Topic: How To Invest

Q: I want to buy a U.S. stock today. In order to realize a gain on that U.S. stock, do I need to wait for the U.S. dollar to rise against the Canadian dollar before I sell the stock?

Article Excerpt

A: The short answer is no. That’s because you pay more in Canadian dollars when you buy U.S. stocks, but you get more Canadian dollars back when you sell. Let’s say you want to buy a U.S. stock trading at $100 U.S. This would cost you $130.14 in Canadian dollars at today’s exchange rate. Let’s say the stock rose 5%, to $105 U.S. If you sold it, and the exchange rate remained the same, you would get $136.65 in Canadian dollars. That’s also an increase of 5%. At the same time, exchange rates do change. If the value of the U.S. dollar rises in relation to the Canadian dollar while you’re holding a U.S. stock, then you would get more Canadian dollars back when you sell than if the exchange rate had remained the same. On the other hand, if the value of the U.S. dollar falls in relation to the Canadian dollar while you’re holding a U.S. stock, then you would get fewer Canadian dollars back…