hey guys it's Adrian here the Canadian in a t-shirt and today I'll be breaking
down how to use Norbert's gambit with Questrade Norbert's gambit is the
cheapest way to buy US stocks allowing you to convert Canadian dollars into US
dollars for free avoiding the currency conversion fee I'll go over the benefits
of Norbert's gambit when you should use it and I'll provide a step-by-step
walkthrough on how to use Norbert's gambit with Questrade I already
talked about why Canadians should invest in the u.s. in my previous questrade
tutorial I also gave a step-by-step guide on how to buy US stocks with
Canadian dollars so click the pop-up at the top right to check out that video
first and then come back to this one as a quick summary all US stocks and ETFs
are traded on American exchanges either the New York Stock Exchange or the
Nasdaq and so these stocks are traded in u.s. dollars but most Canadians don't
have US dollars and so we have to convert our Canadian dollars into US
dollars most online brokers like Questrade 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% so if you have a thousand Canadian
dollars and you want to invest in US stocks
Questrade will charge you a 2% fee or $20 for this conversion Norbert's
gambit is a technique that allows you to avoid this currency conversion fee so
here's how it works the basic idea behind Norbert's gambit is that you will
buy a stock which is cross listed on both the Toronto Stock Exchange and the
New York Stock Exchange so you will buy the stock in Canadian dollars through
the Toronto Stock Exchange and then you will convert these Canadian stocks into
the equivalent American stocks now you own American stocks in the New York
Stock Exchange and now you can sell these American stocks for US dollars the
best part here is that when you convert Canadian stocks into equivalent US
stocks you aren't converting currency you are journaling stocks between
exchanges and you don't pay any fees for this so you avoid the 2% currency
conversion fee you only have to pay a commission fee when you buy the Canadian
stock and when you sell the US stock but this total Commission fee should be less
than $20 depending on your broker even better this technique works on ETS as
well and if you're using Questrade you don't pay any Commission's when you buy
ETFs so with Questrade you can convert any amount of Canadian dollars into US
dollars and it will only call to about five dollars in commission this
is far cheaper than paying 2% conversion fees especially for large sums of money
the only downside is that you can't buy your US stocks right away you'll have to
wait three to four business days. The ETF that you're going to buy to
handle this conversion is DLR.TO this is horizons u.s. dollar currency ETF and
all this ETF does is track the exchange rate between Canadian dollars and US
dollars so you will buy the ETF DLR.TO in Canadian dollars and since you're
buying an ETF with Questrade you won't be paying any Commission on this
then you journal your shares of DLR.TO into DLR.U.TO which is the same
ETF just in u.s. dollars DLR.TO is in Canadian dollars DLR.U.TO is in US
dollars but they're equal in value after three to four business days the trade
will settle and now you will own shares of DLR.U in US dollars now all you
have to do is sell these US shares and then you'll have cash in u.s. dollars
Questrade doesn't charge you a commission when you buy an ETF but they
do charge your commission when you sell a ETF and so you have to pay about five
dollars I'll show you guys these steps in detail later in the video but I
wanted to give you this quick summary to explain when you should use Norbert's
gambit and when you shouldn't. First let's talk about the cost Norbert's
gambit boils down to two transactions buying shares of the DLR ETF and selling
shares of DLR.U if you use a bank's broker like RBC or BMO they'll charge
you $10 of commission every time you buy or sell an ETF so Norbert's gambit will
cost you $20 in total but if you use Questrade you'll only pay five dollars
in commission and only when you sell DLR.U so using Norbert's gambit with
Questrade will only cost you five dollars in total you can see why I love
Questrade let's compare this to the 2% currency conversion fee using the
approach that I covered in my last video if I'm investing a thousand dollars
Canadian this 2% conversion fee will cost me $20 but the advantage is that I
can buy my US stocks instantly if I use Norbert's gambit I'll only pay $5 in
total but I'll have to wait three to four business days which might not be
worth it for me personally if I'm investing with $1,000 or less I don't
bother with Norbert's gambit I'd rather pay that 2%
conversion fee and have the trade executed immediately I don't have to contact
anyone or wait and check back in after four days I can just click buy and now I
own the US stock but if I'm investing in large sums of money I definitely use the
Norbert's gambit let's say I'm investing $10,000 into US stocks that 2%
conversion fee would cost me $200 that's huge but if I use Norbert's gambit I'm
still only paying about $5 in total I'm only paying the Commission when I sell
the US ETF that's much cheaper than paying 2% on the full amount technically
if you're converting tens of thousands of dollars with Norbert's gambit it
might cost you a little more than five dollars because of ecn fees these are
tiny fees that you'll never notice unless you're buying thousands of shares
ecn fees come from the stock exchange itself and they'll charge you at 0.35
cents per share for most trades that's a negligible amount Questrade doesn't
charge you any commission when you buy ETF's but you'll still have to pay these
tiny ecn fees they'll only ever cost you a few pennies for the majority of people
so don't worry this is still much better than paying ten dollars in commission
with another broker i just wanted to mention it here in case you're
converting tens of thousands of dollars that will involve buying thousands of
shares of DLR and so your commission will be a little more than five dollars
probably between $7 and $10 because of these ECN fees so here is my overall
strategy for buying US stocks whenever I'm buying small amounts of US stocks
less than $1,000 I buy directly through Questrade I pay a 2% conversion fee
but the trade happens instantly if I'm buying larger amounts of US stocks
$2,000 or more then I use Norbert's gambit to avoid this 2% conversion fee
but I have to wait three to four business days to execute if you'd like
to get started with Questrade click the 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 10 stock trades will 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 using Norbert's gambit with Questrade
so we start at the Questrade homepage we click on login we enter our
credentials and it takes us to the balances page here I'm in my RSP account
and you can see that I have one thousand eight hundred and two Canadian dollars
to invest in US stocks I could buy these US
stocks directly just like I did before but I'll be paying a two percent
currency conversion fee on this amount so if I'm investing $1,800 a two percent
fee will cost me thirty six dollars and that's too much using Norbert's gambit I
can avoid this thirty six dollar fee but I'll have to wait three to four business days
so to do Norbert's gambit I'm gonna buy the ETF DLR.TO in Canadian dollars all
this ETF does is track the exchange rates between Canadian dollars and US
dollars so the fluctuation of the share price of this ETF is just the
fluctuation of the exchange rate day to day so remember we're gonna be buying
shares of DLR.TO in Canadian dollars and then we're gonna convert them into
the u.s. equivalent ETF dlr.u.to this is actually an inversion of the previous
graph whenever the US dollar goes up the
Canadian dollar goes down and vice-versa but at any moment the value of these two
ETFs are the same based on the current exchange rate let's
confirm that so let's go back to the Canadian ETF DLR.TO and you'll see
that the current value is 14 dollars and 21 cents per share so let's plug that
into our Canadian to US dollar currency converter so we'll enter fourteen point
two one Canadian dollars now let's see the current value of the US ETF DLR.U.TO
and we can see that's currently ten dollars and twelve cents per share in
u.s. dollars and that basically matches the currency conversion which is ten
dollars and thirteen cents and so one share of DLR equals one share of DLR.U
factoring the currency conversion rate okay so let's actually make the
trade first let's confirm how much Canadian cash I have so let's click on
account and we see that I have one thousand eight hundred and two Canadian
dollars to invest with so let's buy some shares of DLR.TO and now we follow the
regular steps I click the green Buy button I click the Refresh icon to
refresh the price I scroll down to confirm my available cash and now we
bring up the calculator to calculate how many shares of the ETF I can afford to
buy so we enter one thousand eight hundred and two dollars and forty six
cents we don't pay Commission when we buy an
ETF so we just divide our cash out by the current asking price of $14.21
that gives us one hundred twenty six point eight four remember you can't buy
a fraction of a share so we have to round down to a hundred and twenty six
shares so that's what I'm gonna do I'm gonna enter one hundred and twenty six
shares and I'm gonna change the order type to market because I want this order
to execute immediately so I'm buying a hundred and twenty six shares at market
price in my RSP account so we click the green Buy button and that gives us the
confirmation pop-up window you'll notice that the Commission is listed as forty
four cents and again that's just the ECN fees which I talked about earlier so
just to confirm let's take this forty four cents divided by one hundred and
twenty six shares and we get $0.0035 that's the charge
for ECN fees zero point three five cents per share still paying forty cents in
ECN fees is way better than paying ten dollars in Commission at another broker
okay so I click send order and then we see a pop-up saying that my order it was
filled let's confirm that let's go to orders and you'll see that I
successfully bought a hundred and twenty six shares of DLR.TO
now if we go to positions you'll see that I also own a hundred and twenty six
shares of DLR.TO if we go to balances you'll see that most of my Canadian cash
is gone I only have eleven dollars cash left okay so now I have a hundred and
twenty six shares of DLR.TO now I have to convert or journal over these
Canadian ETFs into shares of the US ETF DLR.U.TO to do this I can either call
Questrade support or I could just send them a chat message so to do that click
on accounts and then click on the green chat button at the bottom right
you can enter your credentials at your account number if you want it might
speed things up click trading on my own and then start the chat you might have
to wait for a few minutes I've never waited more than 10 minutes but if
there's high demand the way time could be even longer I didn't want to record
my conversation with support but this is literally the message I sent them all I
said was I currently have 126 shares of DLR.TO in my RSP account and I would
like to journal them over to DLR.U.TO please
they let me know that I'll take 3 to 4 business days and that was it the whole
conversation was less than a minute so now 4 business days have passed I logged
back in I go to my positions and now I see that I have 126 shares of DLR.U.TO
that's a US ETF in US dollars so I've converted my Canadian ETF into a US ETF
and I didn't pay any currency conversion fee for this but I don't want shares
of this ETF I want cash in u.s. dollars so we click on DLR.U.TO and we click
sell I'm going to sell all the shares I have so that's 126 shares I'm gonna sell
it at market price and in my RSP account so I click the red sell button now I get
the pop-up confirmation window and you'll notice here that in the
commission I am being charged a $5 Commission fee Questrade doesn't charge
Commission when I buy ETFs but they do charge a commission when I sell ETFs so
I have to pay this $5 still that's much better than paying a 2 percent
conversion fee on this large sum of money so when I sell this I should get
one thousand two hundred and seventy US dollars in cash so I clicked said order
I get a pop-up window notifying that my order was executed so I have sold all
those shares now let's go to my balances and you'll see that I have one thousand
two hundred and seventy US dollars sitting there as cash and that's exactly
what I wanted you can also use Norbert's gambit to convert US dollars into
Canadian dollars it's the exact same steps just in Reverse once you have that
cash in US dollars you can buy whatever US stocks and ETFs that you want follow
the exact same steps I covered in my first Questrade tutorial on how to buy
stocks just know that everything will be in u.s. dollars not Canadian so click
the pop-up at the top right to check out that video so that's how you use
Norbert's gambit to buy US stocks without paying a currency conversion fee
these same steps will work for most online brokers but
unfortunately you can't use Norbert's gambit for some brokers like Wealthsimple
trade. WealthSimple Trade does not allow you to
hold US dollars every foreign transaction is always converted back
into Canadian and they charge you a 1.5% conversion fee every time that
happens I think Wealthsimple trade is a great platform but only for Canadian
investments do not use it for US investments those conversion fees every
single time you buy or sell a US stock will bleed you dry
over the years and there's no way to avoid it, you can't use Norbert's gambit
with WealthSimple I'll be making a whole video comparing Questrade with
WealthSimple so stay tuned for that overall they're both great platforms for
Canadian stocks and ETFs but for US investments no question go with Questrade
remember if you're investing more than two thousand dollars at once I
suggest using Norbert's gambit to avoid conversion fees you'll have to wait for
business days but it will only cost you five dollars if you're investing in
small amounts less than a thousand dollars the savings you get with
Norbert's gambit probably isn't worth the wait just buy the stocks right away
and pay that 2% fee again if you want to get started with Questrade click my
referral link in the box below and you'll get $50 of commission free trades
when you sign up plus I'll get a small referral bonus as well thanks for
watching guys and be sure to LIKE comment and subscribe if you found this
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see you guys on the next episode of the Canadian in a t-shirt bye guys