In the past, I felt that Wealthsimple Trade fell short in one key area: its lack of a U.S. dollar account.
This forced you to trade U.S. stocks or ETFs at a high foreign exchange fee, so it wasn’t an excellent option for people who liked to purchase U.S. stocks frequently.
Well, that’s all changed now with the introduction of Wealthsimple Trade Plus, and it fills that need for Canadian investors eager to buy and sell U.S. stocks or ETFs.
I’ve done extensive research into the best trading platforms in Canada, and I analyze every new offering for each significant provider. This one is a winner for Wealthsimple.
You’ll now be able to buy and sell U.S. stocks and ETFs and incur minimal fees if you sign up for a Wealthsimple Trade Plus Subscription.
How does a Wealthsimple Trade Plus Subscription Work
- It’s a subscription-based model, and you can sign up for a reasonable $10 a month
- After signing up, You will be given a USD account that you can use to buy and sell U.S stocks and ETFs.
- You can buy and sell U.S. stocks or ETFs without incurring any commission charges or foreign-exchange fees on trades within the USD account.
Other great features of Wealthsimple Trade Plus:
- Instant deposits of up to $5,000
- Price-change alerts (unlimited)
- Snap quotes for real-time, on-demand prices
Why Is Having a USD Account Such a Big Deal?
I’ll explain why this is such a great feature by showing you an example of how foreign exchange fees would work before without a USD account with Wealthsimple, and how it works now:
Example 1: FX Fees With No USD Account
Jim wants to buy $1,000 CAD worth of shares from Company X.
– He converts the $1000 CAD to USD and buys the shares and incurs a 1.5% foreign exchange fee = $15 CAD fee
– He sells the shares in USD and it’s automatically converted to CAD a few days later and incurs a 1.5% foreign exchange fee (assuming it’s worth $1,000 CAD at that time)= $15 CAD fee
– He repeats this over the course of a year ten times, with $30 CAD in fees each time
Total Fees = $300 CAD in foreign exchange fees in one year.
Example 2: FX Fees With a USD Account
Jim wants to buy $1,000 CAD worth of shares from Company X.
– He converts the $1,000 CAD to USD, and incurs a 1.5% foreign exchange fee = $15 fee
– He buys stocks with USD in his USD account and incurs $0 in foreign exchange fees.
– He buys and sells within his USD account ten times throughout the year = $0 fee
– At the end of the year, he sells all his U.S stock and converts it from USD to CAD, and incurs a 1.5% foreign exchange fee (assuming it’s worth $1,000 CAD) = $15 CAD fee
Total Fees = $30 CAD in foreign exchange fees in one year
In this example, Jim saved $270 in just one year because of his USD account! As he was only trading $1,000, this translated to a massive 27% savings for him.
The foreign exchange fee is somewhat of a hidden fee, so many investors aren’t even aware of this fee when trading U.S stocks.
In both examples, there are no trading commissions charged, as Wealthsimple has zero commission trading now.
Other Wealthsimple Trade Features
Whether you sign up to Wealthsimple Plus or not, you’ll still get access to all of Wealthsimple Trade’s basic account features, such as the following highlights:
- Commission-free trades buys and sells for stocks and ETFs
- Can buy fractional shares on select stocks
- No account fees
- Simple to sign up
- TFSA, RRSP, and personal non-registered accounts are available to use
- User-friendly with a minimalistic design
Check out my full review on Wealthsimple Trade here
Should You Get A Wealthsimple Trade Plus Subscription?
If you’re not sure if it’s worth it for you to get this subscription, here’s a straightforward guide:
Get a Wealthsimple Trade Plus Subscription if:
If you average more than one U.S. stock buy or sell per month throughout the year, you’ll want to get this subscription. It will more than pay off for itself over the year, as you can see in my example in the previous section.
Don’t Get a Wealthsimple Trade Plus Subscription if:
If you don’t buy or sell any U.S stocks or ETFs. Simple, right?
Is Buying U.S. Stocks a Good Idea For Canadian Investors?
Yes, Canadian investors should look at diversifying by buying American companies. I am heavily invested in the U.S stock market for a lot of reasons:
- Home Bias: I talk about avoiding home bias on Wealth Awesome. A lot of Canadians are guilty of this bias. Home bias is putting all your eggs into one basket and ignoring other markets. This can cause a problem since your entire life, career, and now investments are tied to the success of the Canadian market. Buying U.S stocks or ETFs helps mitigate that risk.
- Potentially better returns: The U.S market generally outperforms the Canadian one. For the period of Dec 7, 2011 to Dec 8, 2022, the U.S S&P 500 has averaged a 14.05% return per year. The Canadian S&P/TSX index only returned 5.56% per year during that same time frame. This isn’t guaranteed, but historically this has been the case.
- Greater selection: The U.S stock market is much more robust than Canada. Canada’s stock market consists of only 3% of the world’s capital markets. The U.S on the other hand has about 56% of that market share.
- Better companies: In my opinion, America has better and more internationally renowned companies, is much more diverse, and their business policies favor growth more than Canada. There aren’t many companies from Canada that are recognized internationally, but America has so many (Google, Apple, Coca-Cola, Tesla, to name a few)
Wealthsimple Trade Plus and Tax Implications
Trading across borders invariably brings up tax considerations. With the Wealthsimple Trade Plus Subscription, here are some pointers:
- Withholding Tax: Any dividends received from U.S. stocks might be subject to a 15% withholding tax. This can affect the net return on your investments.
- Tax-Advantaged Accounts: If you hold U.S. stocks within registered accounts like an RRSP, the tax dynamics change. For instance, U.S. dividend stocks in an RRSP may not be subjected to the withholding tax due to tax treaties between Canada and the U.S.
- Tax Reporting: With a U.S. dollar account, traders might have additional reporting requirements come tax time. Maintain accurate records of all your transactions.
How to Get A Wealthsimple Trade Plus Subscription
Here are the steps to signup:
- If you don’t have a Wealthsimple Trade account, sign up for one here and receive a $50 bonus.
- Then, you can either open up the Wealthsimple Trade app or sign in to the desktop version.
- Go to your profile settings.
- Tap on subscription, and you’ll see an option to upgrade your account to Plus.
Conclusion
The Wealthsimple Trade Plus subscription should satisfy many Canadian customers who have been clamoring for a solution to the FX fee problem for U.S stocks.
Wealthsimple Trade has been an excellent newcomer to the ultra-competitive discount broker/trading platform Canadian market.
Wealtsimple as a whole seems to have its pulse on the needs of Canadian consumers. With new offerings such as Wealthsimple Plus, the company fully deserves its recent $5 billion valuations.
Learn more about Wealthsimple in this detailed overview of the company; it’s a lot more than just a trading platform.
