Sell USD stocks to convert to CAD right now?

[RioIndy]

A few years ago I wanted to get some of my portfolio into a US ETF (VWO) and so put ~$10,000 in USD. This was when CAD -> USD were ~1:1. Today the CAD has dropped to being closer to 0.8 : 1 USD. It's been a pretty dramatic drop all of a sudden.

If I sold that stock and converted it back I would make ~20% on that alone. (the ETF stock itself has only made like 1.5%).

Should I sell it and cash that in? Any other thoughts on this?

Thank you

 

[yakers]

If you think that the Canadian $ will return to near parity with the US$ then you might want to do as described. Not sure how Canada will tax your capital gains or if you would reinvest the US$ in something else. Canada looks like a good long term investment since they have energy, food, other natural resources and access to the US market. But the energy sector could take a hit from currently cheap petroleum. The key question is do you have a better idea where you want to put the $ than VWO? In US$ I have been losing money in VWO but I hold it as part of my AA and I don't have better ideas of where to invest my money.

 

[RioIndy]

Thanks for the response Yakers. Yes the tax implication is the big unknown for me. I have no idea how to find information on the tax implications.

I was also holding VWO (and also VEE, its canadian sister fund) since it seems like a good move for Asset Allocation wise. But neither has done me any good over the last several years. And I am hearing more and more how the emerging markets have largely reached the end of their growth. I am considering re-distributing that money to increase my AA towards TDB902 (US Index) and TDB911 (INT Index).

 

[Totoro]

Should I sell it and cash that in? Any other thoughts on this?

I'm in the same position with regards to the Euro. It's not so much the CAD that went down, the USD went up

I did not cash in on that, and will not cash in. Simply put because I am investing, not timing the currency markets.

In addition, yakkers seems to be confusing VWO with a dollar investment? It's not!

You are invested in companies in emerging markets, whether or not you buy them in USD is irrelevant for the performance. Since it is denoted in USD however you do get the illusion that it does. Buying or selling VWO because of a USD / CAD movement is plain silly (sorry for the bluntness).

So if emerging markets is part of your asset allocation, stick with it. Merely dropping it because it hasn't performed for several years (vs. decades) is not a sound rationale to me.

Every asset class will underperform and outperform at some point - right now US stocks have been on a rampage, but that may change to Europe or even Emerging. Unless you know more than most of us, there is not an easy way to tell.

Long story short: decide on an asset allocation long term and stick with it, don't chase (past) returns or feelings. You'll get burnt.

 

[haha]

A few years ago I wanted to get some of my portfolio into a US ETF (VWO) and so put ~$10,000 in USD. This was when CAD -> USD were ~1:1. Today the CAD has dropped to being closer to 0.8 : 1 USD. It's been a pretty dramatic drop all of a sudden.

If I sold that stock and converted it back I would make ~20% on that alone. (the ETF stock itself has only made like 1.5%).

Should I sell it and cash that in? Any other thoughts on this?

Thank you

This would be a pretty small $ gain. Is it worth the trouble to you?

Ha

 

[Meadbh]

Thanks for the response Yakers. Yes the tax implication is the big unknown for me. I have no idea how to find information on the tax implications.

I was also holding VWO (and also VEE, its canadian sister fund) since it seems like a good move for Asset Allocation wise. But neither has done me any good over the last several years. And I am hearing more and more how the emerging markets have largely reached the end of their growth. I am considering re-distributing that money to increase my AA towards TDB902 (US Index) and TDB911 (INT Index).

I was very confused by your post as your profile said you live in Michigan. Eventually I went back to your first post which says that you are Canadian (and presumably living in Canada). Now it's beginning to make sense.

I think that if you have decided that the investment in US$ no longer fits your desired asset allocation, this is a great time to sell it and reallocate.

My US$ portfolio has blossomed recently, partly because of stock prices and partly because of exchange rates, but I am not selling as I am happy with my current asset allocation.

You might want to correct the information in your profile. For "State" enter "Canada".

For information on taxes, go to taxtips.ca. Use their calculators to model diffferent scenarios. You will find that capital gains generate the lowest amount of tax liability.

 

[Rick_Head]

Thanks for the response Yakers. Yes the tax implication is the big unknown for me. I have no idea how to find information on the tax implications.

The simple answer (and probably close but not 100% accurate in your case) is that 1/2 of your capital gain is added to your taxable income for the year you sell.

 

[Sunset]

Don't know why you wanted to get a US etf and then bought VWO?
VTI would have been much more "US".

So assuming it was a bit of a mistake, I think you should sell, grab the 20% gain, and buy XIU.to if you want to benefit when the CDN dollar returns closer to parity.

Of course you could wait to see if the CDN dips to 75 cents, but that would simply be timing the market intentionally