Investing in US with low CDN $

[Gorilla]

Is it worth Canadians to invest in the US market with the dollar being so low?

There is about a 30% difference in the dollars. Would you need a stock to increase more than 50% for it to be worth investing?

[bjstare]

You should probably think twice about investing at all if that's how you do math.



But to try and answer your question seriously, yes it can still be worth investing. You have to take into account volatility in exchange rates, as well as cost to convert currency. For every % the CAD gains against the USD, your investment has to gain an equal % just to break even. Plus take into account losing around 1% every time you change currency, so as a very loose rule, your investment has to grow by ~2% before you can break even, more if you're going to exchange right back to CAD upon selling. If you already have a USD investment account, and are keeping the funds in USD after selling the investments, it's a moot point.

[GQBalla]

pretty much, If you are able to open a USD account with your broker that would be ideal IMO.

the exchange rates they charge to go USD then back to CAD is outrageous.

If you have a USD account you can convert X amount, take a hit the first time and just continue to play with that.

Would only really benefit you if you can leave that money in an account though

[sabad66]

With trading accounts you can get close to spot rate using "norberts gambit". I have used this trick twice, and you only pay a buy and sell commission (usually $20 total). It's only worth it if you are doing more than $2000 at a time.

[Buster]

Dont forget "low" is relative.

Trading FX profitably over the long term is very difficult. This adds a significant measure of risk/volatility/uncertainty/speculation to your investment beyond the transaction costs.

Then again, investments in Canada are impacted in general by the relative position of the dollar, so it's ultimately in there somewhere even when you invest domestically.

[mr2mike]

Personal opinion. You missed your best chance to move money into a USD trading account when dollar was close to par.

Can still do it but definitely don't buy US stocks in CDN $ or the exchange every trade will reduce your profits.

[max_boost]

Agreed mr2mike.

Rewind few years back. High oil and par exchange.

Exchange. Buy FB. Sell today. Laugh like a mad man. Double whammy.

well today, good luck lol

[JustinL]

Like everyone said, do it inside a US account instead of buying US stocks with CAD. After that, the fluctuating currency is just another variable to the value of the account. Predicting the future is the hard part. If you think the CAD is going lower and US stocks are going up, then make your move now into US stocks. If you think the CAD has bottomed out, then stick to Canadian stocks.

My prediction is that the CAD will bounce around between 74 and 77 cents until the US raises interest rates, then it will dip down to the 70c before coming up slowly again with the price of oil.

[InRich]

I wouldn't invest right now. Wait till our interest rates go up.

[troyl]

Could look at a CAD listed ETF with US holdings.

[GTS Jeff]

Originally posted by troyl
Could look at a CAD listed ETF with US holdings.

You could, but your exposure to FX is no different, and you'll also be hit with the higher MERs of Canadian ETFs.

[Feruk]

Canada makes up 3% of the world economy. You'd be stupid not to be investing outside of Canada. Especially considering Canada's likely to be stagnant for some time and mostly move with oil price.

You can somewhat reduce your currency risk by buying hedged ETFs (see below), but I am not a currency trader and mostly don't do that. Besides, if I was a betting man (I'm not), I'd bet we see 0.6 before we see 0.9. I buy US stocks in USD, Canadian stocks in CAD. I am betting that if the dollar turns around, it's because the Canadian economy is roaring, and I'll get a large enough bump on my Canadian holding that it'll easily outweigh any losses on US/CAD currency.

You can argue currency risk all you want, but one point I want to get across is anyone here who is suggesting you stay out of other markets because our dollar is low needs to immediately have someone else start managing their money, because they're gambling on 3% on the market and ignoring the 97%. That's not investing.

The one fair comment I saw was about interest rates rising... But who knows if that'll ever happen.

Originally posted by GTS Jeff
You could, but your exposure to FX is no different, and you'll also be hit with the higher MERs of Canadian ETFs.

You can buy ETFs hedged to the Canadian dollar. The higher MERs is also untrue. Look at XSP; S&P 500 ETF hedged to Canadian dollar. MER = 0.1%.

[bjstare]

Originally posted by Feruk
*snip*


You can buy ETFs hedged to the Canadian dollar. The higher MERs is also untrue. Look at XSP; S&P 500 ETF hedged to Canadian dollar. MER = 0.1%.

Good post. Also, I was going to say the same about MER with our ETFs. Another good example is VFV (MER = 0.13%).

[Jeff TYPE R]

Originally posted by cjblair


Good post. Also, I was going to say the same about MER with our ETFs. Another good example is VFV (MER = 0.13%).

VFV isn't a hedged ETF. Man, I thought I was a noob...

[Jeff TYPE R]

And it's also still costly compared to VOO at 0.05. And I think what you're confused about is that they are Canadian listed, but if they follow a US index, they're still exposed to the same shitty exchange.

[bjstare]

Originally posted by Jeff TYPE R

VFV isn't a hedged ETF. Man, I thought I was a noob...

Haha I didn't even read the word hedged when I saw that post, my brain went to cheap canadian listed ETFs



» Click image for larger version

edit: and just so we're clear, the noob here is the guy who thought he'd have to make more than 50% to make a US investment worthwile haha.

[GTS Jeff]

Originally posted by cjblair


Haha I didn't even read the word hedged when I saw that post, my brain went to cheap canadian listed ETFs



» Click image for larger version

edit: and just so we're clear, the noob here is the guy who thought he'd have to make more than 50% to make a US investment worthwile haha.

Hah true enough.

Couch Potato had an article a few months ago about how investing in a TSX listed US fund still exposes you to exchange rates.

[bjstare]

Originally posted by GTS Jeff
Hah true enough.

Couch Potato had an article a few months ago about how investing in a TSX listed US fund still exposes you to exchange rates.

Oh yeah, absolutely you are exposed to exchange still. The only real advantage to buying a fund like VFV in lieu of VOO is that if you only have a CAD investment account, you don't get dinged on the currency exchange fee with every transaction.

[GTS Jeff]

Originally posted by cjblair


Oh yeah, absolutely you are exposed to exchange still. The only real advantage to buying a fund like VFV in lieu of VOO is that if you only have a CAD investment account, you don't get dinged on the currency exchange fee with every transaction.

So for the OP, right now is just a worse time to buy into US index if he needs to buy with CAD. But there are also RSP advantages to buying US that I don't quite understand yet.

If it's just a matter of exchanging, sabad mentioned Norbert's Gambit. I'm about to try it in the next little while here.

[Feruk]

Originally posted by GTS Jeff
So for the OP, right now is just a worse time to buy into US index if he needs to buy with CAD.

Wrong. Maybe you should've read my post...

Originally posted by GTS Jeff
But there are also RSP advantages to buying US that I don't quite understand yet.

The only advantage I can think of is not paying withholding tax.

Originally posted by GTS Jeff
If it's just a matter of exchanging, sabad mentioned Norbert's Gambit. I'm about to try it in the next little while here.

All this does is saves you a bit on exchange rate... It does nothing in regards to currency risk.