Let’s take a look at the numbers to show you how your money grows when you eliminate currency conversion fees.
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By Julie Cazzin, with Kornel Szrejber
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Currency conversion fees can easily become an afterthought when it comes to investing. After all, there are so many other moving things to consider when making an investment: what to buy, which investment account to use for maximum tax efficiency, and how much to buy to maintain the desired asset mix, just to name. only a few.
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But what if you could save thousands of dollars in unnecessary fees, invest that savings, and let it accumulate over decades?
Remember, every dollar you don’t spend on fees stays in your investment portfolio and can be used to buy additional investments. These investments will generate additional cash flow in the form of additional dividends and / or interest, which can then be used to purchase additional investments and further increase your returns.
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By using Norbert’s Gambit, you can almost completely bypass the fees that most brokers and foreign exchange providers charge when converting your currency from Canadian dollars to US dollars, or vice versa.
Currency conversion fees might seem insignificant when you buy, say, a $ 10 lunch with your credit card while traveling in the United States, but things change dramatically when we start talking about the tens or hundreds. thousands of dollars converted to US dollars over your lifetime. to buy US investments for your retirement portfolio.
For example, the exchange rate on the day of this writing meant that it took $ 1.2583 to buy one US dollar. In some Canadian banks, the rate was around $ 1.2968. The difference between the two is $ 0.0385.
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In other words, for every US dollar you buy, the bank takes $ 0.0385 as a “fee.”
Just under four cents in fees for every dollar may seem like a small amount to some, but what if you convert $ 10,000 into US dollars to invest in your Registered Retirement Savings Plan (RRSP)? This is an additional fee of $ 385 that you paid for a single transaction to exchange your currency.

Every dollar spent on fees is a dollar that is no longer invested, so if that $ 385 had remained invested for 30 years (for your retirement) it would have increased to $ 2,930.72, assuming a 7% return.
Therefore, you have to remember that it is not just a one-time fee when paying fees for your investments. You also need to factor in the opportunity cost if that money stayed invested and was able to grow until you withdraw it when you retire.
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In this case, it’s not just the $ 385 you spent, but also the $ 2,545.72 you missed in earnings over 30 years.
Using Norbert’s Gambit for currency conversion is not 100% free, but you will see below that the costs are considerably lower. Using it in my investment portfolio has saved me thousands of dollars in currency conversion fees (although we don’t include the opportunity cost, as mentioned earlier).
You can see the full step-by-step guide on how to use Norbert’s Gambit here, but let’s recap the results and quantify why you should care.
The exchange rate you can get using Norbert’s Gambit (as of this writing) was $ 1.2612. In order to convert to US dollars, you must complete a sales transaction through your brokerage house. Most brokerage firms charge a fixed amount of $ 5 to $ 10 for this.
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Therefore, our cost to convert the $ 10,000 from our previous example is only $ 33.72 (including the $ 5 trading fee). That’s a savings of $ 351.28. In other words, by doing it ourselves through Norbert’s Gambit, we just reduced our currency conversion fees by 91.24%.
Again, factoring in the opportunity cost, the $ 351.28 in savings invested over 30 years increases to $ 2,674.03, assuming an annual return of 7%.
The Norbert Gambit process may seem daunting at first glance, but keep in mind that you can do it with a very small amount such as $ 100 first, just to familiarize yourself with the process. Once you’ve done it once or twice, it quickly becomes something you can do in 15 minutes. Using our previous example, where can you do 15 minutes of work to generate an additional $ 2,674.03 for your net worth?
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That alone should be enough motivation. However, there is another huge benefit that comes with your retirement portfolio. Specifically, this technique allows you to buy more tax-efficient investments in your RRSP, saving you thousands of additional dollars by bypassing dividend tax withholding on some of your investments (this is the main reason for which I do Norbert’s Gambit in my own wallet).
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Due to the US-Canada tax treaty, I hold the majority of my US stocks in my RRSP. In doing so, I am able to automatically bypass the withholding taxes that are levied on US dividends. The caveat, however, is that for this to happen, the US stocks you hold must be listed in the US, which means they are in US currency.
Therefore, the tax optimization strategy is to use Norbert’s Gambit to inexpensively convert your Canadian dollars to US dollars and use those US dollars to buy something like a US listed stock or fund traded in. stock market (ETF).
This way, you can get the desired exposure to the US market in a tax-deferred account without paying unnecessary withholding taxes on these investments.
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For more details on this subject, see this guide: What investments to hold in an RRSP vs TFSA vs taxable accounts (optimization of the location of assets).
We used the relatively small amount of $ 10,000 in our example above, but keep in mind that your portion of US stocks will likely be in the hundreds of thousands of dollars over the life of your investment. which makes Norbert’s Gambit particularly interesting, as the savings can easily add up. over $ 10,000 once we start factoring in the opportunity cost of your money.
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Kornel Szrejber is the host of Building Wealth Canada Podcast , one of the largest and highest ranked investment podcasts in Canada, with over 1.1 million downloads. He also directs the Canadian financial summit , one of the largest online personal finance and investing conferences in Canada, held annually in October.
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