Norbert’s Gambit: A Cheaper Way to Buy US Dollars

Norbert’s Gambit: A Cheaper Way to Buy US Dollars
Investing Jul 17, 2024 4 min read
Norbert’s Gambit: A Cheaper Way to Buy US Dollars

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What is Norbert’s Gambit?

Norbert’s Gambit is a method Canadian investors use to get a cheaper exchange rate between CAD to USD, prior to purchasing US equities.

This method is the alternative to the hefty currency conversion fees that brokerages charge.

These conversion fees vary, with some brokerages charging up to 3 percent on each transaction.

With Norbert’s Gambit, only regular commission fees are paid, saving potentially hundreds of dollars per transaction. 

Norbert’s Gambit is commonly misspelled as Norbit’s Gambit, however the man behind the concept is Norbert Schlenker of Libra Investment Management.

Steps To Complete Norbert’s Gambit

1. Fund your account with CAD

The first step is to have a brokerage account open that is funded with Canadian dollars.

Since this method still requires regular commission fees to be paid, Norbert’s Gambit is only worthwhile when you are converting larger sums of money.

Since Norbert’s Gambit requires you to first buy a Canadian stock and then sell a US stock,  you will have to pay commissions on two transactions.

Larger transactions make more sense for those trying to take advantage of this strategy as the fees roll into your ‘cost of conversion’.

The commission fees can range from $1.00 – $20.00 per transaction, depending on brokerage.

2. Purchase shares of DLR.TO

The second step is to purchase shares of a company that is listed in both CAD and USD.

An example of a stock to perform Norbert’s Gambit with is DLR.TO.

Decide how much money you wish to convert from CAD to USD and divide that number by the price of DLR.TO to determine how many shares to buy.

For example, if you want to convert $6,000 CAD to USD and DLR.TO was trading at $12 a share, then you would buy 500 shares. 

3. Journal shares to DLR.U.TO

After purchasing your shares, contact the customer support line for your brokerage and request that the shares be “journaled” over.

The customer service representative will then convert your DLR.TO shares (traded in CAD) into DLR.U.TO shares (traded in USD).

In general, it will take a couple of business days for the transaction to process.

After a short wait, your shares should be converted into DLR.U.TO.

To confirm, check your brokerage account and ensure your shares are now denominated in USD. 

4. Sell shares of DLR.U.TO

At this step, you should have shares in your account that are ready to be sold.

After selling these stocks that you have journaled over, you will see USD in your account balance.

You have successfully avoided paying currency conversion fees, and your USD is now ready to invest in any US stock of your choosing. 

How Much Can I Save With Norbert’s Gambit?

To illustrate the benefits of Norbert’s Gambit, we can look at an individual with $10,000 CAD trying to convert into USD.

Assuming on average a brokerage in Canada charges a conversion fee of 2%, an individual not using Norbert’s Gambit would be paying $200 to convert their CAD into USD.

In comparison, assuming a commission of $4.99 per trade, an individual using Norbert’s Gambit would be paying $9.98 in transaction fees (two transactions, one buy and one sell).

Using Norbert’s Gambit would save this individual over $190!

Risks of Using Norbert’s Gambit

  • Consider the time it will take to complete the transaction. As the journaling over of shares needs to be done through the customer service team, conversion will usually take 1 to 2 business days but sometimes even longer. After that, selling and settling will take another 2 business days. Having money locked up means you will not be able to use it until the transaction is complete.
  • The lock-up of funds during the journaling and settling process also open you up to the risk of currency fluctuations. In the day while your transaction is processing / settling, the CAD-USD exchange rate can fluctuate, leading to less USD in your account than originally anticipated.
  • One last thing to consider is what type of account you plan to use to hold U.S equities. For RRSP accounts, there are no concerns as U.S. withholding taxes do not apply. This is because the U.S. government views RRSPs as tax-deferred registered accounts. However, this is not the case with TFSAs, which are not recognized as registered accounts. Any dividends received from U.S. stocks held in a TFSA are subject to withholding taxes.

Don’t forget!

Exchange rates are constantly changing so look to complete your Norbert’s Gambit transaction when there isn’t a lot of expected volatility in the CAD-USD pair.

Frequently Asked Questions

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Is Norbert's Gambit legal?

Yes, Norbert’s Gambit is entirely legal. The entire process from beginning to end can be done through your brokerage platform. When it's time to journal shares over, most customer support teams will have already have an understanding of the process. As long as the steps outlined here are followed, investors can be confident that this method can be done without legal implications.

Why is it called Norbert's gambit?

Norbert’s gambit is named after Norbert Schlenker, a Canadian who discovered this technique. Norbert founded Libra Investment Management and in the course of his work he developed this method of transferring Canadian dollars into U.S. dollars without needing to pay any currency conversion fees.


Baggio Ma

Baggio Ma

Baggio has been investing for nearly a decade, using the perspectives gained from his work experience in the private, public, and non-profit sectors to shape his investment outlook. He has a specific interest in the potential of emerging disruptive technologies and their impact on the future.

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