Investors should know

Canadian investors love to think they are true masters of their financial kingdom when in practice most studies show many of us don’t realize small insights that could be very beneficial. We’ve uncovered some interesting things, shown below, that every investor should know. What are your thoughts? Have any more? Leave them in the comment section below.

  1. By far the cleverest way to save the most in exchange fees when converting Canadian dollars into U.S. dollars is by way of Norbert’s Gambit.  It’s fairly simple.  To avoid unnecessary fees you will need to buy a Canadian stock in Canada and then transfer it over (aka journaling over) to the stock’s existing U.S. side.  Most investors like to use DLR.TO (Horizon’s US Dollar Currency ETF) held in Canadian currency and its twin sister DLR.U.TO (Horizon’s US Dollar Currency ETF) held in USD currency.  To convert from CAD to USD, you’d buy several shares of DLR.TO and then journal them over to DLR.U.TO and then sell those shares.  And that’s it! You’ve converted CAD to USD.  No exchange fees!  There are, however, potential commission charges for buying/selling but the savings is remarkable.
  2. Corporate directors in public companies can be personally sued if they fail at their fiduciary duties and push less than truthful press releases to help boost share prices.  Although there will be some levels of exaggeration by these directors they will, for the most part, put out what they believe serves their company’s shareholders best.
  3. Don’t hold dividend distributing foreign stock in TFSA registered accounts.  Although TFSA accounts are very popular many Canadians don’t realize  there is a withholding tax applied on dividends.  Most don’t notice because this tax is taken before proceeds are given.  The Canada/US tax treaty applies a 15% withholding tax on U.S. dividends onto Canadians.  RRSP tax deferred accounts are exempt.  Although this treaty exists the W-8BEN IRS form must be filed with your brokerage beforehand or you will instead be subject to a 30% withholding tax.  Yikes!  There is a foreign tax credit that one can apply for to reclaim some of this 15% but it only applies to non-registered accounts (e.g. a margin account).
  4. Over analyzing earnings, fundamentals, management, statements, and every other detail you can find about a stock is not as efficient as paying attention to the sector itself.  Studies consistently show that more than 90% of investment returns are determined by the sector, not by the stock.  Meaning, when an entire sector gets positive news all stocks under that sector move in the same positive direction.
  5. Never enter markets before 10am and after 3:30pm.  Experience shows the biggest chaos happens in the early hours of stocks due to earnings’ releases and other news. Investors tend to panic easy around this time, not wanting to miss the boat on the new findings.  Also there is the issue with price orders that get triggered near the end of the trading day making stocks fluctuate wildly after 3:30pm resulting in more chaos.  Learning to relax and avoiding the panic will help one execute better trades.


  1. Correct. Most don’t realize about the foreign tax credit that CRA offers to reclaim back some of that 15%. There are some cases where holding US stock in a tfsa which pays dividends has been handy. Not ideal but it has helped in my special case.

  2. I find it funny that most discount brokers don’t tell you about this better way of exchanging currencies. I figure because they have their own way of exchanging currency (e.g. im with Questrade and they hae an area for it) which make them more money.

    I only found out about Norbert’s a few months ago. Works like a charm.

  3. I assume all brokerage companies can do this norbert trick online and/or asked? But how long does the conversion process take if one is responsible of selling these shares?

  4. Thanks for this. Never heard of this Gambit thing to save on fx rates. Although i am still vague on the steps i might give it a try. I’ve been with VCE for a while and so its an easy process but if this wills ave me more then its worth a shot. Thanks

  5. It’s still a good idea to do due diligence when deciding if a stock is worth buying/selling. Not just looking over sectors.

  6. So if i get dinged for 30% withholding is there a way to recover that overage of 15% for the IRS? I would imagine so since the treaty exists.

  7. Oh wait, so i do have to file a w8ben despite the treaty? What? Ahh maybe its because although there is a lower rate they still want to know which of us want to make use of it. I just assumed once the treaty was in affect our rates were all 15%. Good to know.

  8. If you remember the Facebook IPO fiasco you will know how management likes to drum up things, fake and all, to push up stock prices. We know how that went in the early days.

  9. Personally, i find its gets more volatile in the mid-day period. I usually execute more orders early in the morning.

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