On September 4th, I sold my last units of DLR¹ within my RRIF account and completed my multi-month activity of kicking USD out of retirement portfolio. I ended up doing this about 3 months faster than I anticipated, but that’s because Questrade offered a free two-month trial for Questrade Plus, which included as many free journaling activities² as you wished during the trial. And since I’m a cheapskate, I figured saving the journaling fees was worth me upping the pace of my USD to CAD conversions.

I asked Claude to take a look at the various gambits I undertook³ and evaluate them. Claude was quite upbeat:

• Claude calculated an effective blended rate of 1.39946.
• Claude said I beat the spot rate by roughly +0.15% overall
• And, as expected, Claude assessed that every single gambit landed within a few basis points of the spot market, much better than what Questrade would have charged me (1.5% or so).

So now, here’s what my various account types look like, in terms of assets. There’s no USD listed ETFs anymore. Here’s what the three kinds of accounts look like.

Let’s recap the major changes, per account type.

Non-Registered accounts

I’m always a bit reluctant to mess around with non-registered accounts since making trades here inevitably lead to capital gains. But the impact in the end was pretty minor.

There’s actually three separate accounts being considered here. Two are legacy investment accounts that have long-term holdings. The other is my so-called “cash cushion” account that is an integral part of my decumulation strategy, called “VPW”. You can read about the mechanics of it here.

So for the cash cushion, I had to get rid of ICSH in favour of ZMMK. I’m giving up roughly 1.2% in annual return by doing this, but I figure at some point the Bank of Canada and the US Federal Reserve will get closer in terms of their interest rates. This had a minor capital gain impact, which was as expected. Both ICSH and ZMMK keep a pretty stable price point (around $50/unit) and pay out monthly.

The bigger issue was getting rid of SCHF from my non-registered holdings, which I had held for a very long time. Selling that was going to trigger a large capital gain that I hadn’t accounted for in my tax calculations. The solution I came up with was pretty nifty, if I do say so myself. SCHF in my model is largely “International Equity” so clearly I was going to have to replace that international equity contribution somewhere. I ended up replacing SCHF with VCN (a Canadian equity holding) and replacing XIC (a slightly different Canadian equity holding than VCN) with VFV in the TFSA account. In essence, I moved my international equity stake out of my non-registered accounts and put it in the TFSA instead.

By buying VCN (a new fund for me) in my non-registered account, I reset the ACB of that fund so selling units a few months from now shouldn’t really attract too much in the way of capital gains. In fact, the first month⁴ I sold VCN to pay my monthly salary, I took a small loss. So my tax planning should also stay intact.

TFSA accounts

There were no USD assets in my TFSA to begin with, so no changes were needed on that account. I had to do some asset class shifting here while maintaining 100% equity allocation in the TFSA. As mentioned above, XIC (Canadian Equity) was dismissed from the TFSA, and replaced with VIU (which is international equity).

I do have a small desire to covert the TFSA into a custom index (a Questrade feature) to save a bit on the MER imposed by XEQT here. I may yet do this. It will expand the number of ETFs in these accounts since I’ll need to decompose XEQT into its constituent components. This is again a case of me adding complexity in order to save a few bucks…But don’t I owe it to my readership to give it a try?

RRIF accounts

Mainly, the RRIF accounts replaced AOA with XGRO and ICSH with ZST. But since XGRO holds a lot less US Equity than AOA did, the AOA to XGRO conversion wasn’t exact. I had to replace some of the AOA with a US Equity holding (VFV). I chose to use ZST instead of ZMMK in the RRIF for two reasons:

• I wanted a different ETF in my RRIF as compared to my non-registered. This helps me avoid CRA superficial loss rules.
• ZST is ever so slightly riskier than ZMMK, which is fine, since the cash position in the RRIF is much more static than the cash position in my non-registered account.

The way ahead

Getting rid of USD assets has simplified my portfolio and my workflow thinking. I no longer have to worry about USD/CAD exchange rates, and my need to use Norbert’s Gambit should be over. It also opens up my universe to other DIY brokers. I’ve been a fan of Wealthsimple, but couldn’t use them for my RRIF accounts since they contained USD assets. Now I can consider Wealthsimple for all my investing needs⁵.

Working through the mechanics of slowly moving my assets to an all CAD lineup has caused me to probably spend way more time than is healthy looking at my portfolio and making trades. This should come to an end — with DRIP set up across all registered accounts⁶, the holdings should be more or less on autopilot with only monthly checkins to make sure my asset allocations haven’t drifted too far from my targets.

I’ve updated my posts that talk about ETF all stars and the “Magnificent Seven” ETFs as well, for reference.

1. Selling DLR is the last step of a Norbert’s Gambit when you’re converting USD to CAD. You can read about the gambit on Questrade here. ↩︎
2. “Journaling” is the step that turns units of DLR.u (which are priced in USD) into units of DLR (which are priced in CAD). If you’re not a Questrade Plus subscriber, journaling costs $9.95 plus HST every time you do it on Questrade. ↩︎
3. Ok, not all of them — Claude only connects to the accounts I own, and not those of my spouse. And the last trades haven’t settled yet, so the one I did on September 4th wasn’t showing up in my transaction history. I don’t expect the story is too different if I include the gambits I ran in my spouse’s RRIF account. ↩︎
4. After making sure 30 days had passed in order to avoid a “superficial loss” in CRA’s parlance. ↩︎
5. And if they offer a promotional offer that throws free money my way, I’d seriously consider switching brokers again. ↩︎
6. I don’t use DRIP in non-registered accounts because non-registered transactions need to be logged for adjusted cost base adjustments; I’d prefer to keep these fully under my control to minimize the number of transactions. I don’t mind carrying a bit of cash in non-registered accounts in order to avoid excess trades. ↩︎