If you’re like me, you’ve probably encountered the frustration of high foreign exchange fees when trying to convert Canadian dollars (CAD) into U.S. dollars (USD) for investing or other purposes of currency conversion in Canada.

When I first heard about Norbert’s Gambit, my initial thought was, “Is Norbert’s Gambit really worth the hassle?” It sounded a bit like some complex financial maneuver, but once I dug in and understood it, it became one of the most useful tools in my personal finance arsenal.

In this post, I’ll walk you through exactly what Norbert’s Gambit is, how it works, and whether it might be the right move for you.

What Is Norbert’s Gambit and Why Should You Care?

Let’s start with the basics. Norbert’s Gambit is a clever strategy that allows you to convert currencies (CAD to USD or vice versa) while avoiding the hefty foreign exchange fees most banks and brokers charge. Named after Norbert Schlenker, the financial planner who popularized this technique, it has become a go-to method for savvy Canadian investors.

This approach is especially popular among those who need to move large sums of money between currencies to invest in stocks on foreign exchanges, like the New York Stock Exchange (NYSE) or NASDAQ.

Instead of converting your money directly through your broker and incurring high forex fees, you use a dual-listed stock—a company that’s traded on both Canadian and U.S. exchanges. You buy the stock on the Canadian exchange, journal it to the U.S. exchange, and then sell it in USD (or vice versa). This way, you bypass the foreign exchange fee altogether, saving significant money.

For those dealing with currency conversion in Canada, Norbert’s Gambit is an invaluable tool for avoiding the high costs typically associated with such transactions.

How Does Norbert’s Gambit Work?

Here’s the basic idea:

1. Buy Dual-Listed Stocks or ETFs: Purchase a security (like an ETF) that is listed on both Canadian and U.S. stock exchanges.
2. Journal It Over: Ask your broker to “journal” (or transfer) the shares from one currency’s account to the other.
3. Sell in the Other Currency: Once the shares are in the U.S. (or Canadian) account, sell them for the desired currency.

This way, instead of paying a 1.5% to 3% foreign exchange fee, you only incur standard trading commissions and possibly a small loss from the bid-ask spread, saving you a significant amount of money.

When Is Norbert’s Gambit Worth It?

Norbert’s Gambit shines in specific scenarios. Let’s explore when it makes the most sense.

1. Large Transactions

If you’re converting more than $5,000, the savings are typically worth the extra steps. For instance, on a $10,000 exchange, avoiding a 1.5% to 2.5% fee can save you $150 to $250—far exceeding the minor trading fees.

2. Investors Buying U.S. Stocks

For Canadian investors, using Norbert’s Gambit to fund a U.S. dollar trading account is a no-brainer. It minimizes the cost of converting CAD to USD, ensuring more of your money goes toward investments.

3. Regular Cross-Border Shoppers or Travelers

If you frequently travel to the U.S. or shop online in USD, using Norbert’s Gambit to load up on USD can help you sidestep those pesky bank fees.

Brokers That Support Norbert’s Gambit

Not all brokers handle Norbert’s Gambit equally. Here’s a breakdown of some popular options in Canada:

• Questrade: One of the most Gambit-friendly platforms with a straightforward journaling process and reasonable trading fees.
• RBC Direct Investing: Supports Norbert’s Gambit and offers a relatively quick journaling time.
• Wealthsimple Trade: Does not currently support journaling, making it unsuitable for Norbert’s Gambit.
• TD Direct Investing: Allows journaling but is slower compared to other brokers.

Related content:

• Questrade vs WealthSimple Self-Directed: Which One is For You?

My First Time Using Norbert’s Gambit: A Learning Curve

I’ll admit, when I first heard about Norbert’s Gambit, I was skeptical. But after repeatedly paying Questrade’s 1.5% foreign exchange fee, I realized there had to be a better way.

I needed to convert a significant amount of CAD to USD for investing in U.S. stocks. With the size of the transfer, even a small percentage in fees would have cost me hundreds of dollars. That’s when I decided it was time to give Norbert’s Gambit a try.

Here’s how I pulled it off, step by step—and how you can do it too:

Step 1: Open a Self-Directed Brokerage Account

First, you’ll need a brokerage account that supports dual-listed stocks. I chose Questrade since I already had an investment account with them, and they make the process relatively straightforward.

Step 2: Identify a Dual-Listed Stock

Next, you’ll need to find a stock that trades on both Canadian and U.S. exchanges. Some popular choices include:

• RY (Royal Bank of Canada)
• ENB (Enbridge)
• BAM.A (Brookfield Asset Management)
• Horizon DLR (Global X US Dollar Currency ETF Class A)

For my first attempt at Norbert’s Gambit, I chose Horizon DLR—a low-cost ETF—because it minimizes the risk of significant price swings during the conversion process. Additionally, Questrade’s low commissions for buying this ETF made the entire process even more cost-effective.

Step 3: Buy the Stock on the Canadian Exchange

I bought shares of DLR.TO on the Toronto Stock Exchange (TSX) using Canadian dollars. For instance, to convert $10,000 CAD to USD, you would begin by purchasing $10,000 worth of DLR.TO shares on the TSX.

Step 4: Journal the Shares to the U.S. Exchange

Now, here’s the crucial part of Norbert’s Gambit: you need to ‘journal’ your shares from the Canadian exchange (TSX) to the U.S. exchange (NYSE or AMEX). Essentially, journaling means transferring the shares from the Canadian version of the stock (DLR.TO) to the U.S. version (DLR.U).

At first, I thought this would be complicated, but it turned out to be pretty straightforward. I simply emailed my broker and requested a journal transfer from the Canadian to the U.S. side. It took about two to three business days for the transfer to complete, and the best part? It didn’t cost me a thing.

Step 5: Sell the Stock on the U.S. Exchange

Once the shares are journaled, you sell them on the U.S. exchange in U.S. dollars. In my case, I sold DLR.U on the NYSE and got the equivalent value in USD, with no foreign exchange fees. The price difference between the two exchanges was negligible, and I was left with nearly the full value of my conversion in U.S. dollars.

Step 6: Voilà, You Have U.S. Dollars (or CAD)!

After selling the stock in USD, the funds landed in my U.S. dollar brokerage account. From there, I could use the money to buy U.S. stocks or transfer it to my bank account.

How Much Does Norbert’s Gambit Really Save You?

Norbert’s Gambit is one of the most effective low-cost forex strategies available to Canadian investors, allowing significant savings compared to traditional bank exchanges. The costs primarily come from two places:

1. Commission Fees: Depending on your broker, you may incur commission fees when buying and selling the stock.
2. Bid-Ask Spread: When you buy and sell a stock, there’s often a small difference between the price you pay (the “ask” price) and the price you sell for (the “bid” price). This difference can result in a tiny loss when converting, but for a dual-listed stock with good liquidity, it’s usually minimal.

Here’s a real-life example that shows exactly how much you can save using Norbert’s Gambit:

a) Buy a Dual-Listed ETF:

I needed to convert Canadian dollars to U.S. dollars, so I bought 579 shares of DLR.TO at $13.84 CAD each, totaling $8,013.36 CAD. After factoring in Questrade’s commission of $0.28 CAD, the total came to $8,013.64 CAD. At the time of purchase, the price of DLR.U (the USD version) was $10.19 USD.

b) Journal the Shares:
I contacted Questrade to request a transfer of my DLR.TO shares to the USD side of my account. This journaling process took 3 business days.

c) Sell the ETF in USD:
Once the shares were journaled, I sold them as DLR.U for $10.15 USD per share. Questrade charged a commission of $7.82 USD for the transaction. Due to a slight price fluctuation, the loss on the sale was 579 shares × ($10.19 – $10.15) = $23.16 USD.

In total, my conversion fees were:

• $0.28 CAD (buying commission)
• $30.98 USD (sale commission + price fluctuation)

If I had used my bank to exchange $8,013.36 CAD with a typical 2.5% forex fee, I would have lost approximately $200.33 CAD. With Questrade’s foreign currency exchange service, which charges 1.5%, the fee would have been lower at $120.20 CAD.

Using Norbert’s Gambit, the cost was significantly lower—just two trading fees (around $8 USD total) and a small loss from the bid-ask spread. After accounting for these costs, I saved approximately $78 CAD compared to Questrade’s forex fee and $158 CAD compared to the bank’s forex fee.

The Benefits of Norbert’s Gambit

1. Huge Savings: The main attraction of Norbert’s Gambit is cutting down on foreign exchange fees. For large sums, the savings can be substantial.
2. Simplicity Over Time: While it may seem complicated initially, once you’ve done it a couple of times, the process becomes straightforward.
3. No Need for Specialized Accounts: You don’t need to open a separate FX account or rely on third-party services. Simply open an account with a broker that supports journaling.

For Canadians looking for low-cost forex strategies, Norbert’s Gambit offers a smart, straightforward way to minimize foreign exchange fees.

What Are the Risks?

While Norbert’s Gambit is a fantastic way to avoid foreign exchange fees, it’s not without its risks:

1. Market Fluctuations: Stock prices can fluctuate between the time you buy the stock on the Canadian exchange and the time you sell it on the U.S. exchange. This can result in a loss (or gain) depending on the market movement. However, if you choose a stable stock with little price movement (like an ETF or a large-cap stock), this risk is generally minimal.
2. Journaling Delays: Depending on your broker, the process of journaling the shares can take anywhere from one to five business days. During this time, the stock’s price might change, which could affect the final amount you get when you sell it. In addition, Norbert’s Gambit might not be ideal if you need funds quickly.
3. Liquidity: Some dual-listed stocks are more liquid (i.e., easier to buy and sell) than others. If you choose a stock with low trading volume, you might have trouble executing your trades quickly or at a favorable price.

In my experience, these risks are manageable, especially if you pick a well-established dual-listed stock and stay patient throughout the process.

Is Norbert’s Gambit Worth It for You?

So, is Norbert’s Gambit worth the effort? Here are a few things to consider:

• Size of the Conversion: Norbert’s Gambit is most beneficial when converting larger sums of money. If you’re only converting a few hundred dollars, the savings may not be worth the time and effort. But if you’re converting thousands (like I was), the potential savings are significant.
• Comfort with Trading: If you’re comfortable with buying and selling stocks, Norbert’s Gambit is pretty straightforward. However, if you’re new to investing or nervous about the process, it might feel a bit overwhelming at first.
• Patience: The process takes a few days from start to finish. If you need your foreign currency immediately, this might not be the best solution. But if you’re willing to wait a bit, the savings can be well worth it.

Tips for a Smooth Norbert’s Gambit

1. Double-Check Broker Policies: Before attempting the Gambit, confirm how the journaling process works with your broker.
2. Avoid Buying Around Time-Sensitive Events: Steer clear of buying stocks before significant economic events, such as Bank of Canada or Federal Reserve meetings, particularly when a rate hike or cut is anticipated, or on US/Canada CPI release dates. These events can cause fluctuations in the USD/CAD exchange rate, impacting your conversion. Additionally, avoid purchasing stocks near earnings report dates. If a company misses its earnings expectations, the stock price could drop, potentially resulting in a significant loss when converting to U.S. dollars by selling the stock on the U.S. exchange.
3. Avoid Market Volatility: Stick to stable ETFs like DLR or other low-volatility stocks to minimize price fluctuations during journaling.

Alternatives to Norbert’s Gambit

If Norbert’s Gambit feels like too much work, there are alternatives:

1. Forex Brokers: Platforms like KnightsbridgeFX or Wise (formerly TransferWise) offer competitive exchange rates with fewer steps.
2. USD-Friendly Credit Cards: Some cards, like the Rogers World Elite Mastercard, allow you to earn cash back on foreign purchases, offsetting FX fees.
3. Bank FX Services: While pricier, banks offer instant exchanges for those in a hurry.

Some Final Thoughts on Norbert’s Gambit

Looking back, I’m thrilled I gave Norbert’s Gambit a try. While it seemed intimidating at first, the process turned out to be surprisingly straightforward—and the savings spoke for themselves. Since my first attempt, I’ve used it several times since for larger conversions. It’s a great tool in your financial toolkit, especially if you frequently need to move money between CAD and USD.

For those who are comfortable with self-directed investing and want to avoid those pesky forex fees, Norbert’s Gambit is a fantastic strategy. Just take it step by step, stay patient, and you’ll see the rewards.

What do you think? Have you tried Norbert’s Gambit, or are you considering it? Share your thoughts or questions below—I’d love to hear from you!