We could assume
currency conversion costs of 1.5 % each way, annualized stock market returns of 7 %, hedging penalty of 1 % and work out who comes out ahead for (1) US dollar remains the same.
For a 25 year term, annual returns of 7 %, currency - hedging lag of 1.5 %, one - way
currency conversion cost of 1.5 %, we find that (no surprises here) not hedging is advantageous if the foreign currency appreciates or remains the same against the Canadian dollar.
Not exact matches
However, the
currency conversion of my country to the USA has made the
cost to pursue the program far above my practical reach.
In fact, with 50 percent
of the portfolio in US ETFs, the portfolio took an initial 0.75 % (50 %
of 1.5 %) hit in
currency conversion costs alone.
Where the instrument
currency is different to the account
currency,
currency conversions of trading
costs as well as profit / loss from trading activities are executed using the FX Spot mid-price at the time
of closing the position, plus / minus 0.5 %.
Currency conversions of trading
costs as well as profits and losses from trading activities are executed at the mid FX Spot rate when you close the position, plus / minus 0.5 %.
1 Analysis
of costs and
currency conversions based off data collected from www.expatistan.com and www.numbeo.com on 28th June and 10th July 2017.
Reduce foreign exchange and
conversion costs when you trade and settle in the
currency of the market
Depending on the size
of your account at iTrade and your RRSP holdings, I'd weigh the
cost of the US - Friendly RSP against how much I'm paying in
currency conversions.
If you are converting a large amount
of money, you should find several ways to convert and look at the «real»
conversion rate (how much source
currency it
costs you vs. how much target
currency you get) and decide based on that.
Based on comparing the
conversions I experienced over the last year compared to the bank
of Canada noon rate for US dollars the
currency conversion cost is 1.7 % over the spot price each way.
It would be nice to have enough investors complain so that brokers stopped charging more than 10X their real
costs of currency conversion.
It probably makes sense for DIY investors to use Canadian - listed ETFs in their taxable accounts — even though their MERs are slightly higher — to avoid the
cost of currency conversion.
Even in an RRSP, the total difference
of 14 basis points is not likely to outweigh the
cost of currency conversion in smaller accounts.
In fact, with 50 percent
of the portfolio in US ETFs, the portfolio took an initial 0.75 % (50 %
of 1.5 %) hit in
currency conversion costs alone.
EverBank claims that the
currency conversion rate that you pay (e.g. the
cost incurred during
currency exchange) will be within 1 %
of the market rate for the foreign
currency of your choosing.
from above: «Unlike some
of their discount brokerage peers, CIBC Investor's Edge does not have US dollar registered accounts so clients will have to factor in
currency conversion fees into their
costs if they plan on trading US - listed securities.»
The TD e-Series US Index Fund has a MER
of 0.33 % but the cheapest equivalent ETF
costs just 0.09 %, which would imply that the swap could be made with $ 4,200 (ignoring the
cost of currency conversion).
I wouldn't call the VEA versus TD e-Series fund decision a no - brainer because you have to figure in the initial
cost of currency conversion (1 %
of your initial investment) and the commissions paid to buy VEA into your equation.
Of course, ignoring foreign
currency conversion charges, which typically
costs about 1 %, does not result in a very accurate estimate.
Usually, you can «wire» transfer money from your BoA account to the account back home, but that is usually comes at a fee
of about $ 30 - $ 50 per transfer (in the US, additional fees may be charged at the receiving end +
currency conversion costs).
Lastly the downside to some
of investing with Vanguard is all
of their funds are USD based, so you have the
cost of currency conversion and risk
of it going up or down to be aware
of.
(1) High
cost of retail foreign
currency conversions and (2) US Estate tax issues.
-- the term
of investment (in years)-- annual returns —
Currency - hedged fund tracking error — Currency conversion cost — size of currency appreciation / depreciation over the investm
Currency - hedged fund tracking error —
Currency conversion cost — size of currency appreciation / depreciation over the investm
Currency conversion cost — size
of currency appreciation / depreciation over the investm
currency appreciation / depreciation over the investment term
However, the
currency conversion of my country to the USA has made the
cost to pursue the program far above my practical reach.
These used to be called
currency conversion fees because card issuers said they imposed them to cover the
cost of converting a foreign transaction into U.S. dollars, but now they're called foreign transaction fees because they're charged even for deals made entirely in dollars.
Constantly and judiciously maintained a fleet
of wide strategic global sourcing contracts while conducting thorough reviews and analysis
of local
currency, supplier, location and
cost in order to continuously update items in the catalog to the appropriate region, vendor and
currency conversion