[Podcast] DGB 04: Canadian vs U.S. Market! Why Not Both?

Currency exchange rates and tax effects are often scary for investors. While it is good to put money in your “home” market, you probably miss out on some great opportunities. There are dividend growers that can make you forget currency and taxes impact!

Here’s why dividend growth investors should consider both Canadian and U.S. stocks.

You’ll Learn

The advantages of both markets.
What stocks should Canadians hold in the US; and which ones should Americans look at in Canada.
The real impacts of the currency exchange rates and the tax effects and how to manage them.
The Norbert’s Gambit technique to save on fees.
A few words on international and emerging markets and their challenges for North American investors.

What’s the Norbert’s Gambit Strategy?

A financial advisor named Norbert Schlenker from Libra Investment Management, a B.C. investment firm found a solution for his clients. According to the online “legend”, this creative advisor established a strategy to skip the middleman and not pay conversion fees. Here’s how it works:

Some companies trade on both Canadian and U.S. stock markets. You can think of Canadian Banks for example. Therefore, if you purchase shares of Royal Bank (RY.TO) through your online brokerage account, you can then call your broker and ask him to journal (transfer) the shares over to the same listing in the foreign currency, at the market exchange rate, and then sell the shares in the currency you want to end up with.

This strategy would convert money invested in Canadian dollar in Royal Bank shares into U.S. dollars once you sold the same shares on the U.S. markets. The only fee paid would be the one charged on the buy and sell transactions. Depending on the amount converted, the transaction fee would be minimal.

In the podcast, I’ve discussed how to use Horizons US Dollar Currency ETF (DLR and DLR.U) to convert your currency. This is the one I personnally use on a regular basis.