In addition to paying the difference between the commission/currency conversion, the exchange rate you exchange is also less US dollars. Fortunately, the Exchange Trade Funds (ETFs) provides several methods to hedge this method of weakening Canada. This is some options to be considered.
Unexplained our equity ETF
The first option you may have already been in the investment portfolio is our equity ETF. This is its working principle:
Vanguard S & P 500 Index ETF (VFV) is a popular. It has Vanguard S & P 500 ETF (VOO), which is denominated in US dollars, but does not use derivatives to eliminate currency fluctuations between us and Canadian currencies. As a result, when the US dollar was strengthened, the price of VFV rose, not the action of the S & P 500 index.
Why? Because VFV is denominated in Canada, its basic assets are in US dollars. When the US dollar appreciates, the number of holdings of the US dollar is increased by Canadian dollar. This currency effect is why VFV is better than its currency correspondence in the past ten years. The Vanguard S & P 500 Index ETF (CAD-Hedged) (VSP).
Within 10 years of backward time, as of December 31, compared with the Canadian dollar, the US dollar generally expressed appreciation. Compared with VSP’s 11.59 %, the total NAV rate of VFV has increased to 15.15 %. Therefore, if you already have VFV or another U.S. equity ETF that has not been required, then you can protect weak CAD inherently, or even benefit from a stronger dollar.
However, please remember that on the contrary, it is correct. If CAD is strengthened and depreciated, VFV may lose additional value beyond the S & P 500 Index movement. (Please read: “Is VFV easy to buy?”)
Global X dollar currency ETF (DLR)
If you have used Norbert’s Gambit to convert Canadian money into Americans at a brokerage company, then you may be familiar with the global X dollar currency ETF (DLR). If not, please know the process is very simple: you buy DLR with Canadian money, please ask your agent to “diary” and “diary” to USD -dominated DLR.U, and then sell DLR.U in US dollars.
In other words, DLR is not limited to currency conversion. It can also be used as cash management tools. By holding DLR, you have paid a long time while earning a risk -free rate. At present, it pays 4.44 % annualized distribution yields.
