Buying US stocks in Canada : Zero Commission is Not The Same as Free

What to watch for when you are buying US stocks in Canada

So you’re a Canuck buying US stocks eh?

You would imagine everyone makes it so that you get a good, transparent rate and don’t get gouged on currency/FX fees right ?

Well this is not always the case. Most of the time, FX is actually something that contributes big margins to the bottom line, and can often be a hidden cost for brokers, banks and other financial institutions.

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But every now and then, we get good providers who focus on keeping fees low – and the plus for them is that they get more volume. Thats exactly how is works for Interactive Brokers on the broker side and in the FX world – it is similar to how Wise operates.

Luckily, they did some research on an example of buying US stocks in Canada and what that would cost.

In their example they list out the ‘Total Trade Costs’ for various brokers for buying $5000 worth of US stocks – hypothetically 100 shares.

1. IBKR Total Trade Cost with Currency Conversion = IBKR Tiered Stock Commissions + Exchange, Regulatory, Clearing Fees + FX “Commission”.
   USD 2.70 = 0.35 + 0.35 + 2.00
2. Wealthsimple Total Trade Cost with Currency Conversion = Zero Stock Commission + FX Conversion Fee.
   USD 58.95 = 0.00 + (CAD 5000 x 0.7860 x 0.0150)
3. Questrade Total Trade Cost with Currency Conversion = Stock Commission + FX Conversion Fee.
   USD 63.90= 4.95 + (CAD 5000 x 0.7860 x 0.0150)
4. BMO Investorline Total Trade Cost with Currency Conversion = Stock Commission + FX Conversion Fee.
   USD 72.83 = 9.95 + (CAD 5000 x 0.7860 x 0.0160);

Do you see the MASSIVE problem?

As with most stuff in life, it’s all about the hidden fees.

So even though Wealthsimple says “$0 Commission”

In reality, the fee is made up along the way…

You can see this directly from the Wealth Simple support website^[1].

This is not to say its only Wealth Simple – its something you have to watch for across whatever app you choose to use to buy US stocks as a Canadian. Questrade as an example:

At Wealth Awesome, we think that is your goal is to be as savvy as possible in order to reach your financial goals. This means picking the right broker, the right investments and setting reasonable goals on how to get there.

We do think that out of all the brokers in Canada, Interactive Brokers has the best access to markets, and lower fees – but it is important to do your own research. You may find that you want certain features, or trade/invest in a certain way that changes your decisions!

FAQs about buying US stocks in Canada

1. Can you buy US stocks in a TFSA or RRSP? Yes you can buy US and other global stocks in a TFSA – some brokers might have some restrictions however.
2. What apps can I use to buy US stocks in Canada? Most brokers will support US and Canadian stocks – other will offer even more market access to global securities.
3. Should I buy US stocks in CAD or USD? Typically US stocks are denominated in USD unless there is a cross exchange listing, and even if you purchase in CAD, your funds will be exchanged to USD – so watch the conversion.

Resources

Interactive Brokers Rewards

• Rated #1 – Best Online Broker Six Years in a Row by Barron’s 2023.
• 2024 BrokerChooser Best Online Brokers: 12 #1 Awards.
• 2024 StockBrokers.com Online Broker Review: 21 #1/Best in Class Awards.
• Benzinga rates Interactive Brokers #1 for such categories as Bonds, Mutual Funds, and a host of product/trading areas.
• 2024 ForexBrokers.com Online Broker Review: 15 #1/Best in Class Awards.
• 2024 Bankrate Best Online Brokers rate #1 Best Overall Online Broker.
• Finder.ca names Interactive Brokers the Best Broker in Canada for 7 Stock Trading categories – more than any other brand in Canada.

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