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I am located in Canada.

I've been buying US stocks(listed on a us stock exchange), my question is, should I buy them in Canadian dollars or convert to US and buy? I have tried both, my broker account shows US stocks in Canadian holdings, and US stocks in US dollars.

What is the difference if any? Pros, cons? Rules of thumb?

For example, I bought US stocks awhile back when Canadian dollar was weaker, so I could afford less US dollars. My US stocks are doing well, and the prices are higher then what i bought them, but my brokerage still shows i'm losing money. Meanwhile the canadian dollar has gotten stronger since I bought stock.

I need help understanding this.

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  • You should be clear about what you mean. Do you mean buying stocks that are denominated in CAD, and you buy them on the TSX vs stocks that are denominated in USD and you buy them from a US exchange? – Grade 'Eh' Bacon Oct 2 '17 at 18:43
  • "US Stocks in my Canadian Holdings" still means something denominated in US dollars. The price might list as CAD, but if the USD weakens, your assets of an American company operating in the US will, all else being equal, be worth less of your stronger Canadian dollars. – Grade 'Eh' Bacon Oct 3 '17 at 13:39
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From a purely financial standpoint, you should invest using whatever dollars get you the best rate. The general rule of thumb that I've come across is that if you are making another person/company change your money into another nation's currency, they will likely charge a higher exchange rate than you could get yourself.

However, it really depends on your situation, how easy it is for you to exchange money, what your exchange rate is, and what your broker is charging you to exchange to USD (if on the off chance this is truly nothing, then stick with CAD).

Don't worry about the strength of the USD to CAD too much because converting your money before you make purchases doesn't allow you to buy more shares. For the vast majority of people, trying to work with national currency exchange rates makes things unnecessarily complex.

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General advice for novice investors is to have the majority of your holdings be denominated in your home currency as this reduces volatility which can make people squeamish and, related to your second question, prevents all sorts of confusion. A rising CAD actually decreases the value (for you) of your current USD stock. After all, the same amount of USD now buys you less in CAD.

An exception to the rule can be made if you would use USD often in your daily life yet your income is CAD. In this case owning stock denominated in USD can form a natural hedge in your life (USD goes up -> your relative income goes down but stock value goes up and visa versa).

Keep in mind —as mentioned in the comments— that an US company with a listing in CAD is still going to be affected by price swings of USD.

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  • thanks for this. So youre saying better to buy my US stock, say Nike, in my CAD dollars? Just seems so confusing to me. – excelguy Oct 5 '17 at 15:13
  • @excelguy I think you are misinterpreting it. I'm reading it to mean investing more in companies who share the same home currency as you. i.e. Canadian companies. The stock of foreign companies is more likely to experience price volatility in CAD terms. However, there are still a lot of Canadian companies that are sensitive to swings in the Canadian dollar as they import/export and thus must buy/sell in other currencies. – Chris W. Rea Oct 5 '17 at 19:16

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