Watch my NORBERT'S GAMBIT Tutorial to see how I convert CAD into USD without paying any conversion fees! This has saved me a TON of money over the years and I do this EVERY time I buy a US stock 👇 ua-cam.com/video/q6Q1dzK8vts/v-deo.html
For norberts gambit... what happens if the price of the etf you buy changes by a % close to or above the % you save on conversion fee? Wouldnt that wipe it out? The etf price is not static over the 3 to 4 it takes to move it to the other exchange. Thanks.
Your videos are so helpful, thanks so much Adrian! As a Canadian getting paid in USD, I think it definitely makes sense for me to invest in US market rather than the Canadian equivalents. Originally I was just going to convert to CAD and do everything in CAD, but you made investing in US market sound way less complicated/scary. My plan is to ride VT for many years.
You're in a fortunate position to be paid in USD, especially with the current exchange rate! Yes I would definitely invest in USD stocks and ETFs and if you can hold them in your RRSP for further tax efficiency, go for it. You can even buy certain Canadian stocks in USD since they're traded on the NYSE. You don't want to neglect the Canadian market =)
@@CanadianTShirt great, thanks for the info! I'm currently in a lower tax bracket, so I'm planning on using my FHSA and then TFSA. I know I get taxed 15 percent if it's not in the RRSP, but I've heard it's better to save this for when I'm in a higher tax bracket. Would you agree?
@@CanadianTShirt There must be cross listed companies.... what you talking about? With cross listing companies are in both markets at the same time....
I really appreciate a Canadian investing channel. We’re so closely linked to the US economy, and yet we’re in such a different world sometimes that it makes it really hard to follow a US investment channel. I appreciate the advice! For my situation, it seems to make sense to stick with VFV for now.
Back then there were a few US focused investing channels but the only Canadian one was Brandon Beavis (who is awesome and now a close personal friend 🙌) but we need MORE Canadian focused content out here! =)
And go for it! If VFV works for you, then all the best! It's a FANTASTIC fund and a great way for everyday Canadians to access the US market. I just like the extra boost I get with VOO instead =)
@@CanadianTShirt So, basically avoid ALL canadian ETF that holds US stock? What if these canadian ETFs are in RRSP (based on the tax agreement between both countires)?
It's my pleasure! And don't worry, VFV is still a fantastic ETF but it does come with some downsides and hidden costs.... If you use an RRSP, I would suggest VOO instead. It will be more profitable in the long run =)
Great video Adrian, would you recommend to invest in VFV or VOO for an RESP account ? Also, another video idea is to talk about the differences between all S&P 500 ETFs (such as VSP, XUS, XSP, HXS, etc.) available to Canadian investors.
So just to make sure I understand every step correctly of what is being described in the video: Use Norbert's Gambit to convert the CAD money in the questrade RRSP account over to USD Use the USD to buy stocks in V00 Hopefully that's correct!
And not just in my RRSP! I do the same steps in my Margin and Corporate account. Whenever I want to buy US stocks and ETFs! It has saved me THOUSANDS over the years! =)
From a simplicity perspective, I don't are about US dividend withholding in my TFSA. Tail wagging the dog. I'd rather be invested sooner and not have to convert $400 a month. Just a makes no sense and puts barriers to investing consistently.
@@fuchsy44 Thing is, if you keep investing for decades and accumulate a significant amount in VFV, you'll notice that a larger portion of returns are reduced by the MER. Additionally, thousands of dollars will remain in the U.S. as taxes instead of going into your pocket. Remember, compounding works both ways, so it also applies to expenses.
@@00RUSH00 You're forgeting as well about the currency exchange fees, which are 1.5% on Questrade and Wealthsimple. Norbert's Gambit work only for higher values, not the average bi-weekly or monthly contribution. VFV on the TFSA has the potential to outpace VOO on RRSP by quite a lot, specially if your TFSA limit contribution is higher, and grows on a higher pace.
Thanks for the video. why don't you invest in UCITS ETF accumulating? Dividends are reinvested by the fund. There are no taxes in the accumulation process. When it's time to sell, only capital gain tax will be payable
Thank you for this. I had VFV for a couple years now, but am finally diving into RRSP. I am hoping to increase my income significantly in the next 2 years, so I'm trying to balance my investments between TFSA and RRSP so I can take advantage of not being dinged with the 15% withholding tax on US Stocks in my RRSP. I'm glad to see you're still putting out content
I believe that even in your RRSP the VFV will be 15% withheld. Only the VOO will not have that. Basically VFV will be 15% penalty regardless of TSFA or RRSP.
very well explained!!! at first i thought you werent gonna factor in the Rfx-rate of foregin exchange rate. so glad to see you did and pointed out the fact there is no difference as long as we are converting the usd back to cad. thank you!
When I put both into backtest portfolio analyzer, VFV out performs VOO by a huge margin. 10k invested in 2013 yields 46k in VFV and 35k in VOO in 2023. That's a huge advantage for VFV
The difference is that VFV's posted performance includes the growth of the fund PLUS the growth of the US dollar! Whereas VOO only posts the growth of the fund. But in the end, it does NOT matter since with VOO, you will eventually convert back into CAD anyway and reap that SAME exchange rate benefit =)
@@CanadianTShirt I understand what you are saying but something doesn't make sense. Look at the 10 year history of VFV vs VOO, 10 years ago today it cost 1.03 CAD to buy 1.00 USD and today it costs 1.35 CAD to buy 1 USD. The 10 year return of each was 328.96% for VFV vs 225.22% for VOO. So if I invested $1,000 CAD in VFV it would be $3,289.60 CAD today. If I converted $1,000 CAD to USD to purchase VOO it would be $970.97 USD at purchase and it would be $2,160.62 USD today, and if converted back to CAD at today's exchange that is $2,916.83 CAD which is over 10% less than VFV. My calculations favored VOO because I didn't factor in a loss on the currency exchange rate and VFV still significantly outperformed VOO.
@@mikehittingernow3179 Your math sounds accurate. Maybe this difference would be the extra 15% you would save on taxes on the dividends (if on your RRSP)?
@@CanadianTShirt What if during the period that you receive VFV's, CAD did better than the moment you decide to sell your VOOs and convert them back to CAD? But opposite is more likely :D
Hi Adrian. Nice info! I find VUG out performs VOO and VFV. However, I do hold over $5,100 of VUG and about $3500 VFV in TSFA., with BMO investorline. I also have about $4500 Fidelity ONEQ. So, it would make sense to leave the VFV in my TSFA and maybe move the VUG and ONEQ to RRSP? I’ve only held VUG and VFV for 5 years, and ONEQ for 2 years…,What do you think?
Great video! I personally buy VSP. I have been for almost a decade. My reasoning for this is because our Canadian dollar has less purchasing power than the US currently and this locks in my purchasing power when the dollar comes back against the US. When the dollar goes back to par God willing one day, I then plan on selling my VSP and then buying either VOO in my RRSP and VFV in my TFSA. Can you please explain to me if you think my notion is incorrect. Thanks again and awesome content!
Your plan is correct if the CAD will indeed become stronger! But if not, you are losing out on significant gains! Currency exchange rates are impossible to predict so don't bother trying to time the market. But looking at the past 10 years, the USD has grown very strong over the CAD and that plays a HUGE part of VFV's returns which you don't get with VSP. Personally, I avoid currency hedging since it will increase your annual fees (more work = more fees) and historically speaking, it doesn't really work. But in the short term, currency hedging can be helpful since you remove one layer of uncertainty. I'll be making a whole video on currency hedging soon so stay tuned for that! =)
@@CanadianTShirt Thank you for your time and input. The plan is to God willing be in it for the long haul. You may find this synopsis interesting for the video your planning around it. cclfg.cclgroup.com/wp-content/uploads/2022/02/brief-history-of-the-canadian-dollar.pdf. Keep up the great work!
I'm glad you found this video helpful! Remember moving from VFV to VOO will have the biggest impact in an RRSP. If you are only using a TFSA, then you're only really saving money with the lower management fees. For many ETFs, waiving the withholding tax in an RRSP provides the bigger boost =)
thanks for the video! The only thing I might see is that people might be more comfortable in investing every week or other week in VFV at 100$ contrary to VOO which requires 400USD. And yes you loose 15%, but the dividend is still so small, that for most people, it's a negligible loss compared to the growth of the stock. Might be better to invest in VFV and compensate the loss in dividends with individual stocks with higher dividends such as BNS or BMO. What are your thoughts
i totally agree. On top of that, the commission fees is high because we are buying with CAD. Wealthsimple charges more for USD version. It might be ok for questrade because it charges commission even it is USD or CAD
Always love when you put out content, if it wasn’t for you, I would have never got started with investing in stocks. This is the kind of information people needs to know, that holding VFV in a TFSA doesn’t save them from the taxes as it taken out by the ETF, and holding it inside a RRSP is giving away potential earnings for taxes you could avoid. However the cost of VOO makes it hard for someone like me to invest. Do you know of any other S P 500 USD ETF’s that have a lower price point to get in on?
Most of the S&P 500 ETFs have large share prices, SPY for example is even more expensive than VOO per share! There are a few options that have a lower share price but the trading volume will also be lower so you have to consider that. You might pay a higher price between the Bid-Ask price (if not a lot of people are trading it, it's harder to buy at the price you want. This can cost you more)
This is a great video, everyone should watch this. I am still thinking for a large portfolio, traded in a TSFA without Norbits gambit VFV may be better? If a broker charges 3% currency conversation and you have 1 million sitting there the difference in fees between the two funds is around $600 a year. When you transfer that million back, you will pay well over $30,000+ to get it back into Canadian dollars. Also an intimidating amount to use Norbits for.
There is no limit to amount you can use Norbert's Gambit for! I know some of my viewers have converted over $200K with Norbert's Gambit and it literally costed them less than $10. If they paid a 1.5% conversion fee instead with something like WS, that would have costed them over $3000!!!! So Norbert's Gambit is definitely the way to go, even MORE so for large sums of money! =)
Don't get me wrong, I think WealthSimple is a great platform but ONLY for Canadian investing. I cannot recommend them for US investing, those conversion fees cost WAY more than a $5 commission fee... So if your broker doesn't allow Norbert's Gambit, I don't think you should use them for US investing =)
@@CanadianTShirt Yea I know this for sure, but I think the difference is quite negligible for the most part. $600 on $1,000,000 is quite minor but something for sure. Id have to watch your norbits video again, but from what I recall, I was a bit nervous letting each equity settle and slight variations that might occur when transferring between the two.
Great video. I didn't know that you can do the currency conversion on investments with such low fees. The main reason I am not buying voo in my resp is the high conversion fee. Thanks to you I will be able to save more money. Great job! Love your content and all videos.
You got it! Here is my link to my NORBERT'S GAMBIT tutorial! This technique has literally saved me THOUSANDS over the years in conversion fees! I use it every month =) ua-cam.com/video/q6Q1dzK8vts/v-deo.html
Please chime in with your thoughts, here was my thought process on VFV over VOO as a Canadian. To provide context, I passively invest and will have an govt pension when I retire. Every two weeks I invest a set amount into VFV once my pay cheque is deposited. With the spread between USD and CAD at the moment, I planned to invest in VFV until (if ever) CAD and USD are closer to par. My arbitrary trigger figure is 88 cents + on the dollar. At this point I would switch from VFV to investing in VOO as any future currency devaluation in CAD would net a favourable exchange + stock growth. I understand there is a way to circumvent the 15% tax holdings on Canadian ETFs, but this is purely passive for me. I have a minimum 23 year time horizon on the portfolio. Thoughts? Insight? Things I’m missing? Edit: spelling corrections.
VFV is an unhedged ETF, so it's price depends directly on the US dollar! VOO is already in USD so they BOTH depend on the exchange rate. Choosing VFV won't give you any protection from currency fluctuations
If you really care about the exchange rate, then look into a hedged ETF like VSP. I talk about this towards the end of the video so give that chapter another watch. Best of luck! =)
Completely understood why buying a Canadian ETF for US stocks is a bad idea in a TFSA. Thank you for pointing out that different investors (low vs. high income) will have different routes, and recommending their appropriate actions respectively. I been buying VFV thru TFSA in a Dollar Cost Average method, but now know I should switch to the RRSP method and probably buy in bulk to avoid regular daily conversion fees.
If you can't do Norbert's Gambit, don't bother converting. The price discount on US etf doesn't offset the conversion fees on currencies. If you lose 2 or even 1.5% converting your contributions, what's the point saving 0.06%? Each monthly contribution may take years to break even. The dividends held by the US cost you about 0.24% of the total dividend amount... See if recouping that loss is worth losing 2% converting your money without Norbert's Gambit.
While I agree with your points, in reality it doesn't really make much of a difference. You mention that VOO makes up 2% of your portfolio. I don't know the size of your portfolio, but let's assume it's $1,000,000. That means VOO is $20,000. The management fee difference between VFV and VOO is 0.06%. That would be $12 a year difference. For dividend yield, you mentioned the yield is 1.59% for VOO and 1.29% for VFV, a difference of 0.30% due to non recoverable withholding taxes or $60. So annually it's only $72 ($60 + $12). Take away $5 for Norbert's Gambit each way it comes to $62. $62 on a $1,000,000 portfolio is a rounding error. Even if VFV / VOO were 20% of your portfolio, it would only amount to $710 on a $1,000,000 portfolio or 0.071%. Personally, I have gotten rid of all my US holding and just buy Canadian ETFs for simplicity. I have done Norbert's Gambit in the past, but now I can't be bothered.
Here is a calculation to illustrate the difference between these strategies in an RRSP investment. Let’s assume an initial amount of CAD 5,000, annual contributions of CAD 2,000 over 20 years, and an annual net return of 8% (including a 2% dividend), with a constant USD/CAD exchange rate of 0.75. The VOO strategy with a 1.5% conversion fee (WS) accumulates CAD 239,322 in 30 years. Without conversion fees (e.g., NG), it reaches CAD 246,581. The VFV strategy, with a 15% withholding tax on dividends, totals CAD 226,611.
Great video Adrian! I did not know about the influence of the USD on the %return (I never tried comparing them like that)! Informative content as always.
I'm happy to hear that Mike! Ya it's important to consider currency fluctuations when looking at international investments. And if you see performance metrics that are surprising (like VFV outperforming VOO even though it's the same fund) it's worth looking deeper =)
I am planning to invest $4500 in S&P500 ETF through RRSP only. Should I convert my CAD through NB and buy VOO or should I simply buy VFV in CAD. The $4500 would be throughout the year for dollar cost averaging (can do monthly or quarterly)
Have you ever done any videos on the Canadian RDSP account and how it works? Is it more like an RRSP or TFSA when it comes to holding US stocks and in regard to the 15% withholding tax? Thanks!
I agree with all you said about the advantage for VOO vs VFV. The only 2 reasons I recommend the CAD ETFs holding to someone is when they invest in a TFSA (so no advantage regarding witholding tax) AND the simplicity if the person is not comfortable with the currency exchange conversion with Norton Gambits. I don't want to discourage someone who is in the right path to manage his own ETF for just 0.05% and go back with his portfolio manager who rob them of 2%.
No question! VFV is infinitely better than a mutual fund! And as I talk about in towards the end of the video, yes if you don't use an RRSP (low income etc) or just want to use a TFSA, then you might as well go with VFV since without an RRSP, you can't avoid the taxes on those US dividends so you might as well go with VFV since it's easier =)
@@muhammadtahamanzoor6444 I agree but the exchange rate fees could be negligeable if you do the Norton Gambit trick. But you're right that for a TFSA it's not a big advantage to go for the USD ETF
Great video! Just looking for some clarification here… In an instance where you convert you CAD at todays rates to buy VOO, then the CAD appreciates vs USD and you sell. Wouldn’t you be better off if you had just bought VFV?
Great video! I was just curious if you are holding also any Fidelity ETFs like FZILX, FZROX or FXIAX? Could you also please make a video on these? I am trying to compare Vanguard and Fidelity. It appears than Fidelity has no management fees? Thank you! Greatly appreciated
Hey Adrian, I rewatched the video and something caught my attention. You mentioned that VOO is ideal for capital gains. If we hold it in an RSP, we'll have to pay taxes when withdrawing the gained money. However, if we keep VFV in a TFSA and withdraw the gains, we won't be taxed. Wouldn't it be smarter to place high-capital-gain tech stocks in a TFSA to avoid any taxes when withdrawing the gains from it?
This just shows that you should do your own research before believing everything you hear, exactly my sentiment, you would be taxed at withdrawal from an RRSP on the capital gains, as opposed to the TFSA which is completely free.
It's the US-listed dividend withholding taxes (not capital) he mentioned which aren't applied to RRSP accounts due to the US Canada tax treaty for this account. That being said, TFSA is great if it's the only account being used and not using an RRSP. If using both accounts, something to think about which asset types to put in which account if looking to optimize everything.
If you are in retirement or approaching it, I would look for lower risk more income oriented products like dividend ETFs. I have this video here on my favourite Dividend ETFs =) ua-cam.com/video/5crp5qeQing/v-deo.html
Depending on individual situation, we will have to pay withdrawal tax (I.e. 20%) when we sell VOO in RRSP and withdraw funds. Holding VFV in TFSA seems like a better option because the witholding tax and higher management fee will cost way less
It really depends on your situation, for some people especially with lower incomes the RRSP doesn't make sense. But for others, the RRSP can be incredibly powerful, even more so than the TFSA (although ideally you want to max out both) Keep in mind that when you withdraw from the RRSP, you do NOT pay an EXTRA 20% withdrawal tax. You just pay a withholding tax upfront so that you don't have a massive surprise tax bill at the end of the year. Think of it like a tax instalment. I cover how RRSP withdrawals are taxed in this video here =) ua-cam.com/video/gcYlQl6hF6w/v-deo.html
@@CanadianTShirt I used to be in the "max out TFSA first befor RRSP" camp. I was curious so i modelled it out the other day. My findings are for the assumptions that if you are a long term investor and have goals to eventually max out both accounts and create a large nest egg to eventually live off of fixed income amounts. My findings were that its best to max the RRSP first, to allow the quick money you earn today, to compound over time and make up for most (not all) of the taxes youll have to pay when you withdraw. The gap betwen the two accounts is actually small, the RRSp is 30% larger nest egg, but affter taxes the yearly income amount is only 2.5% LOWER than the TFSA would be tax free. The problem though, is that in my model if i max out the TFSA first, the gap widens in the TFSA favour since the RRSP requires the early compounding to keep pace with the TFSA's non taxable earnings in the future. The conclusions is that if you can max out both each year, they end up with nearly the same return. But if you can only max out one or the other for now, and have to wait for a bigger income to eventually max both, do the RRSP first to help it keep pace. Lastly, since the RRSP gives you 18% of your income worth of tax free growth and the TFSA 6000ish a year is only 10% of your income for a 60K income and only 6% of your income for a person with 100k yearly income so the RRSP is the clear winner since being able to shelter much more will gain you more regardless of the TFSA being non taxable in the future. Basically, if you max both(around 25%+ income savings) and do the RRSP first, they will end up nearly equal over the long run after tax, if you are only going to be saving round 10% or less of your income and never expect to make more than 80k family income than the TFSA is a clear winner.
@@matthewgerich7649Thanks for this amazing research! The only caveat regarding RRSP is it has to be mandatory withdrawn when I turn 71, or turn it into a RRIF. The first option faces a big tax bill, the latter one faces the risk of losing government benefits. So should we still max out RRSP?
I just came across this video and found it interesting. I did the same analysis awhile ago and came to the same conclusion about VOO vs VFV. However, I still decided to hold VOO in my TFSA rather than my RRSP as even though it is less tax efficient on the dividends, the S&P 500 has historically outperformed the TSX or other international benchmarks to the point that the higher rate of return made sense to be tax free rather then in a RRSP where it would be taxed on withdrawal even with the 15% withholding tax. But I could see if you were putting more aggressive stocks in your TFSA, then this may be better placed in your RRSP. Thanks,
Nice video again! You explained the pros and cons of VFV very well. I personally own VFV, but for the exact reasons you mentioned. I have a small amount of money in VFV in RESP, just want to get some US market exposure for a short period of time, not worth of norbert’s gambit
That makes sense! If you're buying in your RESP, then you can't avoid the 15% withholding tax on dividends no matter which ETF you buy. So in that case, you might as well stick to VFV. The difference in management fees alone is not enough, unless you build up a massive portfolio. Which is a good problem to have 😉
I recommend going through my MILLENNIAL INVESTING Guide. It's my playlist with the light green thumbnails, walking you through all the lessons you need to invest, in a proper order =) ua-cam.com/play/PLj8bU3AuW2qEVri8g-ErBL65ng98iAf5g.html
Thank you so much Adrian! By watching this video, you LITERALLY saved me thousands of dollars as I soon will have a large sum deposited into a locked in RRSP, and I was going to buy Canadian ETF's holding US stocks (VFV being one along with QQC). Now I now to go with the US versions. THANK YOU!!! Question- there's so much talk about S and P 500...and I get why.....but what's your opinion on NASDAQ 100 ETF's like QQQ? I mean I know the NASDAQ is more volatile and they have higher MER, but I'm in it for the long haul and NASDAQ outperforms S and P considerably, no?. Over a long period, would you say its a good pick? Thanks man, keep up the great work!!
Your reel is very helpful and the logic makes sense. The part I have a hard time with is the nominal dividend value. Annual dividends from VOO are quite small for a $500 unit. Six bucks?! Or am I reading something wrong? What is the upside to risking currency exchange and even minor trading commissions to save 15% of a small dividend. If I invest $50k CAD I’m getting a roughly $500US dividend. IRS will cut away about $75 of that. Factor in $10 or $20 of Gambit trades and that’s saving $55 annually. What am I missing?
I'll be making a WHOLE video on investing strategies in a non-registered account. There is a TON to discuss since taxes can become a far more important and complex issue. Personally, I prioritize capital gains and Canadian dividends in my margin account since they are taxed more favourably. Whereas REITs, bonds and US dividends are taxed heavier which I why I only want to hold those in a tax sheltered account. Stay tuned for upcoming videos! =)
I have done some research and found out the following. Invest in Canadian stocks paying eligible dividend, very much tax friendly. If you like to diversify beyond Canada, buy US stocks pay no dividend at all or pay very little dividend as you can claim back dividend withheld when we file our taxes. Keep in mind any dividend received (US stocks) within non registered is considered income and you pay marginal tax at tax time. Other option is to buy total return S&P500 ETFs listed in Canada which yield nothing and when you eventually sell you would only pay capital gain taxes like any other investments.
Unfortunately no... the FHSA is treated the same like the TFSA so US dividends will be taxed 15% in an FHSA. Only the RRSP and retirement accounts like the RRIF or LIRA can waive this withholding tax
I believe so! I personally don't buy fractional shares. But if you are using WealthSimple to buy a USD ETF like VOO, I hope you have a source of USD available. I don't recommend wealthSimple for converting into USD since they are very expensive (that's how they make their money) They're great for CAD investments but very expensive for USD investments. Using Norbert's Gambit with Questrade will save you a ton of money there =)
I'm a dual CA-US citizen, so my income in a TFSA is taxable in the US anyway, so I invest in US ETF's in my TFSA. As long as my US taxable incomes ends up below the standard deduction amount (~US$12,900) then I'll get that 15% back at tax time. I'm not using an RRSP since I want to keep that money accessible for buying a house (not a first-time buyer so FHSA isn't an option, but that would have the same US-tax issue anyway).
Totally fair points, I would just like to put in a small caveet that the 15% withholding tax is not lost. It doesn't compound until you reinvest the tax refund, but you can straight up deduct it from your tax return. As an accountant I can see a situation in the withdrawal phase of your RRSP where the withholding tax is a loophole to get out 15% of the dividends as tax deduction instead of income taxed at marginal rate.
Sorry but I'm not sure what you're talking about... in a tax-sheltered account like the RRSP you cannot deduct the withholding tax, that money is just gone. In a non-registered account, you can claim it to avoid double taxation but not in an RRSP
Thanks for the information! However, do you know if, as an EU resident, you are able to buy the vft? The issue with the voo is that EU regulations do not allow us to buy it because the US does not provide a key information document. If it is possible for EU responders to buy the vft, that would be the major selling point.
Super helpful thanks! Was just looking to begin dollar cost averaging into vfv, I'll be sure to go with VOO instead! So much money to be saved with all these little bits of knowledge
@CanadianTshirt Thank you, Adrian. When investing through a Non-registered account, which option would offer better growth, VFV through Wealthsimple or VOO through Questrade using Norbert’s gambit?
@@Rashesh_Joshi in a non-registered, it won't make a huge difference either way. Similar to the TFSA case, the main benefit of VOO will be the smaller management fees since you can't avoid those US taxes outside of the RRSP. But for smaller portfolios, then VFV is fine
What is better? I genuinely don't know. Pay 15% now to the US or 30% later to Canada? Whether it's 30% or less or more later obviously depends on how much you'll be making when you retire, and how much of your money is left to your heirs.
You should only open an RRSP if it makes sense for you and your situation based on your tax bracket now vs your taxable income in retirement. That's the deciding factor there
Now if you're in a situation where the RRSP will benefit you, then once you already have an RRSP, it becomes a no brainer. Definitely choose VOO over VFV since you get the full dividend and lower management fees. Hope that helps! =)
Hi Adrian. Thanks for the detailed analysis on Tax implications but even if we want to withdraw from rrsp we will be taxed as per Canadian govt as per the tax bracket even if our income is low.
That's how the RRSP works, yes you are taxed when you withdraw (ideally in retirement at a low tax bracket) but remember that you also REDUCE your taxes now in your working years. So if you use it the right way, the tax refund you get now in your high income years will outweigh the taxes you pay in retirement, so it's a net positive! But you have to be strategic
The share price for a stock or ETF really doesn't matter. The only thing that matters is how much it GROWS! And the same for the dividends, you compare the dividend YIELD not the dividend amount. If a $1000 stock pays a $10 dividend every year, that's a 1% yield. But if a $100 stock pays a $5 dividend every year, that's a 5% yield so the $100 stock pays 5 times more in dividends!
The yield tells you, if you invested $1000 into this stock today, you would earn 1% or 5% or whatever the yield is, every year in dividend income. I talk about this in greater detail in my DIVIDENDS EXPLAINED video here =) ua-cam.com/video/6xzfgObXxvU/v-deo.html
Whoa! Great analysis as I'm currently looking at what ETF's to invest in. I never knew that US ones were taxable in TFSA! Thank you for explaining this, I currently have my RRSP in a 5 year GIC with TD bank do you think I should open a new RRSP account in Questrade to invest in VOO ?
If you are investing in an RRSP, then yes VOO is definitely the way to go to save on that 15% cut on those dividends. And yes go with Questrade and use NORBERT'S GAMBIT to avoid those conversion fees!
Don't get me wrong VFV in an FHSA or TFSA is still a great investment but be prepared that you can't avoid the 15% withholding tax on the dividend already baked into the ETF. If you have the RRSP room, it might be worth contributing to VOO instead for optimal tax efficiency =)
I'm curious, are you going to open an FHSA with Questrade? I hope you saw my last video, where I give a step by step tutorial on how to open the FHSA =)
Yea that 15% tax on dividend is a huge waste. What would you recommend as a CAD holding equity ETF then? Is there an SNP 500 but for canadian companies instead? Something more suited for TFSA.
I got you buddy! Some popular options include XIC and VCN which are in Canadian dollars and track the largest Canadian stocks! They would be perfect for the TFSA! I talk about XIC in detail in my video on my favourite Canadian Dividend ETFs =) ua-cam.com/video/5crp5qeQing/v-deo.html
Hey Adrian, as you mentioned in the "Final Thoughts" of your video if I am investing through a non-registered account, buying VFV from Wealthsimple would be a better choice, correct? Just to clarify, I don’t mind investing through Questrade in VOO from my non-registered account. Thank you for the amazing video✌️
Oh no no you can certainly invest MORE than that. It's just that after you own more than $100K in USD assets then you must fill out a form. And this does NOT include TFSA and RRSP, just non-registered!
How about investing in Horizon's corporate class ETFs? For example, HXS which tracks S/P 500, According to their fund facts explanation, they don't distribute dividends and calculate values into total return of the ETF prices. There should be no withholding taxes since they technically don't distribute dividend. For the management fees, yes, their MERs are still higher than the US counterparts.
"Thanks for the video; the explanation is marvelous! There is one thing I can't wrap my head around: even if you hold VOO in your RRSP, isn't it going to be taxed 15% foreign tax once you decide to withdraw? If not, then how come the Canadian government lets you not pay this 15% eventually?
Oh no the 15% withholding tax is never paid in an RRSP. Even when you withdraw. I understand the confusion because the term "withholding tax" has two separate meanings
But when you eventually withdraw from an RRSP, there is an entirely separate "withholding tax" applied by the Canadian government. This doesn't matter what you invested in, it's just a tax applied on withdrawals from the RRSP
The point of this withdrawal "withholding tax" is to avoid a giant surprise tax bill at the end of the year. You will pay a portion of those taxes upfront (withholding) and the rest at tax time. I have a whole video on RRSP withdrawals and these withholding taxes here so make sure you give it a watch =) ua-cam.com/video/gcYlQl6hF6w/v-deo.html
Thanks Adrian, learned a lot! I was wondering since you shared in your TFSA video from September 2023 that you held other ETF's , some of which are higher MER fees than VFV, what makes you choose them rather than VFV? Are they Canadian-based and avoid the 15% witholding tax?
Oh absolutely! Remember the whole point of an ETF is to own a bundle of stocks and bonds all at once. So the most important factor to consider with an ETF is what is inside it!
My pleasure Enid! Yes the LIRA will benefit from the same tax savings as the RRSP, so that 15% withholding tax on US dividends will be waived in a LIRA =)
Hey there! What are your thoughts on XGRO and the other all-in-one asset allocation ETFs? The MER is super low (e.g. XGRO, 0.22%). If you were to create a separate portfolio with both fixed income and equity ETFs (even the low-fee USD ones, VTI, VOO, BND, etc.), it would add up to much more than a total MER of 0.22%. The all-in-one ETF (e.g. XGRO) charges only one MER, not separate MERs for each underlying ETF. I guess the only remaining issue would be the tax withholdings--only for RRSP, though. Very eager to her your thoughts! I'm looking for an even cheaper option that WS Managed offerings and these all-in-one asset allocation ETFs (e.g. XBAL, XGRO) look very attractive.
I think they are a GREAT option for really passive investors, you just put money in, set-it-and-forget-it and it has incredibly built-in diversification and market exposure. Personally, I avoid these all-in-one packaged ETFs. I don't want to have all of my Canadian, US and international stocks, some are growth and some are dividend focused all in the SAME place since they are taxed differently!
I want to control exactly which account should go where to minimize my taxes rather than just lumping them all in your TFSA and paying withholding taxes on dividends for example. It's a bit more work, but I like having full control of my investments. But for people who don't want the hassle of diversifying their portfolio themselves, I think they are awesome products and MUCH better than going through a mutual fund! I hope that helps! =)
I’m a begginer investor, so I’ve watching and doing my own research for a couple of weeks. According to the video, should I invest in vfv in my tfsa for a period of time and then start investing in voo in my rrsp to avoid the 15% tax ? I was confident to start investing in vfv but now I’m not sure because of extra fees and taxes
Of course! One of the most important factors when choosing an ETF is to minimize those annual fees because that's one of the few things that you CAN control! I've made many videos on my favourite ETFs including this one on my favourite Canadian DIVIDEND ETFs =) ua-cam.com/video/5crp5qeQing/v-deo.html
@CanadianTShirt Hi Adrian, love the channel and content! I currently hold US ETFs (growth, foundational and dividend - all in USD) in both my TFSA and Cash accounts and wondering whether I should swap them to Canadian ETFs /stocks. Withholding tax aside, I'm apprehensive about U.S. tax filing requirements and U.S. estate tax for holding U.S. ETFs in my Cash Account. I'd really appreciate your advice!
And don't worry too much about the US tax filing requirements, the TFSA and RRSP do NOT apply. It's only for $100K and above and only in a non-registered account
Thanks for that! However at the date of this comment the exchange rate USD CAD is 1.36 and VOO costs, again, at the time of this writing, 483$ vs VFV that costs only 127$. Buying VOO at 483$ + 1.36 usd/cad currency conversions makes buying VOO seem way more unreachable while VFV seems way more accessible. Is my reasoning sound?
It's true that the share price of VOO is higher than VFV but share price shouldn't be your priority... A $20 stock isn't a better investment than a $200 stock. What matters is the actual company or fund, the % of return etc
Maybe with VOO, you can only afford to invest once a month and that's okay! Whereas with VFV, you might be able to invest once a week. Find a strategy and frequency that works for you =)
Really interesting and informative stuff, thanks. Wealthsimple now offers no commissions on US stocks with USD accounts with either a $10/month subscription or holding $100,00 cad between all accounts. A nice way to get around the conversion fee
So I have a lower income. Would you reccomend i buy VFV in my TFSA then? Should I buy it at all ? I’ve JUST started investing - only hold XEQT right now. I’m so new to all of this, there is so much information and it’s overwhelming!!
If you are in a low income tax bracket and you don't see your income growing significantly in the next few years, then yes focus on the TFSA and VFV would be fine in a TFSA =)
But if you're expecting a salary increase in the next 2 years, you can still contribute to the RRSP and carry forward those tax deductions when you're in that higher tax bracket! That way you can benefit from the RRSP & VOO combination even at a lower income, check out my RRSP Low Income Trick to see how that works! =) ua-cam.com/video/Wm2nOmqOqCQ/v-deo.html
Fair enough! Just something to consider! As your portfolio gets larger and larger, the loss you'll see with annual fees and the 15% dividend cut will become more pronounced. Keep that in mind =)
Hey thanks for all the useful info!! at 8:40 you mention an argument for using VFV when in a TFSA (basically to avoid currency conv.) If i don't mind using the norbet's gambit each month for a 1000$ DCA, is VOO still the better option? If so, i'm wondering by how much with a rough average? I'm 34 y.old and starting my invest. journey with my TFSA before switching to RRSP.
If you are only investing in a TFSA, then you lose the biggest advantage of VOO which is avoiding that 15% cut to your dividends. That can only be done in the RRSP
Great as always! Appreciate this. Could you also post your thoughts on "US debt ceiling issue" affecting Canadians? Any strategy/tips for your followers?
This is an issue we see every few years, especially with a new administration. Honestly, it's exhausting seeing this same circus show repeat itself over and over again. But here's my rule of thumb. I never trust what a politician says. But I do trust that they will serve their own financial interests. And it is in EVERY congressmen's self interest to ensure the US market does not implode so at the end of the day, that's what they'll do. Everything up to that point is just huffing and puffing and theatrics
As always, AMAZING content! Thank you thank you Adrian! Would you know if it is possible for a Canadian to invest directly into VTSAX? How?! Where?! :)
Vanguard has hundreds of ETFs so I'm not familiar with that one. It might be one of those exclusive funds only available through Vanguard directly in the US
@@CanadianTShirt thanks so much for taking the time to answer! I really appreciate it 🙏 And I thought so too but had hope there might be a way 😊 it’s an Index Fund that tracks the entire US market. VTI would be it’s ETF equivalent but I wanted an Index Fund.
@@mariad5374 don't worry VTI is an index fund! An index fund just means that it tracks an index, like the S&P500 etc. Index funds can be ETFs or Mutual Funds, the idea being that since it just tracks an index, there isn't much decision making required and thus the management fees are very low =)
@@CanadianTShirt thank you once again!! You have tremendously helped so many Canadians and me make financial decisions be not so confusing! Can’t quite express just how appreciated that is. Wishing you a wonderful weekend!
I enjoyed what you explained about avoiding witholding tax by buying VOO (US version of VFV). However it seems there is a caveat here: you pay US withholding tax because you earn income from US source while you are a canadien resident and not because of you're buying the ETF in Cdn or in US dollars. This is regulated by the US-Cda tax treaty.
Yes but I covered this in the video, within the US-CAD tax treaty, there is an exception for the RRSP. Within an RRSP the 15% tax is waived however it ONLY works with USD versions of stocks and ETFs
Just got my RRSP transferred to QT. What a hassle and it was like they sent it on a snail. Anyway, I'm thinking of going for VOO as you said but wow, it's almost 400/share. VFV is only 100. Wouldn't it be better to go with VFV if I'm using an RRSP? Maybe I'm just looking at it wrong. The number of stocks I get for my money doesn't matter, I guess. Thanks for doing your video on Norbert's Gambit. From this vid, I assume I'll have to use it to get VOO. But not VFV? Anyway, your advice is gold and thanks.
Yes. Use norbits gambit to convert your CDN to USD. Once you have your USD, you use that to buy VOO in your RRSP. That’s what he was getting at in the video😊.
You buy VFV in Canadian dollars, so no currency conversion required. To buy VOO, you need USD. You can either use your broker like WealthSimple to convert into USD but it will cost you a LOT (1.5% upfront plus another 1.5% when you eventually sell) Instead, I use Norbert's Gambit to get USD without paying any conversion fees, instead I essentially pay a flat rate of $5! This will make a HUGE difference especially for larger sums of money!
And in regards to the Questrade transfer, where were you transferring from? The transfer will depend on the financial institution, some are quick, some are slow. I have only transferred from TD and from Tangerine and both were pretty quick so my money arrived in Questrade within a week. Also, don't get too hung up on the share price. That only really matters if you can't afford to buy one share. What you really care about is the long term performance of a stock. 10 shares of a $100 stock is NOT "better" than 1 share of a $1000 stock, it depends on the investment itself. If you have an RRSP already, then I suggest VOO because you get to avoid that 15% cut to your dividend and that will earn you extra money EVERY year! =)
@@CanadianTShirt Transfer from Simplii. It took about 2 weeks. And I nearly had a bird when I was notified that it had been transferred but didn't show up for a couple more days in QT. I don't like Simplii, for more reasons than that.
So holding VOO in an RRSP rather than a TFSA saves a 15% tax on dividends.... but what if RRSPs don't make sense to a given individual's situation but a TFSA does: does it make more sense to take the hit on the dividend tax in the TFSA, or on the conversion fee applied by just going with VFV?
You are totally right, as I said at the ending summary of the video. If you are already using an RRSP then it's worth investing in VOO. But if you are at a low tax bracket or you don't expect your working income to exceed your retirement income then the RRSP probably doesn't make sense for you. In that case, stick with the TFSA and then you might as well stick with VFV since it's easier
If you stick with the TFSA, there's no way to avoid the 15% cut to your dividend so the only benefit of VOO would be the lower annual management fees. But this won't make a significant impact unless your portfolio grows rather large. I hope that helps! =)
For the most part yes, VEQT contains several other ETFs each of which are taxed differently. The US portion of VEQT would be taxed the same as VFV but the international holdings face different withholding taxes since they depend on each individual country
Great video comparing the pros and cons of Canadian vs U.S.-listed ETFs! I'd also like to mention one thing to keep in mind when holding U.S.-listed ETFs, stocks, or any other foreign investments. If the cost of your foreign investments is $100,000 or more, you're obligated to file Form T1135 to the CRA every year. Canadian-listed ETFs that contain U.S, or other foreign, holdings (such as VFV) is considered a domestic asset and is not considered foreign ownership. It's important to keep this in mind, and to keep track of how much you own in foreign assets, to avoid being hit with fines for failure to file Form T1135.
VOO is only 2% of your portfolio? What is your biggest US stock investment on Questrade? I'm looking for the top 10 or Top 5 now that I have a brand new QT account (thanks for your referral link) I see (at 2:10 ) REI-UN (but that's Canadian - I use Wealthsimple for my canadian stocks), KO Coca Cola, SPYD (don't know what that is) ... Do you have another video of your top 10 US stocks?
That's fair and important to consider! The RRPS is not for everyone and yes the TFSA has more flexibility! In my position, I want to max out both my TFSA and RRSP so it gives me more tax efficiency to hold USD investments in my RRSP and Canadian investments in my TFSA. But if you are only using the TFSA, then you might as well stick with VFV since you can't avoid that 15% dividend cut unless you go with an RRSP =)
as usual great video and content! Adrian, what are your thoughts on the asset allocation ETFs such as VGRO, same principal in terms of tax implications/withholdings etc. thanks!
I get the VGRO question all the time. I think it is a great option for really passive investors, you just put money in, set-it-and-forget-it and it has incredibly built-in diversification and market exposure. Personally, I avoid these all-in-one packaged ETFs. VGRO is just a collection of 7 ETFs. I would rather just invest in these ETFs directly and in doing so, I can control exactly which account should go where to minimize my taxes rather than just lumping them all in your TFSA and paying the withholding tax as you mentioned. It's a bit more work, but I like having full control of my investments. But for people who don't want the hassle of diversifying their portfolio themselves, I think VGRO is an awesome product and MUCH better than going through a mutual fund! I hope that helps! =)
@@CanadianTShirt it helps tremendously! thank you! So can VGRO in a RRSP can waive the 15% tax withholdings? or because its a CAD ETF holding US stocks/etfs 15% still applies? as you can see very new to investing ;-)
@@Raz_Peach Unfortunately no! Each of the ETFs within VGRO will have different tax implications. Some of those ETFs are Canadian ETFs so that portion will be tax free but others like the US or international ETFs will be taxed. Just like I showed with VFV, go on the Vanguard website and you can see the breakdown of VGRO's distribution and you'll see how much foreign tax they are paying =)
@CanadianTShirt Thanks for the video! I was wondering if FHSA would have the same advantage as the RRSP of avoiding the 15% fee for the dividends? Thank you so much, your videos are so helpful!
Wealthsimple has US accounts, they still charge 1.5% fee to convert to USD and back but won't charge conversion fee to buy and sell. But I guess it's still not worth it to do US stocks/ETFs with Wealthsimple
When it comes to investing, it is a LONG game! I really do NOT care about a few days, I care about YEARS! But if for whatever reason, you NEED this money immediately then sure you can convert the currency directly. Just be aware that it can be costing you hundreds or even thousands of dollars for the "convenience" The market very rarely changes over the course of 3 days... just a thought =)
Watch my NORBERT'S GAMBIT Tutorial to see how I convert CAD into USD without paying any conversion fees! This has saved me a TON of money over the years and I do this EVERY time I buy a US stock 👇
ua-cam.com/video/q6Q1dzK8vts/v-deo.html
For norberts gambit... what happens if the price of the etf you buy changes by a % close to or above the % you save on conversion fee? Wouldnt that wipe it out? The etf price is not static over the 3 to 4 it takes to move it to the other exchange. Thanks.
I’m a simple man. I see a Canadian in a T-Shirt video I click on it, every time. Keep up the good work 🙏, appreciate it.
Thank you for helping
You are always my first recommendation to a people who want to learn about investing in Canadian stocks
@dakshpatel2183 thank you so much! I really appreciate that! 🙏
Your videos are so helpful, thanks so much Adrian! As a Canadian getting paid in USD, I think it definitely makes sense for me to invest in US market rather than the Canadian equivalents. Originally I was just going to convert to CAD and do everything in CAD, but you made investing in US market sound way less complicated/scary. My plan is to ride VT for many years.
You're in a fortunate position to be paid in USD, especially with the current exchange rate! Yes I would definitely invest in USD stocks and ETFs and if you can hold them in your RRSP for further tax efficiency, go for it. You can even buy certain Canadian stocks in USD since they're traded on the NYSE. You don't want to neglect the Canadian market =)
@@CanadianTShirt great, thanks for the info! I'm currently in a lower tax bracket, so I'm planning on using my FHSA and then TFSA. I know I get taxed 15 percent if it's not in the RRSP, but I've heard it's better to save this for when I'm in a higher tax bracket. Would you agree?
@@CanadianTShirt There must be cross listed companies.... what you talking about? With cross listing companies are in both markets at the same time....
I really appreciate a Canadian investing channel. We’re so closely linked to the US economy, and yet we’re in such a different world sometimes that it makes it really hard to follow a US investment channel.
I appreciate the advice! For my situation, it seems to make sense to stick with VFV for now.
That's exactly why I started this channel in the first place, 5 years ago now! 😉
Back then there were a few US focused investing channels but the only Canadian one was Brandon Beavis (who is awesome and now a close personal friend 🙌) but we need MORE Canadian focused content out here! =)
And go for it! If VFV works for you, then all the best! It's a FANTASTIC fund and a great way for everyday Canadians to access the US market. I just like the extra boost I get with VOO instead =)
@@CanadianTShirt So, basically avoid ALL canadian ETF that holds US stock? What if these canadian ETFs are in RRSP (based on the tax agreement between both countires)?
@@shellz831 if they pay out significant dividends, the CAD versions will cost you. Even in an RRSP
Thank you for posting this, I had no idea and I have $1,000 in VFV.
It's my pleasure! And don't worry, VFV is still a fantastic ETF but it does come with some downsides and hidden costs.... If you use an RRSP, I would suggest VOO instead. It will be more profitable in the long run =)
This man is making a real impact with his work. THANK YOU
I appreciate those kind words and I'm glad that you are finding my videos so helpful! =)
Great video Adrian, would you recommend to invest in VFV or VOO for an RESP account ?
Also, another video idea is to talk about the differences between all S&P 500 ETFs (such as VSP, XUS, XSP, HXS, etc.) available to Canadian investors.
Yes! A video talking about the differences between all S&P 500 ETFs would be fantastic!
Agree!!!
So just to make sure I understand every step correctly of what is being described in the video:
Use Norbert's Gambit to convert the CAD money in the questrade RRSP account over to USD
Use the USD to buy stocks in V00
Hopefully that's correct!
Correct! That's exactly what I do every single month! =)
And not just in my RRSP! I do the same steps in my Margin and Corporate account. Whenever I want to buy US stocks and ETFs! It has saved me THOUSANDS over the years! =)
This guy takes it to the extreme, I buy VOO in Tfsa without thinking
From a simplicity perspective, I don't are about US dividend withholding in my TFSA. Tail wagging the dog. I'd rather be invested sooner and not have to convert $400 a month. Just a makes no sense and puts barriers to investing consistently.
@@fuchsy44 15% on dividend is nothing because of low yield
@@fuchsy44 Thing is, if you keep investing for decades and accumulate a significant amount in VFV, you'll notice that a larger portion of returns are reduced by the MER. Additionally, thousands of dollars will remain in the U.S. as taxes instead of going into your pocket. Remember, compounding works both ways, so it also applies to expenses.
@@00RUSH00 You're forgeting as well about the currency exchange fees, which are 1.5% on Questrade and Wealthsimple. Norbert's Gambit work only for higher values, not the average bi-weekly or monthly contribution. VFV on the TFSA has the potential to outpace VOO on RRSP by quite a lot, specially if your TFSA limit contribution is higher, and grows on a higher pace.
and you pay your 15% tax like everyone else.
Thanks buddy. Well explained and I have avoided so much hidden charges. Keep shedding lights on these inv. topics and we'll keep supporting you.
I appreciate that! And I'm glad that you found this video so helpful! =)
Thank you so much, as always, for your videos Adrian! So much great content and so helpful. Appreciate you!
You won the first place comment this time!!! 🏆
Thank you for those kind words! I really do appreciate it and I'm so glad to hear that my videos have provided such value 🙏
Thanks for the video.
why don't you invest in UCITS ETF accumulating? Dividends are reinvested by the fund. There are no taxes in the accumulation process. When it's time to sell, only capital gain tax will be payable
Thank you for this. I had VFV for a couple years now, but am finally diving into RRSP. I am hoping to increase my income significantly in the next 2 years, so I'm trying to balance my investments between TFSA and RRSP so I can take advantage of not being dinged with the 15% withholding tax on US Stocks in my RRSP. I'm glad to see you're still putting out content
I believe that even in your RRSP the VFV will be 15% withheld. Only the VOO will not have that. Basically VFV will be 15% penalty regardless of TSFA or RRSP.
very well explained!!! at first i thought you werent gonna factor in the Rfx-rate of foregin exchange rate. so glad to see you did and pointed out the fact there is no difference as long as we are converting the usd back to cad. thank you!
You got it buddy! I always make sure that all my bases are covered! 😁
When I put both into backtest portfolio analyzer, VFV out performs VOO by a huge margin. 10k invested in 2013 yields 46k in VFV and 35k in VOO in 2023. That's a huge advantage for VFV
Make sure you watch the ENTIRE video! I have a whole section at the end on currency hedging and why the VFV performance metrics are misleading =)
The difference is that VFV's posted performance includes the growth of the fund PLUS the growth of the US dollar! Whereas VOO only posts the growth of the fund. But in the end, it does NOT matter since with VOO, you will eventually convert back into CAD anyway and reap that SAME exchange rate benefit =)
@@CanadianTShirt I understand what you are saying but something doesn't make sense. Look at the 10 year history of VFV vs VOO, 10 years ago today it cost 1.03 CAD to buy 1.00 USD and today it costs 1.35 CAD to buy 1 USD. The 10 year return of each was 328.96% for VFV vs 225.22% for VOO. So if I invested $1,000 CAD in VFV it would be $3,289.60 CAD today. If I converted $1,000 CAD to USD to purchase VOO it would be $970.97 USD at purchase and it would be $2,160.62 USD today, and if converted back to CAD at today's exchange that is $2,916.83 CAD which is over 10% less than VFV. My calculations favored VOO because I didn't factor in a loss on the currency exchange rate and VFV still significantly outperformed VOO.
@@mikehittingernow3179 Your math sounds accurate. Maybe this difference would be the extra 15% you would save on taxes on the dividends (if on your RRSP)?
@@CanadianTShirt What if during the period that you receive VFV's, CAD did better than the moment you decide to sell your VOOs and convert them back to CAD? But opposite is more likely :D
Hi Adrian. Nice info! I find VUG out performs VOO and VFV. However, I do hold over $5,100 of VUG and about $3500 VFV in TSFA., with BMO investorline. I also have about $4500 Fidelity ONEQ. So, it would make sense to leave the VFV in my TSFA and maybe move the VUG and ONEQ to RRSP? I’ve only held VUG and VFV for 5 years, and ONEQ for 2 years…,What do you think?
Great video! I personally buy VSP. I have been for almost a decade. My reasoning for this is because our Canadian dollar has less purchasing power than the US currently and this locks in my purchasing power when the dollar comes back against the US. When the dollar goes back to par God willing one day, I then plan on selling my VSP and then buying either VOO in my RRSP and VFV in my TFSA. Can you please explain to me if you think my notion is incorrect. Thanks again and awesome content!
Your plan is correct if the CAD will indeed become stronger! But if not, you are losing out on significant gains! Currency exchange rates are impossible to predict so don't bother trying to time the market. But looking at the past 10 years, the USD has grown very strong over the CAD and that plays a HUGE part of VFV's returns which you don't get with VSP. Personally, I avoid currency hedging since it will increase your annual fees (more work = more fees) and historically speaking, it doesn't really work. But in the short term, currency hedging can be helpful since you remove one layer of uncertainty. I'll be making a whole video on currency hedging soon so stay tuned for that! =)
@@CanadianTShirt Thank you for your time and input. The plan is to God willing be in it for the long haul. You may find this synopsis interesting for the video your planning around it. cclfg.cclgroup.com/wp-content/uploads/2022/02/brief-history-of-the-canadian-dollar.pdf. Keep up the great work!
Thank you Adrian for sharing this. I realized I’ve only noticed vfv but never paid attention to voo. Will be moving over to voo.
I'm glad you found this video helpful! Remember moving from VFV to VOO will have the biggest impact in an RRSP. If you are only using a TFSA, then you're only really saving money with the lower management fees. For many ETFs, waiving the withholding tax in an RRSP provides the bigger boost =)
@@CanadianTShirt thank you Adrian !
thanks for the video! The only thing I might see is that people might be more comfortable in investing every week or other week in VFV at 100$ contrary to VOO which requires 400USD. And yes you loose 15%, but the dividend is still so small, that for most people, it's a negligible loss compared to the growth of the stock. Might be better to invest in VFV and compensate the loss in dividends with individual stocks with higher dividends such as BNS or BMO. What are your thoughts
i totally agree. On top of that, the commission fees is high because we are buying with CAD. Wealthsimple charges more for USD version. It might be ok for questrade because it charges commission even it is USD or CAD
@@pothysvignesh3472 exactly
Always love when you put out content, if it wasn’t for you, I would have never got started with investing in stocks. This is the kind of information people needs to know, that holding VFV in a TFSA doesn’t save them from the taxes as it taken out by the ETF, and holding it inside a RRSP is giving away potential earnings for taxes you could avoid. However the cost of VOO makes it hard for someone like me to invest. Do you know of any other S P 500 USD ETF’s that have a lower price point to get in on?
I appreciate those kind words! I'm glad my video has been so helpful! 🙏
Most of the S&P 500 ETFs have large share prices, SPY for example is even more expensive than VOO per share! There are a few options that have a lower share price but the trading volume will also be lower so you have to consider that. You might pay a higher price between the Bid-Ask price (if not a lot of people are trading it, it's harder to buy at the price you want. This can cost you more)
Look into something like SPLG, it only costs about $60 USD right now
This is a great video, everyone should watch this. I am still thinking for a large portfolio, traded in a TSFA without Norbits gambit VFV may be better?
If a broker charges 3% currency conversation and you have 1 million sitting there the difference in fees between the two funds is around $600 a year. When you transfer that million back, you will pay well over $30,000+ to get it back into Canadian dollars. Also an intimidating amount to use Norbits for.
There is no limit to amount you can use Norbert's Gambit for! I know some of my viewers have converted over $200K with Norbert's Gambit and it literally costed them less than $10. If they paid a 1.5% conversion fee instead with something like WS, that would have costed them over $3000!!!! So Norbert's Gambit is definitely the way to go, even MORE so for large sums of money! =)
Don't get me wrong, I think WealthSimple is a great platform but ONLY for Canadian investing. I cannot recommend them for US investing, those conversion fees cost WAY more than a $5 commission fee... So if your broker doesn't allow Norbert's Gambit, I don't think you should use them for US investing =)
@@CanadianTShirt Yea I know this for sure, but I think the difference is quite negligible for the most part. $600 on $1,000,000 is quite minor but something for sure.
Id have to watch your norbits video again, but from what I recall, I was a bit nervous letting each equity settle and slight variations that might occur when transferring between the two.
Great video. I didn't know that you can do the currency conversion on investments with such low fees. The main reason I am not buying voo in my resp is the high conversion fee. Thanks to you I will be able to save more money. Great job! Love your content and all videos.
You got it! Here is my link to my NORBERT'S GAMBIT tutorial! This technique has literally saved me THOUSANDS over the years in conversion fees! I use it every month =)
ua-cam.com/video/q6Q1dzK8vts/v-deo.html
Great video, Adrian! So glad you brought the differences to our attention!
I'm happy to help! It's important to know where your money is going so you can make the best decision for yourself 😊
Please chime in with your thoughts, here was my thought process on VFV over VOO as a Canadian.
To provide context, I passively invest and will have an govt pension when I retire.
Every two weeks I invest a set amount into VFV once my pay cheque is deposited. With the spread between USD and CAD at the moment, I planned to invest in VFV until (if ever) CAD and USD are closer to par. My arbitrary trigger figure is 88 cents + on the dollar. At this point I would switch from VFV to investing in VOO as any future currency devaluation in CAD would net a favourable exchange + stock growth.
I understand there is a way to circumvent the 15% tax holdings on Canadian ETFs, but this is purely passive for me. I have a minimum 23 year time horizon on the portfolio.
Thoughts? Insight? Things I’m missing?
Edit: spelling corrections.
If that strategy works for you then go for it! But keep in mind that BOTH of these ETFs depend on the exchange rate!
VFV is an unhedged ETF, so it's price depends directly on the US dollar! VOO is already in USD so they BOTH depend on the exchange rate. Choosing VFV won't give you any protection from currency fluctuations
If you really care about the exchange rate, then look into a hedged ETF like VSP. I talk about this towards the end of the video so give that chapter another watch. Best of luck! =)
Completely understood why buying a Canadian ETF for US stocks is a bad idea in a TFSA. Thank you for pointing out that different investors (low vs. high income) will have different routes, and recommending their appropriate actions respectively.
I been buying VFV thru TFSA in a Dollar Cost Average method, but now know I should switch to the RRSP method and probably buy in bulk to avoid regular daily conversion fees.
If you can't do Norbert's Gambit, don't bother converting. The price discount on US etf doesn't offset the conversion fees on currencies. If you lose 2 or even 1.5% converting your contributions, what's the point saving 0.06%? Each monthly contribution may take years to break even. The dividends held by the US cost you about 0.24% of the total dividend amount... See if recouping that loss is worth losing 2% converting your money without Norbert's Gambit.
When I was just about to buy some VFV.. Adrian dropped some street knowledge !! what about a 15% withholding tax on the FHSA?
Great question, I like where you're thinking! Unfortunately no, you can't avoid the 15% withholding tax in the FHSA
US dividends will face a 15% tax in an FHSA, the same as the TFSA. Only the RRSP (and RRIF and LIRA) can avoid this
While I agree with your points, in reality it doesn't really make much of a difference.
You mention that VOO makes up 2% of your portfolio. I don't know the size of your portfolio, but let's assume it's $1,000,000. That means VOO is $20,000. The management fee difference between VFV and VOO is 0.06%. That would be $12 a year difference. For dividend yield, you mentioned the yield is 1.59% for VOO and 1.29% for VFV, a difference of 0.30% due to non recoverable withholding taxes or $60.
So annually it's only $72 ($60 + $12). Take away $5 for Norbert's Gambit each way it comes to $62. $62 on a $1,000,000 portfolio is a rounding error. Even if VFV / VOO were 20% of your portfolio, it would only amount to $710 on a $1,000,000 portfolio or 0.071%.
Personally, I have gotten rid of all my US holding and just buy Canadian ETFs for simplicity. I have done Norbert's Gambit in the past, but now I can't be bothered.
Thats my exact question, is it worth it for the savings and dividend. By your numbers I guess not really ?
Here is a calculation to illustrate the difference between these strategies in an RRSP investment. Let’s assume an initial amount of CAD 5,000, annual contributions of CAD 2,000 over 20 years, and an annual net return of 8% (including a 2% dividend), with a constant USD/CAD exchange rate of 0.75. The VOO strategy with a 1.5% conversion fee (WS) accumulates CAD 239,322 in 30 years. Without conversion fees (e.g., NG), it reaches CAD 246,581. The VFV strategy, with a 15% withholding tax on dividends, totals CAD 226,611.
Great video Adrian! I did not know about the influence of the USD on the %return (I never tried comparing them like that)! Informative content as always.
I'm happy to hear that Mike! Ya it's important to consider currency fluctuations when looking at international investments. And if you see performance metrics that are surprising (like VFV outperforming VOO even though it's the same fund) it's worth looking deeper =)
I am planning to invest $4500 in S&P500 ETF through RRSP only. Should I convert my CAD through NB and buy VOO or should I simply buy VFV in CAD. The $4500 would be throughout the year for dollar cost averaging (can do monthly or quarterly)
I learn so much from every one of your videos. Thank you!
I'm so happy to hear that Lori! Thanks for watching! 🙏
Have you ever done any videos on the Canadian RDSP account and how it works?
Is it more like an RRSP or TFSA when it comes to holding US stocks and in regard to the 15% withholding tax?
Thanks!
I agree with all you said about the advantage for VOO vs VFV. The only 2 reasons I recommend the CAD ETFs holding to someone is when they invest in a TFSA (so no advantage regarding witholding tax) AND the simplicity if the person is not comfortable with the currency exchange conversion with Norton Gambits. I don't want to discourage someone who is in the right path to manage his own ETF for just 0.05% and go back with his portfolio manager who rob them of 2%.
No question! VFV is infinitely better than a mutual fund! And as I talk about in towards the end of the video, yes if you don't use an RRSP (low income etc) or just want to use a TFSA, then you might as well go with VFV since without an RRSP, you can't avoid the taxes on those US dividends so you might as well go with VFV since it's easier =)
From a TFSA perspective only: VOO has lower fee but will have to deal with exchange rates, so eventually VFV might still be cheaper.
@@muhammadtahamanzoor6444 I agree but the exchange rate fees could be negligeable if you do the Norton Gambit trick. But you're right that for a TFSA it's not a big advantage to go for the USD ETF
Which is better for a tfsa
Why not just buy individual Canadian stocks and maybe one Canadian etf and use VFV or Xsp in your rrsp. That makes more sense to me
Great video!
Just looking for some clarification here…
In an instance where you convert you CAD at todays rates to buy VOO, then the CAD appreciates vs USD and you sell. Wouldn’t you be better off if you had just bought VFV?
I cover this at the end of the video but BOTH of these ETFs depend directly on the exchange rate!
VFV is unhedged meaning that it depends directly on the US dollar. So the exchange rate affects both VFV and VOO equally!
If you want a currency hedged option, look into VSP. Again I go into greater detail in a chapter towards the end of the video =)
As usual, awesome info (and tshirt) ! 👍👍
Thanks buddy! I try to mix it up every video but I'm running out of T-Shirts! 😅
Great video! I was just curious if you are holding also any Fidelity ETFs like FZILX, FZROX or FXIAX? Could you also please make a video on these? I am trying to compare Vanguard and Fidelity. It appears than Fidelity has no management fees? Thank you! Greatly appreciated
I don't personally own any Fidelity ETFs but I will look into them! The vast majority of my ETFs are Vanguard, Blackrock or BMO =)
Hey Adrian, I rewatched the video and something caught my attention. You mentioned that VOO is ideal for capital gains. If we hold it in an RSP, we'll have to pay taxes when withdrawing the gained money. However, if we keep VFV in a TFSA and withdraw the gains, we won't be taxed. Wouldn't it be smarter to place high-capital-gain tech stocks in a TFSA to avoid any taxes when withdrawing the gains from it?
I am wondering the same
This just shows that you should do your own research before believing everything you hear, exactly my sentiment, you would be taxed at withdrawal from an RRSP on the capital gains, as opposed to the TFSA which is completely free.
It's the US-listed dividend withholding taxes (not capital) he mentioned which aren't applied to RRSP accounts due to the US Canada tax treaty for this account. That being said, TFSA is great if it's the only account being used and not using an RRSP. If using both accounts, something to think about which asset types to put in which account if looking to optimize everything.
Great video and information, just wondering what your take on best Canadian retirement income ETF, thanks Adrian
If you are in retirement or approaching it, I would look for lower risk more income oriented products like dividend ETFs. I have this video here on my favourite Dividend ETFs =)
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You could also throw in some bond ETFs for good measure, ZAG for example. Hope that helps!
Depending on individual situation, we will have to pay withdrawal tax (I.e. 20%) when we sell VOO in RRSP and withdraw funds. Holding VFV in TFSA seems like a better option because the witholding tax and higher management fee will cost way less
It really depends on your situation, for some people especially with lower incomes the RRSP doesn't make sense. But for others, the RRSP can be incredibly powerful, even more so than the TFSA (although ideally you want to max out both) Keep in mind that when you withdraw from the RRSP, you do NOT pay an EXTRA 20% withdrawal tax. You just pay a withholding tax upfront so that you don't have a massive surprise tax bill at the end of the year. Think of it like a tax instalment. I cover how RRSP withdrawals are taxed in this video here =)
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@@CanadianTShirt I used to be in the "max out TFSA first befor RRSP" camp. I was curious so i modelled it out the other day. My findings are for the assumptions that if you are a long term investor and have goals to eventually max out both accounts and create a large nest egg to eventually live off of fixed income amounts. My findings were that its best to max the RRSP first, to allow the quick money you earn today, to compound over time and make up for most (not all) of the taxes youll have to pay when you withdraw. The gap betwen the two accounts is actually small, the RRSp is 30% larger nest egg, but affter taxes the yearly income amount is only 2.5% LOWER than the TFSA would be tax free.
The problem though, is that in my model if i max out the TFSA first, the gap widens in the TFSA favour since the RRSP requires the early compounding to keep pace with the TFSA's non taxable earnings in the future. The conclusions is that if you can max out both each year, they end up with nearly the same return. But if you can only max out one or the other for now, and have to wait for a bigger income to eventually max both, do the RRSP first to help it keep pace. Lastly, since the RRSP gives you 18% of your income worth of tax free growth and the TFSA 6000ish a year is only 10% of your income for a 60K income and only 6% of your income for a person with 100k yearly income so the RRSP is the clear winner since being able to shelter much more will gain you more regardless of the TFSA being non taxable in the future.
Basically, if you max both(around 25%+ income savings) and do the RRSP first, they will end up nearly equal over the long run after tax, if you are only going to be saving round 10% or less of your income and never expect to make more than 80k family income than the TFSA is a clear winner.
Omg, thanks for all that research
@@matthewgerich7649Thanks for this amazing research! The only caveat regarding RRSP is it has to be mandatory withdrawn when I turn 71, or turn it into a RRIF. The first option faces a big tax bill, the latter one faces the risk of losing government benefits. So should we still max out RRSP?
Thank you im under 80k so tfsa it is ❤@@matthewgerich7649
I just came across this video and found it interesting. I did the same analysis awhile ago and came to the same conclusion about VOO vs VFV. However, I still decided to hold VOO in my TFSA rather than my RRSP as even though it is less tax efficient on the dividends, the S&P 500 has historically outperformed the TSX or other international benchmarks to the point that the higher rate of return made sense to be tax free rather then in a RRSP where it would be taxed on withdrawal even with the 15% withholding tax. But I could see if you were putting more aggressive stocks in your TFSA, then this may be better placed in your RRSP. Thanks,
Nice video again! You explained the pros and cons of VFV very well. I personally own VFV, but for the exact reasons you mentioned. I have a small amount of money in VFV in RESP, just want to get some US market exposure for a short period of time, not worth of norbert’s gambit
That makes sense! If you're buying in your RESP, then you can't avoid the 15% withholding tax on dividends no matter which ETF you buy. So in that case, you might as well stick to VFV. The difference in management fees alone is not enough, unless you build up a massive portfolio. Which is a good problem to have 😉
Thank you! I’m trying to learn investing and this is really helpful
I'm so happy to hear that! And major props to you for having the guts to start your investing journey! 😁
I recommend going through my MILLENNIAL INVESTING Guide. It's my playlist with the light green thumbnails, walking you through all the lessons you need to invest, in a proper order =)
ua-cam.com/play/PLj8bU3AuW2qEVri8g-ErBL65ng98iAf5g.html
Thank you so much Adrian! By watching this video, you LITERALLY saved me thousands of dollars as I soon will have a large sum deposited into a locked in RRSP, and I was going to buy Canadian ETF's holding US stocks (VFV being one along with QQC). Now I now to go with the US versions. THANK YOU!!!
Question- there's so much talk about S and P 500...and I get why.....but what's your opinion on NASDAQ 100 ETF's like QQQ? I mean I know the NASDAQ is more volatile and they have higher MER, but I'm in it for the long haul and NASDAQ outperforms S and P considerably, no?. Over a long period, would you say its a good pick? Thanks man, keep up the great work!!
*following - I’d like to know as well.
Thank you. I was just about to invest from RRSP
My pleasure! I'm glad you found it helpful! =)
Your reel is very helpful and the logic makes sense. The part I have a hard time with is the nominal dividend value. Annual dividends from VOO are quite small for a $500 unit. Six bucks?! Or am I reading something wrong?
What is the upside to risking currency exchange and even minor trading commissions to save 15% of a small dividend. If I invest $50k CAD I’m getting a roughly $500US dividend. IRS will cut away about $75 of that. Factor in $10 or $20 of Gambit trades and that’s saving $55 annually. What am I missing?
Which etf would you recommend for non-registered cdn account. I am heavy on pipelines. thanks
I'll be making a WHOLE video on investing strategies in a non-registered account. There is a TON to discuss since taxes can become a far more important and complex issue. Personally, I prioritize capital gains and Canadian dividends in my margin account since they are taxed more favourably. Whereas REITs, bonds and US dividends are taxed heavier which I why I only want to hold those in a tax sheltered account. Stay tuned for upcoming videos! =)
@@CanadianTShirt Thanks for your time !
I have done some research and found out the following.
Invest in Canadian stocks paying eligible dividend, very much tax friendly.
If you like to diversify beyond Canada, buy US stocks pay no dividend at all or pay very little dividend as you can claim back dividend withheld when we file our taxes. Keep in mind any dividend received (US stocks) within non registered is considered income and you pay marginal tax at tax time. Other option is to buy total return S&P500 ETFs listed in Canada which yield nothing and when you eventually sell you would only pay capital gain taxes like any other investments.
@@Northern_Squirrel thanks
Adrian you are also holding ZSP in your portfolio which is similar to VFV, so the same drawbacks apply to ZSP as well. Thanks
You're correct, ZSP would be exactly the same as VFV, it would face the same 15% withholding tax on those dividends
But I don't hold ZSP.... I own several BMO ETFs (starting with Z) but not ZSP
@@CanadianTShirt ohh
Can someone buy it using FHSA without paying withholding tax?
Unfortunately no... the FHSA is treated the same like the TFSA so US dividends will be taxed 15% in an FHSA. Only the RRSP and retirement accounts like the RRIF or LIRA can waive this withholding tax
Great vide and good explanation of the differences. Does Wealthsimple allow fractional buys of VOO??
I believe so! I personally don't buy fractional shares. But if you are using WealthSimple to buy a USD ETF like VOO, I hope you have a source of USD available. I don't recommend wealthSimple for converting into USD since they are very expensive (that's how they make their money) They're great for CAD investments but very expensive for USD investments. Using Norbert's Gambit with Questrade will save you a ton of money there =)
I'm a dual CA-US citizen, so my income in a TFSA is taxable in the US anyway, so I invest in US ETF's in my TFSA. As long as my US taxable incomes ends up below the standard deduction amount (~US$12,900) then I'll get that 15% back at tax time.
I'm not using an RRSP since I want to keep that money accessible for buying a house (not a first-time buyer so FHSA isn't an option, but that would have the same US-tax issue anyway).
Totally fair points, I would just like to put in a small caveet that the 15% withholding tax is not lost. It doesn't compound until you reinvest the tax refund, but you can straight up deduct it from your tax return.
As an accountant I can see a situation in the withdrawal phase of your RRSP where the withholding tax is a loophole to get out 15% of the dividends as tax deduction instead of income taxed at marginal rate.
Sorry but I'm not sure what you're talking about... in a tax-sheltered account like the RRSP you cannot deduct the withholding tax, that money is just gone. In a non-registered account, you can claim it to avoid double taxation but not in an RRSP
Thanks for the information! However, do you know if, as an EU resident, you are able to buy the vft? The issue with the voo is that EU regulations do not allow us to buy it because the US does not provide a key information document. If it is possible for EU responders to buy the vft, that would be the major selling point.
Great video summarising mistakes many Canadians make. Thank you!
I'm glad to hear you found it helpful! =)
Super helpful thanks! Was just looking to begin dollar cost averaging into vfv, I'll be sure to go with VOO instead!
So much money to be saved with all these little bits of knowledge
Thanks brother. I was wondering if I should sell VOO and buy VFV
That wouldn't make sense. You already went through the trouble of buying VOO which has lower fees and a higher dividend so keep it
If you're in an RRSP, then VOO is the clear winner
In a TFSA, the VOO is still a little better but VFV is fine
@CanadianTshirt Thank you, Adrian.
When investing through a Non-registered account, which option would offer better growth, VFV through Wealthsimple or VOO through Questrade using Norbert’s gambit?
@@Rashesh_Joshi in a non-registered, it won't make a huge difference either way. Similar to the TFSA case, the main benefit of VOO will be the smaller management fees since you can't avoid those US taxes outside of the RRSP. But for smaller portfolios, then VFV is fine
What is better? I genuinely don't know. Pay 15% now to the US or 30% later to Canada? Whether it's 30% or less or more later obviously depends on how much you'll be making when you retire, and how much of your money is left to your heirs.
This is an important point which I emphasized in the video, saving the 15% withholding tax is NOT the reason to open an RRSP
You should only open an RRSP if it makes sense for you and your situation based on your tax bracket now vs your taxable income in retirement. That's the deciding factor there
Now if you're in a situation where the RRSP will benefit you, then once you already have an RRSP, it becomes a no brainer. Definitely choose VOO over VFV since you get the full dividend and lower management fees. Hope that helps! =)
Hi Adrian. Thanks for the detailed analysis on Tax implications but even if we want to withdraw from rrsp we will be taxed as per Canadian govt as per the tax bracket even if our income is low.
I have a WHOLE video on how RRSP Withdrawals are taxed, make sure you give it a watch! =)
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That's how the RRSP works, yes you are taxed when you withdraw (ideally in retirement at a low tax bracket) but remember that you also REDUCE your taxes now in your working years. So if you use it the right way, the tax refund you get now in your high income years will outweigh the taxes you pay in retirement, so it's a net positive! But you have to be strategic
Great video! New subscriber! Why is VOO $400usd but VFV is $100cdn. Is the dividend payout 4-5x higher as well?
The share price for a stock or ETF really doesn't matter. The only thing that matters is how much it GROWS! And the same for the dividends, you compare the dividend YIELD not the dividend amount. If a $1000 stock pays a $10 dividend every year, that's a 1% yield. But if a $100 stock pays a $5 dividend every year, that's a 5% yield so the $100 stock pays 5 times more in dividends!
The yield tells you, if you invested $1000 into this stock today, you would earn 1% or 5% or whatever the yield is, every year in dividend income. I talk about this in greater detail in my DIVIDENDS EXPLAINED video here =)
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Thank you for this helpful video and explanation! I had a simple question why not VTI vs VOO in RRSP using Norbert’s gambit?
Whoa! Great analysis as I'm currently looking at what ETF's to invest in. I never knew that US ones were taxable in TFSA! Thank you for explaining this, I currently have my RRSP in a 5 year GIC with TD bank do you think I should open a new RRSP account in Questrade to invest in VOO ?
I'm glad you found it helpful and thank you for joining my membership program! 🙏
When are your GICs maturing? And what is the interest rate on them?
If you are investing in an RRSP, then yes VOO is definitely the way to go to save on that 15% cut on those dividends. And yes go with Questrade and use NORBERT'S GAMBIT to avoid those conversion fees!
Here is my tutorial showing you how it's done step by step. It's saved me THOUSANDS over the years =)
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@@CanadianTShirt thanks for the response! I opened the GIC last year so still have 4 years to go and the interest rate is 4.10 %
thanks for this video which commes at the right time because I'm about to open a FHSA and was planing to invest in VFV so now I will rethink it
Don't get me wrong VFV in an FHSA or TFSA is still a great investment but be prepared that you can't avoid the 15% withholding tax on the dividend already baked into the ETF. If you have the RRSP room, it might be worth contributing to VOO instead for optimal tax efficiency =)
I'm curious, are you going to open an FHSA with Questrade? I hope you saw my last video, where I give a step by step tutorial on how to open the FHSA =)
Yea that 15% tax on dividend is a huge waste. What would you recommend as a CAD holding equity ETF then? Is there an SNP 500 but for canadian companies instead?
Something more suited for TFSA.
I got you buddy! Some popular options include XIC and VCN which are in Canadian dollars and track the largest Canadian stocks! They would be perfect for the TFSA! I talk about XIC in detail in my video on my favourite Canadian Dividend ETFs =)
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Hey Adrian, as you mentioned in the "Final Thoughts" of your video if I am investing through a non-registered account, buying VFV from Wealthsimple would be a better choice, correct?
Just to clarify, I don’t mind investing through Questrade in VOO from my non-registered account.
Thank you for the amazing video✌️
Thank you for this video.
What about US estate taxes? I thought we cannot invest more than 60K in US domiciled ETFs in RRSP or TFSA for that reason
Oh no no you can certainly invest MORE than that. It's just that after you own more than $100K in USD assets then you must fill out a form. And this does NOT include TFSA and RRSP, just non-registered!
And remember they're not stopping you from investing above $100K, it just must be reported!
How about investing in Horizon's corporate class ETFs? For example, HXS which tracks S/P 500, According to their fund facts explanation, they don't distribute dividends and calculate values into total return of the ETF prices. There should be no withholding taxes since they technically don't distribute dividend. For the management fees, yes, their MERs are still higher than the US counterparts.
"Thanks for the video; the explanation is marvelous!
There is one thing I can't wrap my head around: even if you hold VOO in your RRSP, isn't it going to be taxed 15% foreign tax once you decide to withdraw?
If not, then how come the Canadian government lets you not pay this 15% eventually?
Oh no the 15% withholding tax is never paid in an RRSP. Even when you withdraw. I understand the confusion because the term "withholding tax" has two separate meanings
The 15% withholding tax applies to foreign dividends. You can avoid this 15% tax on US dividends in an RRSP
But when you eventually withdraw from an RRSP, there is an entirely separate "withholding tax" applied by the Canadian government. This doesn't matter what you invested in, it's just a tax applied on withdrawals from the RRSP
The point of this withdrawal "withholding tax" is to avoid a giant surprise tax bill at the end of the year. You will pay a portion of those taxes upfront (withholding) and the rest at tax time. I have a whole video on RRSP withdrawals and these withholding taxes here so make sure you give it a watch =)
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@@CanadianTShirt Awesome, thanks for the explanation!
Thanks Adrian, learned a lot! I was wondering since you shared in your TFSA video from September 2023 that you held other ETF's , some of which are higher MER fees than VFV, what makes you choose them rather than VFV? Are they Canadian-based and avoid the 15% witholding tax?
Oh absolutely! Remember the whole point of an ETF is to own a bundle of stocks and bonds all at once. So the most important factor to consider with an ETF is what is inside it!
VFV is a great ETF but it ONLY contains US stocks. Zero Canadian or international holdings!
If you want Canadian ETFs, here's a video on my favourite Canadian ETFs =)
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And yes all those ETFs will be 100% tax free in any tax-sheltered accounts: TFSA, RRSP, FHSA, etc =)
@@CanadianTShirt Thank you :)
Sold VUN and vfv from TFSA and I’m buying VOO in lira account. Thanks for sharing your wisdom.
My pleasure Enid! Yes the LIRA will benefit from the same tax savings as the RRSP, so that 15% withholding tax on US dividends will be waived in a LIRA =)
@@CanadianTShirt I started with SCHD and I’m thinking to wait a bit for VOO to come down a bit. Do you think VOO and VTI are overinflated right now?
What is a lita account?
@@cynpam4543 LIRA account is the money that both my employer and myself contributed monthly to my retirement fund. It is a retirement account.
Hey there! What are your thoughts on XGRO and the other all-in-one asset allocation ETFs? The MER is super low (e.g. XGRO, 0.22%). If you were to create a separate portfolio with both fixed income and equity ETFs (even the low-fee USD ones, VTI, VOO, BND, etc.), it would add up to much more than a total MER of 0.22%. The all-in-one ETF (e.g. XGRO) charges only one MER, not separate MERs for each underlying ETF. I guess the only remaining issue would be the tax withholdings--only for RRSP, though. Very eager to her your thoughts! I'm looking for an even cheaper option that WS Managed offerings and these all-in-one asset allocation ETFs (e.g. XBAL, XGRO) look very attractive.
I think they are a GREAT option for really passive investors, you just put money in, set-it-and-forget-it and it has incredibly built-in diversification and market exposure. Personally, I avoid these all-in-one packaged ETFs. I don't want to have all of my Canadian, US and international stocks, some are growth and some are dividend focused all in the SAME place since they are taxed differently!
I want to control exactly which account should go where to minimize my taxes rather than just lumping them all in your TFSA and paying withholding taxes on dividends for example. It's a bit more work, but I like having full control of my investments. But for people who don't want the hassle of diversifying their portfolio themselves, I think they are awesome products and MUCH better than going through a mutual fund! I hope that helps! =)
I’m a begginer investor, so I’ve watching and doing my own research for a couple of weeks. According to the video, should I invest in vfv in my tfsa for a period of time and then start investing in voo in my rrsp to avoid the 15% tax ?
I was confident to start investing in vfv but now I’m not sure because of extra fees and taxes
Oddly for the "same product", VGG returns are significantly higher by 1-3% than VIG.
I really enjoyed this video… can you do more of them on low cost etf and money market funds ?
Of course! One of the most important factors when choosing an ETF is to minimize those annual fees because that's one of the few things that you CAN control! I've made many videos on my favourite ETFs including this one on my favourite Canadian DIVIDEND ETFs =)
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@CanadianTShirt Hi Adrian, love the channel and content!
I currently hold US ETFs (growth, foundational and dividend - all in USD) in both my TFSA and Cash accounts and wondering whether I should swap them to Canadian ETFs /stocks. Withholding tax aside, I'm apprehensive about U.S. tax filing requirements and U.S. estate tax for holding U.S. ETFs in my Cash Account. I'd really appreciate your advice!
If they pay a high dividend yield, I would rather hold them in my RRSP. For capital growth, the TFSA is totally fine
And don't worry too much about the US tax filing requirements, the TFSA and RRSP do NOT apply. It's only for $100K and above and only in a non-registered account
@@CanadianTShirt Thanks for the tips!
Happy to help!
Thanks for that! However at the date of this comment the exchange rate USD CAD is 1.36 and VOO costs, again, at the time of this writing, 483$ vs VFV that costs only 127$. Buying VOO at 483$ + 1.36 usd/cad currency conversions makes buying VOO seem way more unreachable while VFV seems way more accessible. Is my reasoning sound?
It's true that the share price of VOO is higher than VFV but share price shouldn't be your priority... A $20 stock isn't a better investment than a $200 stock. What matters is the actual company or fund, the % of return etc
It's true that VFV has a lower barrier to entry since it's a lower share price but you will be sacrificing more money in the long run. It's your call!
Maybe with VOO, you can only afford to invest once a month and that's okay! Whereas with VFV, you might be able to invest once a week. Find a strategy and frequency that works for you =)
Really interesting and informative stuff, thanks. Wealthsimple now offers no commissions on US stocks with USD accounts with either a $10/month subscription or holding $100,00 cad between all accounts. A nice way to get around the conversion fee
GReat Vid, i`m guessing its the same thing for VDY...
Nope! VDY contains CANADIAN stocks! That's why it's 100% tax free in a TFSA which is what I do =)
So I have a lower income. Would you reccomend i buy VFV in my TFSA then? Should I buy it at all ? I’ve JUST started investing - only hold XEQT right now.
I’m so new to all of this, there is so much information and it’s overwhelming!!
If you are in a low income tax bracket and you don't see your income growing significantly in the next few years, then yes focus on the TFSA and VFV would be fine in a TFSA =)
But if you're expecting a salary increase in the next 2 years, you can still contribute to the RRSP and carry forward those tax deductions when you're in that higher tax bracket! That way you can benefit from the RRSP & VOO combination even at a lower income, check out my RRSP Low Income Trick to see how that works! =)
ua-cam.com/video/Wm2nOmqOqCQ/v-deo.html
Good point about the conversion fee though! That's why for me I stick to VFV but great points
Fair enough! Just something to consider! As your portfolio gets larger and larger, the loss you'll see with annual fees and the 15% dividend cut will become more pronounced. Keep that in mind =)
@CanadianTShirt you will always get taxes 15 % when you withdraw you RRSP.
Hey thanks for all the useful info!!
at 8:40 you mention an argument for using VFV when in a TFSA (basically to avoid currency conv.) If i don't mind using the norbet's gambit each month for a 1000$ DCA, is VOO still the better option? If so, i'm wondering by how much with a rough average?
I'm 34 y.old and starting my invest. journey with my TFSA before switching to RRSP.
If you are only investing in a TFSA, then you lose the biggest advantage of VOO which is avoiding that 15% cut to your dividends. That can only be done in the RRSP
In a TFSA, the only benefit of VOO would be the smaller management fees but that only makes a difference for very large portfolios
My advice would be in an RRSP, definitely go with VOO. In a TFSA, then VFV is fine and easier =)
I totally knew this and didn't even think about shifting my RRSP investments from VFV to VOO. Do you prefer VOO over SPY?
They are essentially the same, I just prefer VOO since it has a lower management fee. Vanguard is well known for offering rock-bottom fees =)
@@CanadianTShirt so trying to figure out the math with paying the 1.5% fee to wealthsimple. Does it still make sense over time to buy voo.
Had to come back to sharpen my insights. Thanks again!
That's what I LOVE to hear! Thanks for stopping by for a refresh! =)
Thanks for the video Adrian! Great analysis and explanation.
Thanks buddy! I'm happy to hear that you found it helpful! =)
Great as always! Appreciate this.
Could you also post your thoughts on "US debt ceiling issue" affecting Canadians? Any strategy/tips for your followers?
This is an issue we see every few years, especially with a new administration. Honestly, it's exhausting seeing this same circus show repeat itself over and over again. But here's my rule of thumb. I never trust what a politician says. But I do trust that they will serve their own financial interests. And it is in EVERY congressmen's self interest to ensure the US market does not implode so at the end of the day, that's what they'll do. Everything up to that point is just huffing and puffing and theatrics
As always, AMAZING content! Thank you thank you Adrian! Would you know if it is possible for a Canadian to invest directly into VTSAX? How?! Where?! :)
Vanguard has hundreds of ETFs so I'm not familiar with that one. It might be one of those exclusive funds only available through Vanguard directly in the US
@@CanadianTShirt thanks so much for taking the time to answer! I really appreciate it 🙏 And I thought so too but had hope there might be a way 😊 it’s an Index Fund that tracks the entire US market. VTI would be it’s ETF equivalent but I wanted an Index Fund.
@@mariad5374 don't worry VTI is an index fund! An index fund just means that it tracks an index, like the S&P500 etc. Index funds can be ETFs or Mutual Funds, the idea being that since it just tracks an index, there isn't much decision making required and thus the management fees are very low =)
@@CanadianTShirt thank you once again!! You have tremendously helped so many Canadians and me make financial decisions be not so confusing! Can’t quite express just how appreciated that is. Wishing you a wonderful weekend!
I enjoyed what you explained about avoiding witholding tax by buying VOO (US version of VFV). However it seems there is a caveat here: you pay US withholding tax because you earn income from US source while you are a canadien resident and not because of you're buying the ETF in Cdn or in US dollars. This is regulated by the US-Cda tax treaty.
Yes but I covered this in the video, within the US-CAD tax treaty, there is an exception for the RRSP. Within an RRSP the 15% tax is waived however it ONLY works with USD versions of stocks and ETFs
Just got my RRSP transferred to QT. What a hassle and it was like they sent it on a snail. Anyway, I'm thinking of going for VOO as you said but wow, it's almost 400/share. VFV is only 100. Wouldn't it be better to go with VFV if I'm using an RRSP? Maybe I'm just looking at it wrong. The number of stocks I get for my money doesn't matter, I guess.
Thanks for doing your video on Norbert's Gambit. From this vid, I assume I'll have to use it to get VOO. But not VFV?
Anyway, your advice is gold and thanks.
Yes. Use norbits gambit to convert your CDN to USD. Once you have your USD, you use that to buy VOO in your RRSP. That’s what he was getting at in the video😊.
You buy VFV in Canadian dollars, so no currency conversion required. To buy VOO, you need USD. You can either use your broker like WealthSimple to convert into USD but it will cost you a LOT (1.5% upfront plus another 1.5% when you eventually sell) Instead, I use Norbert's Gambit to get USD without paying any conversion fees, instead I essentially pay a flat rate of $5! This will make a HUGE difference especially for larger sums of money!
And in regards to the Questrade transfer, where were you transferring from? The transfer will depend on the financial institution, some are quick, some are slow. I have only transferred from TD and from Tangerine and both were pretty quick so my money arrived in Questrade within a week. Also, don't get too hung up on the share price. That only really matters if you can't afford to buy one share. What you really care about is the long term performance of a stock. 10 shares of a $100 stock is NOT "better" than 1 share of a $1000 stock, it depends on the investment itself. If you have an RRSP already, then I suggest VOO because you get to avoid that 15% cut to your dividend and that will earn you extra money EVERY year! =)
@@CanadianTShirt Transfer from Simplii. It took about 2 weeks. And I nearly had a bird when I was notified that it had been transferred but didn't show up for a couple more days in QT. I don't like Simplii, for more reasons than that.
So holding VOO in an RRSP rather than a TFSA saves a 15% tax on dividends.... but what if RRSPs don't make sense to a given individual's situation but a TFSA does: does it make more sense to take the hit on the dividend tax in the TFSA, or on the conversion fee applied by just going with VFV?
You are totally right, as I said at the ending summary of the video. If you are already using an RRSP then it's worth investing in VOO. But if you are at a low tax bracket or you don't expect your working income to exceed your retirement income then the RRSP probably doesn't make sense for you. In that case, stick with the TFSA and then you might as well stick with VFV since it's easier
If you stick with the TFSA, there's no way to avoid the 15% cut to your dividend so the only benefit of VOO would be the lower annual management fees. But this won't make a significant impact unless your portfolio grows rather large. I hope that helps! =)
Thank you for your videos! So this applies to VEQT as well?
For the most part yes, VEQT contains several other ETFs each of which are taxed differently. The US portion of VEQT would be taxed the same as VFV but the international holdings face different withholding taxes since they depend on each individual country
You are the best! These videos are so incredibly helpful. Thank you so much 🙏
Thank you for those kind words! I'm glad you found my videos helpful! =)
Great video comparing the pros and cons of Canadian vs U.S.-listed ETFs! I'd also like to mention one thing to keep in mind when holding U.S.-listed ETFs, stocks, or any other foreign investments.
If the cost of your foreign investments is $100,000 or more, you're obligated to file Form T1135 to the CRA every year. Canadian-listed ETFs that contain U.S, or other foreign, holdings (such as VFV) is considered a domestic asset and is not considered foreign ownership. It's important to keep this in mind, and to keep track of how much you own in foreign assets, to avoid being hit with fines for failure to file Form T1135.
Great point! I'll be making a whole video on T1135 soon! =)
US stocks are subject to US estate tax when you die. You might be double taxed by CRA and IRS. something to consider
Great detailed explanation of the pros and cons of VFV vs VOO!
Thank you James! I'm glad you found it helpful! =)
VOO is only 2% of your portfolio? What is your biggest US stock investment on Questrade? I'm looking for the top 10 or Top 5 now that I have a brand new QT account (thanks for your referral link) I see (at 2:10 ) REI-UN (but that's Canadian - I use Wealthsimple for my canadian stocks), KO Coca Cola, SPYD (don't know what that is) ... Do you have another video of your top 10 US stocks?
great video and detailing adrian
Thank you! I'm glad you found it helpful! =)
Awesome video - really clearly explained, with great information. Thanks!
Thank you Nicole! I'm happy to hear that you found it helpful! 😊
What Canadian index fund is best for Canadians that covers global? Much appreciated. Want it in Tfsa. And which of these 2 u speak of is best for Tfsa
There are a TON of ETFs that cover international and emerging markets! Some of the most popular, all in one ETFs are things like VGRO, XEQT and ZEQT
They'll be fine in a TFSA but remember, you will pay a withholding tax on all US and foreign dividends you receive, even in a TFSA
The problem is RRSP will lock my funds and TFSA will not. That flexibility makes me put my money in TFSA.
That's fair and important to consider! The RRPS is not for everyone and yes the TFSA has more flexibility! In my position, I want to max out both my TFSA and RRSP so it gives me more tax efficiency to hold USD investments in my RRSP and Canadian investments in my TFSA. But if you are only using the TFSA, then you might as well stick with VFV since you can't avoid that 15% dividend cut unless you go with an RRSP =)
as usual great video and content! Adrian, what are your thoughts on the asset allocation ETFs such as VGRO, same principal in terms of tax implications/withholdings etc. thanks!
I get the VGRO question all the time. I think it is a great option for really passive investors, you just put money in, set-it-and-forget-it and it has incredibly built-in diversification and market exposure. Personally, I avoid these all-in-one packaged ETFs. VGRO is just a collection of 7 ETFs. I would rather just invest in these ETFs directly and in doing so, I can control exactly which account should go where to minimize my taxes rather than just lumping them all in your TFSA and paying the withholding tax as you mentioned. It's a bit more work, but I like having full control of my investments. But for people who don't want the hassle of diversifying their portfolio themselves, I think VGRO is an awesome product and MUCH better than going through a mutual fund! I hope that helps! =)
@@CanadianTShirt it helps tremendously! thank you! So can VGRO in a RRSP can waive the 15% tax withholdings? or because its a CAD ETF holding US stocks/etfs 15% still applies? as you can see very new to investing ;-)
@@Raz_Peach Unfortunately no! Each of the ETFs within VGRO will have different tax implications. Some of those ETFs are Canadian ETFs so that portion will be tax free but others like the US or international ETFs will be taxed. Just like I showed with VFV, go on the Vanguard website and you can see the breakdown of VGRO's distribution and you'll see how much foreign tax they are paying =)
@@CanadianTShirt thanks so much!!
@CanadianTShirt Thanks for the video! I was wondering if FHSA would have the same advantage as the RRSP of avoiding the 15% fee for the dividends? Thank you so much, your videos are so helpful!
Unfortunately no. The FHSA is treated like the TFSA so it will still face a 15% tax on US dividends
Only the retirement accounts like the RRSP, RRIF and LIRA will waive this withholding tax
@@CanadianTShirt Thank you!
Amazing content as always! Incredible new info!
Thank you! I really appreciate that! =)
Wealthsimple has US accounts, they still charge 1.5% fee to convert to USD and back but won't charge conversion fee to buy and sell. But I guess it's still not worth it to do US stocks/ETFs with Wealthsimple
Excellent video! Nice channel. Thanks for the great info! 🤠
Thank you and welcome to the channel! I'm glad you found it helpful! 🙏
My issue is that Norbert's gambit has a 3-5 business day lead time and I do not think there is anyway to automate the process.
When it comes to investing, it is a LONG game! I really do NOT care about a few days, I care about YEARS! But if for whatever reason, you NEED this money immediately then sure you can convert the currency directly. Just be aware that it can be costing you hundreds or even thousands of dollars for the "convenience" The market very rarely changes over the course of 3 days... just a thought =)