If other readers of the blog have any insights to share, please speak up!

I’m considering opening a Questrade RSP account where I would like to hold Vanguard ETFs. I only plan on making trades a couple times a year to keep things balanced and I don’t plan on holding anymore than 4-5 ETFs. Is there any reason not to take advantage of Questrade’s option to hold and trade in USD? I understand it will cost me $5 each day I trade in USD, plus $20-$25 dollars for the 4-5 trades I’m planning on making twice a year, but I will save on the 0.5% currency conversion. As far as I can figure it, the USD account makes sense.

Any advice? Am I missing anything?

Thanks so much.

As a regular monthly contributor, you could always use both ETFs and index mutual funds in your RRSPs. For example, use ETFs for your equity holdings and an index fund for your bonds. Make your monthly contributions to the bond fund and then add to the ETFs once a year or so, if necessary. Dollar cost averaging is a good strategy, but not as important as regular saving.

Good luck with your investing!

In the case of the $50 QTrade fee, think of it like this: if a store charged $50 for a membership that gives you a 10% discount on merchandise, it would only be worth it if you spent more than $500 a year at that store (because your 10% discount would save you more than $50).

With QTrade, assuming you lose 1% of your dividends to foreign exchange fees, then you’d need to receive more than $5,000 in US dividends to make it worthwhile to pay a $50 fee. And to get $5,000 in annual dividends, you would need about $250,000 in US holdings. (US stocks on average yield about 2% these days.)

Holding US dollars in your account might also save you about $1 or so on trading commissions when buying and selling US stocks or ETFs. So again, unless you make a lot of trades, you’re wasting your money on the $50 upfront fee.

If you plan to buy or sell a US-listed ETF, you can do the math here, too. If you buy $10,000 worth of shares, the 1% fee would save you $100, so the $50 fee seems worthwhile. But if you’re going to hold that ETF for 10 years, is it worth it paying that $50 annually? Probably not.

Hope that makes some sense.

Other than that peeve, thanks for trying to make some sense out of these confusing rules!

If an investor wants to avoid the foreign exchange hit when selling and buying US-listed ETFs, they might want to check out discount brokers who offer what’s called “wash trading”. TD Waterhouse, for instance, automatically sets the same buy and sell exchange rates on US stocks or ETFs sold and purchased on the same day.