How To Do Norbert’s Gambit (currency conversion for the lowest possible cost)

I’m frequently asked by students of my investing course on how to do Norbert’s Gambit. In a nutshell, Norbert’s Gambit is the least expensive way to convert Candian currency to US currency, and vice versa. In other words, it’s converting CDN to USD, or USD to CDN without having to pay the very high fees that many currency providers charge. 

Some providers will even go as far as to say that they don’t charge any fees for converting currency, but what they actually do is adjust the currency exchange rate in their favour so that they make money from every dollar that you convert. In these cases, there may not be an explicit fee being stated, but if you are receiving less US or Canadian dollars than you are entitled to (as per the true exchange rate), then clearly you are still paying a fee as you’re basically overpaying for the currency, while the provider pockets the difference.

Why do Norbert’s Gambit?

The main reason that I use Norbert’s Gambit is to buy the ETF VTI in my RRSP. By buying VTI in the RRSP, you are able to bypass the withholding taxes on the US dividends, due to a tax treaty between the US and Canada. The fees (MER) on VTI is also lower than its Canadian equivalent ETF. 

Keep in mind that this is not a good technique for someone completely new to DIY investing. There are enough concepts and processes to wrap your head around as a new DIY investor, and so you definitely don’t need this to add to the complexity yet. 

How to do Norbert’s Gambit:

Below are my own private instructions on how to do Norbert’s Gambit. It’s worth mentioning that while the instructions below are fast and efficient for somebody that has done Norbert’s Gambit before, I think they are a little too brief for somebody that is completely new to Norbert’s Gambit.

To remedy this, I’m in the process of creating a video that shows you exactly how I do it. It will be me actually investing several thousand dollars in this way.

UPDATE: Instead of keeping you waiting, Justin from PWL actually already has a really good video on how to do it. I suggest you watch the video below, and read my text instructions below. Once you do both of those, you should feel comfortable enough to do your first Norbert’s Gambit. Remember that if you are nervous about it (I definitely was when I first did it), you can do it once with a really small amount of money. Yes, you’ll pay the $5-$10 commission for doing the trade in Questrade, but that’s a small price to pay if you’re going to be getting anxiety for a week while you’re waiting for the transaction to go through. 

Still, to ensure that you get the video when it’s released (along with future educational videos), make sure that you are on the Build Wealth Canada newsletter by signing up on the homepage here: buildwealthcanada.ca

I will be sending out the video to everyone that is on that newsletter so that’s the best way to make sure you get the video once it’s released.

Alright, with that said, here are my own private instructions. As a disclaimer, treat the below as general tips and education, and I am not telling you to do what I do and buy these specific investments because I don’t know your personal situation.

First, log into your Questrade account. I’m using Questrade because they let me buy all these ETFs for free instead of charging $5-$10 per trade like almost all other brokerages do in Canada. If you use my referral link, you’ll receive $50 in free trades from Questrade:

1. Buy DLR.TO in your RRSP

Buy this like any ETF you would normally buy, where you divide the total amount to invest by the share price. (Ex. $5,000/share price = how many units of that ETF to buy). Remember to round down as you can’t buy a fraction of a unit.

In the “Limit price” field, enter the exact “ask price” that you see.

2. Call 1-888-783-7866 or use the chat feature within Questrade to speak to one of their staff. 

Ask them to journal the DLR.TO shares to DLR.U.TO shares (this will turn them to USD).

If it’s your first time doing it, ask them to make sure your account is set up to have these in an RRSP in USD.

Here is a template/script that you can copy and paste into the chatbox when doing the live chat with their customer service:

Hi. I’m doing Norbert’s Gambit and I just purchased x units of DLR.TO in my RRSP (Account # X). Can you please journal the entire amount to DLR.U.TO.

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3. Wait for 4-5 business days for the switch to replace.

4. Check to make sure your holdings have transitioned over to DLR.U.TO.

To check this, go to the trading platform and look up your holdings. You should see that your holdings have changed to “DLR.U” if it’s done.

5. Sell using the exact Bid price.

6. Now you have US currency, and can buy US listed ETFs like VTI.

That’s it.

Let me know if something isn’t clear and I can be sure to include the answer in the video too.

Don’t forget to sign up on the homepage here to be informed when the video is released.

And, if you aren’t already a Questrade user, please use my referral link and as a “thank you” you’ll get $50 in free trades.

I hope you found that helpful. It has literally saved me thousands of dollars in currency exchange fees so while it may appear like a hassle, it’s really easy to do once you’ve done it once or twice, and is totally worth it as all those savings will now compound for you.

When is Norbert’s Gambit worth doing:

You can actually do Norbert’s Gambit with a really small amount (ex. $100) if you want to just get comfortable with the process first, and see it be successful once before doing a larger amount. Especially if it’s your first time doing it, you may be nervous and so doing it with a small portion can be a good idea so you’re not getting anxiety during the process. Just tell the Questrade agent that “Sorry, it’s my first time doing it so I just wanted to do a small amount first to get familiar with the process”.

The main disadvantage to doing it in small amounts is that first, it takes time for you to do. You have to do a bunch of transactions, contact support, etc. So, I personally don’t do it until I have a minimum of $10,000 to convert. But, it’s up to you.

The other negative is that while Questrade lets you buy ETFs for free, you do still have to pay when you sell (last time I checked it was something like $5 per trade). So, when you are going through Norbert’s Gambit, you are going to be paying the $5 or so to sell DLR.U (to get the US currency).

The $5 is not that big of a deal (unless you’re doing it multiple times a month), but it does take your time and attention to do. Hence I like to do it with amounts in the 5 figures ($10,000 minimum). But, for your first time, feel free to do a small amount like $100 just to start feeling comfortable with the process.

What I do is that while waiting for the $10,000 to build up, I put that cash to work in VUN which is the Canadian equivalent to VTI. You won’t get the tax advantages with VUN like you do with VTI, but at least you’ll have the money invested so it’s not just sitting there in cash and not growing at all (and is actually decreasing in value due to inflation). 

Enjoy the savings. They really add up over time. 🙂

Feel free to comment below, especially if there is any part that you don’t fully understand or is not clear.

Kornel