Comments on: Reader Question: How to Buy Vanguard ETFs? http://www.canadiancapitalist.com/reader-question-how-to-buy-vanguard-etfs/ Helping you invest and prosper Thu, 18 Mar 2010 13:41:32 +0000 http://wordpress.org/?v=2.9.2 hourly 1 By: Arthur C Perron http://www.canadiancapitalist.com/reader-question-how-to-buy-vanguard-etfs/#comment-210943 Arthur C Perron Sun, 14 Feb 2010 00:17:17 +0000 http://www.canadiancapitalist.com/2007/08/13/reader-question-how-to-buy-vanguard-etfs#comment-210943 I wish to buy the Vanguard ETF "VWO"...through my Self Investing Facility with a major bank. As I am in Canada, would this transaction require me to purchase the ETF in $ USA ? ......and if I proceeded to purchased the ETFs would my Cdn $ be hedged to avoid a foreign Exchange loss when I eventually sold my ETFs ? ..... Thanks in advance for your advice Art I wish to buy the Vanguard ETF “VWO”…through my Self Investing Facility with a major bank.

As I am in Canada, would this transaction require me to purchase the ETF in $ USA ? ……and if I proceeded to purchased the ETFs would my Cdn $ be hedged to avoid a foreign Exchange loss when I eventually sold my ETFs ? …..

Thanks in advance for your advice

Art

]]> By: Canadian Capitalist http://www.canadiancapitalist.com/reader-question-how-to-buy-vanguard-etfs/#comment-90811 Canadian Capitalist Sun, 09 Dec 2007 13:31:10 +0000 http://www.canadiancapitalist.com/2007/08/13/reader-question-how-to-buy-vanguard-etfs#comment-90811 Ryan: I haven't run into this problem yet because initially most of your portfolio growth will come from contributions and you can simply rebalance when contributing. Also, if you have an account with a broker that offers wash trades, you pay for the currency conversion only if you switch between currencies. For example, selling XIC to buy VTI or vice-versa. I prefer VTI over XSP because I can a one-ETF exposure to the entire US market (including small-caps) and I don't think that over the long run investors need currency hedging. Ryan: I haven’t run into this problem yet because initially most of your portfolio growth will come from contributions and you can simply rebalance when contributing.

Also, if you have an account with a broker that offers wash trades, you pay for the currency conversion only if you switch between currencies. For example, selling XIC to buy VTI or vice-versa.

I prefer VTI over XSP because I can a one-ETF exposure to the entire US market (including small-caps) and I don’t think that over the long run investors need currency hedging.

]]> By: Ryan http://www.canadiancapitalist.com/reader-question-how-to-buy-vanguard-etfs/#comment-90326 Ryan Sat, 08 Dec 2007 01:54:28 +0000 http://www.canadiancapitalist.com/2007/08/13/reader-question-how-to-buy-vanguard-etfs#comment-90326 Oh, sorry, I meant to say that this rebalancing cost occurs when you are holding your portfolio inside an RRSP. RRSPs hold Canadian currency only, so as you buy and sell you are switching in and out of Canadian currency. If your portfolio is outside an RRSP then you only pay the one fee up front to convert your money to US funds. Oh, sorry, I meant to say that this rebalancing cost occurs when you are holding your portfolio inside an RRSP. RRSPs hold Canadian currency only, so as you buy and sell you are switching in and out of Canadian currency. If your portfolio is outside an RRSP then you only pay the one fee up front to convert your money to US funds.

]]> By: Ryan http://www.canadiancapitalist.com/reader-question-how-to-buy-vanguard-etfs/#comment-90323 Ryan Sat, 08 Dec 2007 01:19:47 +0000 http://www.canadiancapitalist.com/2007/08/13/reader-question-how-to-buy-vanguard-etfs#comment-90323 When buying US ETFs for a long term portfolio you are presumably also going to be rebalancing it. At 1% to sell and 1% to buy, this is an additional 2%. If you're rebalancing 10% of your portfolio per year, this is like adding .2% to your MERs. So is it really cheaper to buy US ETFs? In terms of selection you are kind of stuck if you only want to buy Canadian. However, have you looked at the long term correlation between the S&P500 (XSP) and the total US market (VTI)? It's practically identical. When buying US ETFs for a long term portfolio you are presumably also going to be rebalancing it. At 1% to sell and 1% to buy, this is an additional 2%. If you’re rebalancing 10% of your portfolio per year, this is like adding .2% to your MERs. So is it really cheaper to buy US ETFs?

In terms of selection you are kind of stuck if you only want to buy Canadian. However, have you looked at the long term correlation between the S&P500 (XSP) and the total US market (VTI)? It’s practically identical.

]]> By: Canadian Capitalist http://www.canadiancapitalist.com/reader-question-how-to-buy-vanguard-etfs/#comment-65433 Canadian Capitalist Thu, 06 Sep 2007 02:55:52 +0000 http://www.canadiancapitalist.com/2007/08/13/reader-question-how-to-buy-vanguard-etfs#comment-65433 Earl: When I buy VTI, I plan to hold it for a long time (20 years or more). Yes, I incur a currency conversion charge of 1% when initially buying VTI. But, even if VTI never increased in value, you can break even after roughly six years by choosing VTI over XSP. Since XSP is mostly in large-caps, you would likely want small-cap exposure through another ETF, which you need to buy. With VTI, in a single ETF, you have exposure to the entire US market, including small-caps. Earl: When I buy VTI, I plan to hold it for a long time (20 years or more). Yes, I incur a currency conversion charge of 1% when initially buying VTI. But, even if VTI never increased in value, you can break even after roughly six years by choosing VTI over XSP. Since XSP is mostly in large-caps, you would likely want small-cap exposure through another ETF, which you need to buy. With VTI, in a single ETF, you have exposure to the entire US market, including small-caps.

]]> By: Earl http://www.canadiancapitalist.com/reader-question-how-to-buy-vanguard-etfs/#comment-65387 Earl Wed, 05 Sep 2007 22:32:53 +0000 http://www.canadiancapitalist.com/2007/08/13/reader-question-how-to-buy-vanguard-etfs#comment-65387 The usual commission will still apply. What I'm talking about is the currency conversion cost that brokerages charge you in buying and selling. When you purchase cdn stocks with cdn currency there's no currency cost, only the cost in making the trade. But when you purchase a us stock with cdn currency they first exchange the cdn to us currency and then buy the stock. Let's say the exchange rate is 1.05, your brokerage might charge you 1.07 for the exchange and so it's an additional cost on top of the regular rate of (Amount x .02) If you buy and sell frequently that this is an issue, hence CC's post on "wash" trades. I actually saw this calculator that I thought was interesting, but haven't played with yet at http://fxtrade.oanda.com/spreads/SpreadCostCalc.shtml The usual commission will still apply. What I’m talking about is the currency conversion cost that brokerages charge you in buying and selling.

When you purchase cdn stocks with cdn currency there’s no currency cost, only the cost in making the trade.

But when you purchase a us stock with cdn currency they first exchange the cdn to us currency and then buy the stock. Let’s say the exchange rate is 1.05, your brokerage might charge you 1.07 for the exchange and so it’s an additional cost on top of the regular rate of (Amount x .02)

If you buy and sell frequently that this is an issue, hence CC’s post on “wash” trades. I actually saw this calculator that I thought was interesting, but haven’t played with yet at http://fxtrade.oanda.com/spreads/SpreadCostCalc.shtml

]]> By: Robert Ross http://www.canadiancapitalist.com/reader-question-how-to-buy-vanguard-etfs/#comment-64398 Robert Ross Thu, 30 Aug 2007 17:36:59 +0000 http://www.canadiancapitalist.com/2007/08/13/reader-question-how-to-buy-vanguard-etfs#comment-64398 I have bought Vanguard funds through my TD Waterhouse Self Directed RRSP account with no problem. They are trade like a stock so the usual commission applies. I have bought Vanguard funds through my TD Waterhouse Self Directed RRSP account with no problem. They are trade like a stock so the usual commission applies.

]]> By: Canadian Capitalist http://www.canadiancapitalist.com/reader-question-how-to-buy-vanguard-etfs/#comment-62992 Canadian Capitalist Tue, 21 Aug 2007 16:54:57 +0000 http://www.canadiancapitalist.com/2007/08/13/reader-question-how-to-buy-vanguard-etfs#comment-62992 Earl: I believe VTI would be cheaper to own in the long run compared to XSP, if you are willing to accept foreign exchange risk (the risk of C$ appreciating a lot against the USD). I think buying VEA as opposed to XIN is an easier decision. I'll make a post on this topic. Earl: I believe VTI would be cheaper to own in the long run compared to XSP, if you are willing to accept foreign exchange risk (the risk of C$ appreciating a lot against the USD).

I think buying VEA as opposed to XIN is an easier decision. I’ll make a post on this topic.

]]> By: Earl http://www.canadiancapitalist.com/reader-question-how-to-buy-vanguard-etfs/#comment-62904 Earl Tue, 21 Aug 2007 04:49:07 +0000 http://www.canadiancapitalist.com/2007/08/13/reader-question-how-to-buy-vanguard-etfs#comment-62904 For purchasing ETF's on foreign exchanges, I believe you incur a currency conversion which essentially charges a bank rate on the monies transfered. I noticed that in the sleepy profile you purchase the VTI ETF which is listed on the NYSE, and so this currency conversion would apply. I know that the VTI offers a lower MER than the equivalent iShares ETF, but do you think that the saved MER is worth the currency exchange cost? I'm just wondering if I should buy all iShares equivalent since they're tracked against CDN currency. I may also be unclear in this, so please let me know. Example: US to CDN might be 1.06 but a discount brokerance might charge 1.055 in the buying and then charge when you sell the ETF. For purchasing ETF’s on foreign exchanges, I believe you incur a currency conversion which essentially charges a bank rate on the monies transfered. I noticed that in the sleepy profile you purchase the VTI ETF which is listed on the NYSE, and so this currency conversion would apply.

I know that the VTI offers a lower MER than the equivalent iShares ETF, but do you think that the saved MER is worth the currency exchange cost?

I’m just wondering if I should buy all iShares equivalent since they’re tracked against CDN currency. I may also be unclear in this, so please let me know.

Example: US to CDN might be 1.06 but a discount brokerance might charge 1.055 in the buying and then charge when you sell the ETF.

]]> By: Anonette Anon http://www.canadiancapitalist.com/reader-question-how-to-buy-vanguard-etfs/#comment-61915 Anonette Anon Tue, 14 Aug 2007 21:45:02 +0000 http://www.canadiancapitalist.com/2007/08/13/reader-question-how-to-buy-vanguard-etfs#comment-61915 JonD: Thank you! CC: BTW, I love your blog. Read it everyday. Cheers. JonD: Thank you!

CC: BTW, I love your blog. Read it everyday. Cheers.

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