Why do I buy US Stocks in Canada in Canadian Dollar?
Part of my strategy is to keep investment in the stock market simple so I can focus more on my complicated Crypto investment. Therefore, I only buy stocks and ETFs listed on Canadian Exchanges TSX and NEO priced in our very own Canadian Dollar $CAD.
My goal here is to show you some simple methods on how to buy US stocks in Canada and save on fees and commissions. Remember saving more means investing more, right?
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What are some benefits of buying International Stocks in Canadian Dollar?
There are mainly three reasons to invest only in stocks or ETFs listed in Canadian Dollar $CAD.
Investors can avoid the headache of converting USD to CAD and vise versa. It also eliminate a portion of FX (Foreign Exchange) conversion fees which ranges from 1.5% to 3% on each currency transaction. In addition, it helps as a hedge against currency fluctuations.
Hence comes the benefit of Canadian Hedged stocks and ETFs.
In this article, I am going to cover the best and easiest ways to own some of top US companies like Apple, Meta, Alphabet (Google), Amazon, and many more directly in Canadian dollar $CAD.
How to Buy US Stocks in Canada while Saving on Foreign Transaction Fees?
Method 1: Buy ETFs (Index Funds) in Canadian Dollar
Naturally, this is the most known method to own US (or any international) stocks in Canadian Dollar. The benefit of ETFs is that investors won’t have to pick stocks individually which gives a broader exposure while reducing the risk of a being negatively impacted by a single company.
I personally own many ETFs which are listed in my Exotic Series of the Best ETFs in Canada and some other articles I posted on the blog. One disadvantage of owning ETFs is that investors neither have a direct control on the owned shares nor can predict dividends or distributions. Second downside of ETFs is their management fees.
$XUU, $XQQ, $TLF are some of the best US ETFs to hold. I also recommend $VIU which is an All Cap Developed except North America ETF. I also like $TECH ETF which has exposure to the giant technology FANGMA (Facebook, Apple, Netflix, Google, Microsoft, Amazon) companies.
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Method 2: Buy Canadian Depositary Receipts (CDRs) on NEO Exchange
CDRs are an efficient and easy way to own a foreign including US stocks in Canadian Dollar. CDRs have a built-in currency hedge mechanism which reduces the currency fluctuation complication for investors.
Buying CDRs means owning fractional shares of foreign companies with small amounts. This makes owning companies like Google or Amazon accessible to small investors.
Fun Fact: The equivalent of CDRs in the US is called ADRs (American Depository Receipts) which have been trading in the US for years.
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CDRs also have a factor called CDR Ratio which is adjusted daily to represent the number of underlying shares owned by each CDR. To simplify, if Canadian Dollar gets stronger against the foreign currency (US Dollar), the associated CDR will represent more underlying shares and vise versa.
There are currently 35 CDRs provided by CIBC in Canada. These CDRs can be only bought on Neo Exchange. All these CRDAs represent big US companies listed on NYSE or NASDAQ.
- AbbVie CDR (CAD Hedged) – ABBV
- Advanced Micro Devices CDR (CAD Hedged) – AMD
- Alphabet CDR (CAD Hedged) – GOOG
- Amazon.com CDR (CAD Hedged) – AMZN
- Apple CDR (CAD Hedged) – APPL
- Bank of America CDR (CAD Hedged) – BOFA
- Berkshire Hathaway CDR (CAD Hedged) – BRK
- Cisco CDR (CAD Hedged) – CSCO
- Coca-Cola CDR (CAD Hedged) – COLA
- Costco CDR (CAD Hedged) – COST
- CVS Health CDR (CAD Hedged) – CVS
- Goldman Sachs CDR (CAD Hedged) – GS
- Home Depot CDR (CAD Hedged) – HD
- Honeywell CDR (CAD Hedged) – HON
- IBM CDR (CAD Hedged) – IBM
- JPMorgan CDR (CAD Hedged) – JPM
- Mastercard CDR (CAD Hedged) – MA
- McDonald’s CDR (CAD Hedged) – MCDS
- Meta CDR (CAD Hedged) – MVRS
- Microsoft CDR (CAD Hedged) – MSFT
- Netflix CDR (CAD Hedged) – NFLX
- NIKE CDR (CAD Hedged) – NKE
- Nvidia CDR (CAD Hedged) – NVDA
- PayPal CDR (CAD Hedged) – PYPL
- Pfizer CDR (CAD Hedged) – PEE
Procter & Gamble CDR (CAD Hedged) – PG - Salesforce.com CDR (CAD Hedged) – CRM
- Starbucks CDR (CAD Hedged) – SBUX
- Tesla CDR (CAD Hedged) – TSLA
- UnitedHealth CDR (CAD Hedged) – UNH
- UPS CDR (CAD Hedged) – UPS
- Verizon CDR (CAD Hedged) – VZ
- Visa CDR (CAD Hedged) – VISA
- Walmart CDR (CAD Hedged) – WMT
- Walt Disney CDR (CAD Hedged) – DIS
All these CDRs are traded on Neo Exchange and available on all major Canadian trading platforms like Wealthsimple and Questrade.
As mentioned, CDRs can be bought directly using typical investment brokerage accounts in registered or non-registered accounts. As always, I recommend Wealthsimple Trade due to its no-fee structure which allows maximizing the profits by eliminating trading fees.
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Notably, there is a built-in foreign exchange fee charged by CIBC for these CDRs. However, the percentage is a favorable value similar to what large institutions pay which is currently 1.1.358%.
Fantastic Fact: There are no management fees for CDRs.
CDRs’ investors receive the underlying dividends according to their percentage of holding and the tax works similar to any other form of investment. This means, expect a 15% foreign withholding tax.
Conclusion on Buying International or US Stocks in Canada
Owning international including US companies in Canadian Dollar simplifies the investment for Canadian investors. It also helps against the fluctuation of currencies plus saving time and saving on fees.
Best methods to own US Stocks in Canadian Dollar $CAD is to buy ETFs in $CAD or buy CDRs on NEO Exchange through most brokers.
What is your investment approach? Share your thoughts and experiences.
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