Diversifying Your Portfolio: How Canadians Can Invest in US Stocks at a Lower Cost

Investing in the stock market has always been seen as a complex and time-consuming endeavor, requiring a significant amount of capital and research. However, with the advancements in technology, online discount trading brokerages have made it more accessible and affordable for anyone to invest. (Updated my old post)

Introduction: No Commission Brokerages

One of the biggest breakthroughs in Canada in recent years has been the emergence of no commission online trading brokerages. These platforms offer $0 minimum and $0 commission trading, making it more attractive for new and seasoned investors alike. National Bank Direct Brokerage, Desjardin Online Brokerage, and Wealthsimple Trade are just a few examples of these types of brokerages that are currently available in Canada. These brokerages offer a wide range of investment options such as stocks, ETFs, bonds, and mutual funds.

I personally have experience with Wealthsimple Trade, as I am a client myself. It is a slick, simple, and mobile-accessible platform that is perfect for anyone who wants to start investing. Furthermore, with no minimum balance requirement, it is a great option for those who have less capital to invest. By eliminating commission fees, your money will go a lot further and help your investments grow faster. While the platform does not offer educational resources for new investors to learn about the stock market and make informed decisions, you can do this on free financial websites.

Read: Invested our TFSA contribution limit early.

Interested in Investing in US stock market

Another advantage of investing in the stock market is the opportunity to diversify your portfolio. By investing in the US stock market, you can allocate investments to various sectors and geographies, which can help to reduce the risk of allocating investments to just one sector or location. The US stock market has a wider range of companies and sectors, such as technology and healthcare, which are not as well represented in Canada. This can provide a great opportunity for investors to gain exposure to companies that they may not have had access to otherwise.

However, one of the biggest challenges of investing in the US stock market is the currency exchange. Many online brokerages charge a fee for converting CAD to USD, which can add up over time if you make frequent deposits and trades. Additionally, if you want to sell your US stocks, you will also incur a fee for converting your USD back to CAD. This can be a significant cost for investors and eat into your returns.

Read: Where we keep our cash.

Avoiding Currency Exchange Fees

To mitigate this issue, some investors opt to invest in CAD-hedged ETFs or use the Norbert’s Gambit strategy. These options can help investors avoid currency exchange fees but come with their own set of costs and complexities. For example, CAD-hedged ETFs may have higher management fees than unhedged ETFs, and the Norbert’s Gambit strategy can be difficult to execute for smaller amounts. Ultimately, as an individual stock investor, my strategy is to buy and hold household name blue chip companies and recoup the costs involved over time.

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My Final Thoughts

In conclusion, investing in the stock market is now more accessible and affordable than ever before. With the help of no commission online trading brokerages, anyone can start investing and diversifying their portfolio. By investing in the US stock market, you can also take advantage of the wider range of companies and sectors that are not as well represented in Canada. While there may be challenges, such as currency exchange, there are ways to mitigate these issues and stay invested for the long-term. It’s important to do your research and understand the costs and risks involved before making any investment decisions. Remember, investing in the stock market always comes with risks, but with the right knowledge and strategies, you can make informed decisions and potentially achieve your financial goals.

You may check out Vibrant Dreamer Combined Magic of Dividend Income Earnings Dec. 2022!

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Mr. Dreamer
1 month ago

Very nice. I am also a fan of CDRs to avoid FX fees and headache.

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