars by dividing the figure by the
current foreign exchange rate of 1.3259.
We’ll then subtract the $9.95 commission, and divide this value by the current ask price
of $116.48, which equals 19 shares.
We can then enter 19 as our # of shares.
We’ll enter a limit price that’s a couple cents above the current ask price, and then
click on ‘Continue’.
And after verifying the order details, we’ll click on ‘Confirm’.
We can then return to the ‘Stock Order Entry’ screen.
For the next trade, we’ll select the US dollar RRSP account, and then choose ‘Buy’
as our action.
We’ll enter IEFA as our symbol, and select ‘US’ as our market.
We’ll then click on ‘Show Quote’.
We’ll convert our 2,400 Canadian dollars to US dollars by dividing the figure by the
current foreign exchange rate of 1.3259.
We’ll then subtract the $9.95 commission, and divide this value by the current ask price
of $54.84, which equals 32 shares.
We can then enter 32 as our # of shares.
We’ll enter a limit price that’s a couple cents above the current ask price, and then
click on ‘Continue’.
And after verifying the order details, we’ll click on ‘Confirm’.
We can then return to the ‘Stock Order Entry’ screen.
The RRSP account is now showing $535 US dollars available.
This figure is deceiving, as it also includes any Canadian dollar cash that hasn’t been
converted to US dollars.
In order to find the true amount of US dollars available, hover over the ‘My Portfolio’
tab at the top left of the screen, and then click on ‘My Portfolio Holdings’.
Here we’ll find that there’s actually only $504 US dollars available, not $535.
Now that we have the accurate information, we can return to the ‘Stock Order Entry’
screen.
For the final trade, we’ll try to use up as much of the remaining US dollar cash as
possible.
We’ll once again select the US dollar RRSP account, and then choose ‘Buy’ as our
action.
We’ll enter IEMG as our symbol, and select ‘US’ as our market.
We’ll then click on ‘Show Quote’.
We’ll take our remaining cash balance of $504.80 and subtract the $9.95 commission.
We’ll then divide this amount by the current ask price of $43.95, which equals 11 shares.
We can then enter 11 as our # of shares.
We’ll enter a limit price that’s a couple cents above the current ask price (even if
the trade fills at the higher limit price that we entered, there will still be enough
cash in the account to pay for the shares).
When you’re ready to move forward, click on ‘Continue’.
And after verifying the order details, we’ll click on ‘Confirm’.
Now that our final trade has been placed, we can verify the order details by clicking
on ‘View Order Status’.
Here we’ll find that all shares from the three US-listed ETF purchases have been successfully
filled.
If you’d like to review your new portfolio holdings, hover over the ‘My Portfolio’
tab at the top left of the screen and then click on ‘My Portfolio Holdings’.
To show the US-listed ETF market values in Canadian dollars, select this option from
the ‘Values’ drop-down menu and then click on ‘Go’.
Here we’ll find that we now have about $3,000 in US stocks, $2,400 in international stocks
and $600 in emerging markets stocks.
If you have any questions, please feel free to send them to me by email: jbender@pwlcapital.com