How Canadians Can Beat Currency Conversion Fees when investing

In Canada, to avoid currency conversion fees when investing, especially in U.S. stocks.

Investing in U.S. stocks or other international assets can offer exciting growth opportunities, but for Canadian investors, the constant drag of currency conversion fees can really chip away at your returns. Fortunately, there are smart strategies to keep those fees in check or avoid them entirely. Here’s how you can invest globally without losing out to exchange rates!

You can use several strategies:

  1. Use a USD Account with Your Brokerage
    • Many Canadian brokerages, like Wealthsimple Premium, Questrade allow you to hold both Canadian and U.S. dollar accounts.
    • By holding a *USD account*, you avoid currency conversion fees when buying and selling U.S. stocks since the transactions occur in U.S. dollars
  2. Master Norbert's Gambit
    For those who want to avoid hefty conversion fees but don’t want to leave their cash sitting in a USD account, Norbert’s Gambit is an ingenious solution. This technique allows you to convert large sums of money between Canadian and U.S. dollars with minimal fees.


    • This is a technique used to convert Canadian dollars to U.S. dollars (or vice versa) at a minimal cost, bypassing typical currency conversion fees.
    • You purchase a stock or exchange-traded fund (ETF) that is dual-listed on both the **Toronto Stock Exchange (TSX)** and a U.S. exchange (e.g., **DLR/DLR.U**).

      Steps for Norbert's Gambit:
      1. Buy the stock or ETF in CAD on the TSX.
      2. Ask your brokerage to "journal" (transfer) it over to the U.S. side of your account.
      3. Sell the stock or ETF on the U.S. exchange in USD.
      4. This minimizes conversion fees as the stock price on both exchanges remains closely aligned.
  3. Buy Canadian Depositary Receipts (CDRs)
    Looking to invest in big U.S. companies like Amazon or Apple but don’t want to deal with U.S. dollars at all? 
    1. As mentioned earlier, CDRs (Canadian Depositary Receipts) allow you to invest in U.S. companies without currency conversion since they are priced in Canadian dollars.
    2. CDRs are also *currency hedged*, so you're protected from fluctuations in the CAD/USD exchange rate.
  4. Invest in Canadian ETFs That Hold U.S. Assets
    1. Some Canadian ETFs hold U.S. stocks but are traded in **Canadian dollars** on the TSX. This allows you to invest in U.S. markets while avoiding direct currency conversion fees.
    2. Examples include ETFs like *XUU* (iShares Core S&P U.S. Total Market Index ETF).
  5. Use a Brokerage with Low Currency Conversion Fees
    1. Some Canadian brokerages, such as *Interactive Brokers*, offer lower-than-average currency conversion fees.
    2. You can convert money at close to the interbank rate (the rate banks use to trade currencies with each other) and avoid the typical 1.5%-2.5% markups seen in other platforms.

By using these methods, you can effectively minimize or avoid currency conversion fees when investing in foreign markets.

Final Thoughts: Beating the Currency Trap


Currency conversion fees may seem like a small price to pay, but over time, they can seriously erode your gains. By using strategies like Norbert’s Gambit, CDRs, or USD accounts, Canadian investors can hold on to more of their hard-earned returns and make cross-border investing more efficient.

So next time you’re ready to invest internationally, remember: It’s not just about what you buy, but how you buy it!