Norbert's Gambit is a strategy some investors use to convert money between Canadian dollars (CAD) and U.S. dollars (USD) in a brokerage account. It was popularized by Canadian financial adviser Norbert Schlenker, and it involves buying dual-listed stocks in one currency and selling them in the other to avoid paying hefty brokerage fees.
Norbert’s Gambit can be a good strategy for investors in Canada to save money on fees if you’re moving a lot of money. But there are some risks and drawbacks, and it may not be worth the trouble if you’re converting less than about $1,000.
We’re breaking down how and when to use this financial maneuver to your advantage and how much you can save, plus sharing tips on when it’s not worth it and alternatives you can try instead.
Key Takeaways
- Norbert's Gambit is a method used to exchange large amounts of Canadian dollars for U.S. dollars.
- This technique involves opening an account with an online broker, buying shares of DLR.TO, exchanging them for shares in DLR.U.TO, and then selling these shares.
- Norbert's Gambit may not be worth it if you're only exchanging a small amount of money.
- Alternatives include using a credit card with no FX fees, opening a USD bank account, and/or using a virtual multicurrency account.
What is Norbert’s Gambit?
Norbert’s Gambit might seem complicated at first glance, but it's actually straightforward enough for even new investors. It works by purchasing shares of an exchange-traded fund (ETF) that trades on both the Canadian and U.S. stock markets.
Norbert's Gambit is a fairly simple technique to employ and there’s no need to go to a bank or currency exchange. You just need to have the proper investment accounts set up before you convert your funds.
How Norbert’s Gambit works
Here are the basic steps when using Norbert's Gambit to convert CAD to USD:
- Open an account with an online broker (also referred to as a discount brokerage)
- Buy shares of DLR.TO in CAD, an ETF commonly used to conduct Norbert’s Gambit
- Exchange (or "journal") your DLR.TO shares for USD shares in DLR.U.TO
- Sell your DLR.U.TO shares
What are DLR.TO and DLR.U.TO? DLR is Horizon’s U.S. Dollar Currency ETF. It’s the most common investment fund used for Norbert’s Gambit because the price is equivalent between currencies and there’s little risk of the stocks fluctuating unpredictably.
How long does Norbert’s Gambit take?
It takes between 3 and 5 days to complete a Norbert's Gambit transaction, including:
- About 2 days for the DRL.TO or DLR.U.TO shares to become available within your account
- 1 day to journal your shares
- Another day, possibly 2, before your after-sale cash is available
When is Norbert's Gambit worth it?
The most obvious time to use Norbert's Gambit is when you have a large amount of money that you want to convert from Canadian into American dollars. But even so, there are other details to consider when deciding whether it’s worth it.
Ask yourself these questions:
- Are you converting more than $1,000 in Canadian dollars?
- Will you be able to save more in fees than if you exchanged cash with a bank?
- Are you able to wait up to 5 business days for the transaction to complete?
- Do you want to buy U.S.-listed ETFs in an RRSP account?
If you've answered yes to any of these, it's probably a good idea to proceed with Norbert's Gambit. Otherwise, consider an alternative conversion method.
When to avoid Norbert's Gambit
If any of the following are true, reconsider whether using the Norbert's Gambit conversion strategy is the best choice:
- You need to convert less than $1,000
- You're worried about currency risk
- You want to buy U.S.-listed ETFs in a TFSA or non-registered account
- The market is especially volatile
If you're exchanging smaller amounts of money – say, less than $1,000 – you'll actually pay less in fees if you use the currency conversion service at your bank.
Norbert's Gambit and taxes
If you're using an unregistered account to conduct these transactions, there will likely be some tax implications. If you're using an RRSP or other registered account, capital gain taxes aren't a concern (though you'll be charged withholding tax if you withdraw from your RRSP).
The exchange rate between Canadian and U.S. dollars changes quickly and frequently. If your brokerage doesn’t allow you to journal the ETF between accounts until the buy trade settles – which can be up to 4 business days – the price of your stocks could fluctuate. If the exchange rate goes down, you'll have a loss. And if it goes up, you'll have capital gain, which means you’ll owe taxes on the trade.
How much can you save by using Norbert’s Gambit?
The more money you exchange, the more you’ll save.
Here’s an example: Let's say you wanted to exchange $10,000 CAD for USD. Since banks charge an average of 2.5% to convert currency, you would pay approximately $250 just for doing it at a bank.
If you were to exchange the same amount of money using Norbert’s Gambit, you would only pay commission fees. For instance, Questrade doesn’t charge customers a fee for buying ETFs, so you’d only pay about $5 - $10 in commission fees for selling your DLR.U.TO shares.
That said, if you're only looking to exchange a small amount of money, you'll likely be better off making the exchange at the bank rather than using Norbert's Gambit.
How to use Norbert's Gambit using Questrade
Here's how to use one of Canada's favourite online brokers to implement Norbert's Gambit: Questrade.
1. Open an account
If you don't have a Questrade account, you'll need to open one.
- Visit the Questrade homepage
- Select the green "Open an Account" button in the right-hand corner of the screen
- Choose which type of account you’d like – for this purpose, either a TFSA, RRSP, or margin account will work.
Note: If you choose to open a registered account, it's better to keep the USD funds in your account so you don't have to pay fees on withdrawals, especially with an RRSP. You can use those funds to purchase US-listed ETFs.
If you'd like a bit more info before committing to Questrade, you'll find it here:
Questrade is one of Canada's top online investment platforms. With very low fees, including no-fee ETF trading, commission-free stock trades, and plenty of investment types, Questrade just about covers it all.
- Total transparency with fees
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$25 GeniusCash + $50 bonus for funding a new account, and $0 commissions on stocks & ETFs2. Purchase DLR.TO
This is where that specific ETF we mentioned comes in. The one you want to buy is called Horizons U.S. Dollar Currency and uses the ticker symbol DLR.TO.
Calculate precisely how many shares you'll need by taking your CAD amount and dividing it by the ETF's asking price.
Let's say you have $5,000 you want to exchange and the asking price is $14.50 per share. The calculation would look like this:
$5,000 / $14.50 = 344 shares (round down)
So in this case, you'll enter 344 as the quantity you'd like to buy. Your order should be filled immediately as long as you’re purchasing during regular business hours.
Questrade doesn't charge for purchasing ETFs, so that's less fees you have to worry about.
3. Journal the shares and wait for the transaction to complete
When you declare that you want your CAD shares turned into USD (or vice versa), it's called "journalling."
Questrade doesn’t automatically journal your shares, so you’ll need to contact a representative and request to have them journalled.Be ready with the following information:
- Your account number
- Original (DLR.TO) and destination ticker symbols (DLR.U.TO)
- Quantity of shares you want to exchange
It can take anywhere from 2 - 4 business days for this transaction to "settle." You'll know the process is complete when you actually see the DLR.U.TO shares in your account.
While you're waiting for this, you don't need to worry about whether the conversion rate has changed. Yes, the rate can climb or dip during these few days, but the rate you pay is locked in as soon as you authorize the transaction.
4. Sell your shares
Once you see the DLR.U.TO shares in your account, you're in possession of US funds. At this point, you can sell those shares and cash out.
The easiest way is to use the Positions tab on your Questrade account overview page, click on the position, and choose "Sell." This fills in all the necessary information for you, and all you have to do is select "Send Order."
Note that while Questrade doesn't charge fees to buy an ETF, they do charge 1 cent per share to sell them, with a minimum fee of $4.95 and a max of $9.95.
In our example, since you’re selling 344 shares, your fees would be the minimum $4.95.
5. Transfer your money out of the account
The process for Norbert's Gambit Questrade is now complete and you're free to withdraw your USD funds. Withdrawing is pretty simple:
- Log into your account
- Choose "Move Money"
- Select "Withdrawal"
- Select the account you want to withdraw money from
- Choose the currency and dollar amount you'd like to transfer
- Decide which withdrawal method and destination account you prefer
See here for more detailed steps for Questrade: How to place a withdrawal request.
There are no additional fees for an EFT withdrawal to a Canadian bank account. If you’re wiring the funds to a U.S. account, you'll be charged $30 USD.
You can also choose to keep the funds in your Questrade account and use it for other investment opportunities.
Using Norbert's Gambit with TD Direct Investing
Another popular online broker option is TD Direct Investing. Using Norbert's Gambit with this broker involves a very similar process as when using Questrade, but there are a few key differences.
Let's take a look at what these are.
1. Open a registered account with TD Direct Investing
Norbert's Gambit with TD Direct Investing is mostly used to exchange funds within your registered accounts.
To get started with TD Direct Investing, head to the home page and click Open An Account. From here, you can choose the type of account you'd like to use – just make sure that it's a registered account.
You’ll need both USD and CAD accounts – you may need to call and speed to a TD Direct Investing representative to set up the USD account.
You can learn more about TD Direct Investing and setting up accounts here:
Like all of the Big 5 Banks, TD offers convenient online investing tools that regular people (not just professional traders) can use to manage their own investments. The TD Direct Investing Platform has high per trade fees, but does offer some pretty interesting educational materials and opportunities to help new and advanced investors.
- No minimum investment needed to open an account
- Some transfer fees may be reimbursed
- Active trader discount
- Variety of trading and investing platforms
- Wide array of free tools and market research
- Cash back offer
- High fees per trade can add up fast
- $25 per quarter inactivity fees
- No practice accounts
- No way to automate certain account activities
- Video series to learn about investing
- Daily live, interactive Master Class workshops
- Free investment research and tools
- TFSA
- RRSP
- RESP
- RRIF
- LIRA
- LIF
- RDSP
- Cash account
- Margin account
- FHSA
- Stocks
- Mutual Funds
- ETFs
- Options
- Fixed Income
- GICs
- Cryptocurrency ETFs
2. Look for and buy DLR.TO
Here’s what to do once you’re ready to buy the ETF:
- Log into your account
- Click "Buy/Sell"
- Type "DLR" into the symbol box and select “DLR.TO”
Once you see the asking price for DLR.TO, calculate how many shares you need by dividing the amount of Canadian dollars you want to exchange and divide it by the asking price.
So if you have $5,000 to convert and the price is $12 per share, your calculation should look like this:
$5,000 / $14.50 = 344 shares (round down)
Under "Action", select "Buy" and enter the number of shares you want to buy – in this case, 344. Type in the asking price as well. Double-check that you’re using your CAD account, then enter your password to complete the trade.
3. Wait 2-3 days for the transaction to complete
The buying process can take up to 5 days to process.
Just like with Questrade, you don't have to worry about the exchange rate fluctuating while you wait for the purchase to complete. When you’re transferring funds from CAD to USD, your rate is essentially locked in when you hit the button to buy.
Once you confirm that the shares are in your account, go to the "Accounts" tab and select "Security Transfers." Enter DLR.TO into the search bar and proceed to move all the shares into your USD account. Once you see that they've been moved, it's time to sell them.
4. Convert the stock and then sell it
Navigate back to the "Buy/Sell" screen and enter "DLR.U" into the symbol box, then go ahead and sell all of your DLR.TO shares.
Again, it will take a few days for everything to process, but once it does, you'll have the desired USD available in your TD Direct Investing account.
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$25 GeniusCash + Delicious meal choices with fresh ingredients + Front-door delivery.Using Norbert’s Gambit with Wealthsimple
At this time, Wealthsimple does not support Norbert’s Gambit. However, Wealthsimple’s currency conversion fee is 1.5%, which is less than the average 2.5% offered by banks.
Alternatives to Norbert's Gambit
If you'd rather avoid using Norbert's Gambit, there are a few alternatives that could save you money over exchanging currency at the bank, including opening a USD bank account so you can easily move funds back and forth.
| Alternative | Details | Suggested products |
|---|---|---|
| Credit card with no FX fees | * Typical FX free is around 2.5%, but this is waived with certain credit cards * Your available credit is in CAD and monthly payments are made in CAD, but you can spend in other currencies | * Scotiabank Gold American Express® Card * Scotiabank Passport Visa Infinite * Home Trust Preferred Visa |
| USD bank account | * Holds USD even though you live in Canada * Easy currency conversions * Earns interest | * EQ Bank US Dollar Account * Tangerine US Dollar Savings Account * Scotiabank U.S. Dollar Daily Interest Account |
| Virtual bank account | * Can hold various currencies * Low or no monthly fee * Inexpensive money transfers | * Wise |
FAQ
What is Norbert's Gambit?
Norbert's Gambit is a method used for converting Canadian funds to US funds, or vice versa. It's often preferable to simply exchanging currency at the bank, especially for large amounts, as it saves on the conversion fees.
Is Norbert's Gambit legal?
Yes, Norbert's Gambit is a completely legal way to exchange your currency. While this method does allow you to bypass the usual conversion and bank fees, it's a legitimate, legal maneuver that requires paying commission fees and applicable taxes.
Is Norbert's Gambit worth it?
Using Norbert's Gambit can be worth it, depending on the situation. If you're looking to exchange large amounts of CAD to USD (or the other way around), this is an excellent choice that can save you considerable amounts of money.
How much do you save using Norbert's Gambit?
This depends on how much money you're trying to convert and how much your online broker charges for commission, etc. It's safe to say, though, that you'll be able to save money when exchanging $1,000 or more.
How long does Norbert's Gambit take?
The whole process can take up to 5 days to complete. You'll have to journal your shares between ETFs – from DLR.TO to DLR.U.TO – before selling the shares, and this can take some time.
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