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Is Norbert's Gambit anything but theoretical? It sounds like a guaranteed way to lose money. Given the tick size, crossing the spread with this ETF is going t
by derriz 7y ago
Is Norbert's Gambit anything but theoretical? It sounds like a guaranteed way to lose money.
Given the tick size, crossing the spread with this ETF is going to cost you around 10bp alone. Never mind that this ETF only holds $45m in assets - you're only going to be able to get a very small amount without eating through price levels. On top of all this you have to carry 3 days of currency risk?
I'm sure other online discount brokers are similar, but I checked Interactive Brokers, since I'm a customer, and they charge max 0.2bp fees, the spreads are around 1bp and there's no currency risk.
- chrisfosterelli 7y agoAre you in the US? While I've never personally done Norbert's Gambit my understanding is that it's extremely popular for Canadian investors to do if they want to get USD. Might not be vice-versa. The most common use case I'm familiar with is within RRSPs, as there is sometimes a tax advantage to using US-listed ETFs within them. Most brokerages charge 1.5-2% to do currency conversion so it would be a lot better deal to do Norbert's Gambit to get USD trading funds.
- eru 7y agoThat's weird? Why is paying the ETF spread twice cheaper than paying the CAD/USD spread once?
- perl4ever 7y agoFor some reason, people think the cost of buying and selling a security is equal to the explicit commissions and fees, I guess.
- eru 7y agoGiven some weird structure of fees and spread, paying the ETF spread twice might very well be cheaper. I have no clue. I was just wondering, what weirdness must be going on to make that so.
- derriz 7y agoI'm not in the US but there are probably even more online discount brokers operating in the US and Canada so maybe it's a tax efficiency thing? Paying 1.5%-2% for FX conversion between two major currencies is very expensive unless the sums are small. The last time I converted currencies using a discount broker - including all costs I was charged less than .1% compared to the mid-market rate at the time.