How does Norbert's Gambit work?
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- Updated On:05-Dec-2022
- Replies:1
Short Answer
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.
Detailed Answer
Norbert’s Gambit
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.
How does Norbert's Gambit work?
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.
Process of Norbert’s Gambit
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.
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Discussion (0)
Using Norbert's Gambit is worthwhile given some conditions - when you do not have to convert your currency immediately and/ or when you need to convert a large sum of money.
You will save a considerable amount on conversion fees, by following the Norbert's Gambit. Our calculations suggest that you can save around $2,100 CAD for converting $100,000 CAD into USD.
Yes, Norbert's Gambit method of currency conversion is legal in Canada. It is not restricted by any registered authorized of Canada.
In Norbert's Gambit, you need to buy, journal and sell DLR ETF. It takes around 5 business days for the Norbert's Gambit process to be completed.
Norbert's Gambit is a cheap method to convert CAD to USD and vice versa using an online discount brokerage account. It is named after its founder Mr. Norbert Schlenker.
The contribution conditions within TFSA differs from circumstance to circumstance. Let's figure out in details how TFSA works for Canadian investors.
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