Norbert's Gambit process has various steps starting from buying DLR.TO, journaling the shares, selling DLR. UTO, and finally selling the shares in the US stock exchange.
Norbert’s Gambit is a cheaper way of converting Canadian currency to US currency and vice versa. Since it is cheaper, it takes longer to convert your money when compared to a bank or an exchange kiosk. In a bank, you tender your Canadian dollar to the banker and he/she gives you US dollars. In exchange, the machine does it for you. The process is completed in a few minutes. Let us explore the steps involved in Norbert’s Gambit.
We have illustrated below the step-by-step process of how Norbert’s Gambit works:
Step 1: You are required to have an online brokerage account. If you do not have one already, there are various options, such as TD Direct Investing, RBC, Wealthsimple, Questrade etc., You may complete research and choose a platform that is suitable for your needs.
Step 2: Determine how much you need to convert. For example, you need to convert $100,000 CAD to US. Number of units = Funds to be converted/ share price of DLR.TO. As of 11th October 2022, it is $100,000/$13.95 = 7,168 units. DLR. TO is Horizons US dollar currency ETF USD that closely tracks the currency conversion of USD and CAD.
Step 3: Purchase 7,168 units of DLR ETF on the Toronto stock exchange.
Step 4: Once your purchase is settled, you are required to call or email or chat with your brokerage account and journal your shares and convert them to DLR. UTO
Step 5: Once your journaling is completed, you are required to sell DLR on the New York Stock Exchange.
Step 6: Once the sale is settled, you will have US dollars in your brokerage account. You can then transfer the funds to your bank account and withdraw them as physical cash.
You can complete the above-mentioned process in both non-registered accounts or registered accounts such as a Tax-Free Savings Account (TFSA), Registered Retirement Savings Plan (RRSP) etc., However, when you are processing it within a registered account, you must be aware of the contribution limits, withdrawal rules and taxation rules.