Should Canadians buy U.S. stocks in CAD or USD?

Investors often use the terms CAD and USD investing interchangeably, but several different concepts can be involved.

Trading currency

The trading currency refers to the currency used to buy and sell an investment. For example, a security listed on a Canadian exchange may trade in Canadian dollars, while another security may trade in U.S. dollars on a U.S. exchange.

Listing currency

The listing currency refers to the currency in which the security’s price is displayed on an exchange. This describes how the investment is quoted, but does not necessarily describe the currencies represented within the investment.

Underlying currency exposure

Underlying currency exposure refers to the currencies connected to the companies, assets, revenues, or markets held by an investment.

For example, a Canadian investor may purchase a CAD-listed ETF that holds U.S. companies. Although the ETF trades in Canadian dollars, the underlying holdings may still be affected by movements between the Canadian dollar and the U.S. dollar unless the fund uses currency hedging.

Currency hedging

Currency hedging refers to techniques used by some funds to reduce the impact of exchange-rate movements between currencies.

A currency-hedged investment may attempt to limit the effect of changes between CAD and another currency, while an unhedged investment allows currency movements to influence returns when measured in Canadian dollars.

The currency displayed beside an investment price does not always represent the currency exposure within the investment.

Six factors that may help investors make a decision

The choice between CAD and USD investing can depend on several portfolio considerations rather than one single factor.

1. The investments the investor wants to own (e.g. U.S. stocks, ETFs, etc.)

CAD-listed ETFs can provide exposure to U.S. companies without requiring a USD balance. 

The availability of a preferred investment, along with its structure and characteristics, can influence whether CAD or USD investing fits within the portfolio.

2. How often the investor invests

Investment frequency can affect how investors think about currency management.

Someone making regular contributions may prioritize simplicity and consistency, while someone making larger or less frequent purchases may place greater importance on maintaining a particular currency balance.

3. Whether the investor already holds or earns USD

Investors who receive USD income, hold existing USD cash, or regularly receive USD distributions may find it practical to invest those dollars directly.

Maintaining investments in the same currency as existing cash flows may reduce the need to manage multiple currency movements.

4. The investor’s preferred level of simplicity

A CAD-focused portfolio may reduce the number of currencies and cash balances an investor tracks.

A portfolio that includes both CAD and USD holdings may provide additional flexibility but may also require more monitoring of account activity and currency balances.

5. The investor’s investment horizon

The investment timeline can influence how investors evaluate currency decisions.

Long-term investors may consider factors such as ongoing portfolio maintenance, reinvestment of distributions, and account management over time. Short-term investors may place greater focus on liquidity and transaction frequency.

6. The investor’s account structure

Account features and tax considerations can vary depending on whether investments are held in a Tax-Free Savings Account (opens in a new tab) (TFSA), Registered Retirement Savings Plan (opens in a new tab) (RRSP), First Home Savings Account (opens in a new tab) (FHSA), or non-registered account.

Investors may review how their account supports different currencies, securities, and reporting requirements. Individual tax considerations can vary, and professional guidance may be appropriate for personal circumstances.

When investing through CAD may make more sense

For some investors, holding investments primarily in Canadian dollars may provide a simpler way to manage a portfolio.

This approach may appeal to investors who:

• Deposit and budget mainly in CAD.

• Prefer a straightforward investment setup.

• Make smaller or regular contributions.

• Prefer Canadian-listed ETFs.

• Do not require access to a specific U.S.-listed security.

• Want account values and transactions presented mainly in one currency.

Potential benefits can include simpler cash management, easier contribution planning, and fewer separate currency balances to monitor. Canadian-listed funds may also provide access to U.S. companies and markets without requiring the investor to directly manage a USD balance.

However, buying an investment in Canadian dollars does not automatically remove foreign-currency exposure. A CAD-listed fund may still hold U.S. assets and remain affected by movements in the U.S. dollar, depending on its structure and whether currency hedging is used.

The choice between CAD and USD can depend on how the investment fits within the investor’s broader portfolio rather than the currency shown beside the investment price alone.

When holding and investing in USD may make more sense

For some investors, maintaining a USD investment balance may provide additional flexibility, particularly when U.S.-dollar activity already forms part of their financial life.

Holding and investing in USD may be considered by investors who:

• Already earn or hold U.S. dollars.

• Regularly purchase U.S.-listed stocks or ETFs.

• Want access to specific U.S.-listed securities.

• Receive USD dividends and plan to reinvest them.

• Prefer to maintain long-term U.S.-dollar holdings.

Potential benefits can include direct access to U.S.-listed securities, easier reinvestment of USD distributions, and fewer repeated currency movements for investors who regularly invest in U.S. dollars.

However, managing investments in both CAD and USD can add complexity. Investors may need to monitor separate cash balances, investment values, and account activity across two currencies.

The choice to hold USD can depend on the role U.S.-dollar investments play within the overall portfolio. For some investors, USD holdings may support an existing pattern of U.S.-dollar income or investment activity. For others, maintaining multiple currencies may add unnecessary complexity.

CAD-listed vs. U.S.-listed ETFs

When comparing CAD-listed and U.S.-listed ETFs, the trading currency represents only one part of the decision. Two funds providing exposure to a similar market may still differ in structure, costs, tax considerations, and portfolio characteristics.

Investors may compare factors such as:

• Underlying holdings: The companies, bonds, or assets held by the fund.

• Currency exposure: Whether the investment is exposed to movements between CAD and other currencies.

• Currency hedging: Whether the fund attempts to reduce foreign-currency effects.

• Management fees: The ongoing costs charged by the fund.

• Fund size and liquidity: Factors that may affect trading activity and availability.

• Tracking approach: How closely the fund attempts to follow its underlying market or index.

• Distribution currency: Whether income payments are made in CAD or USD.

• Account availability and tax considerations: How the investment fits within the investor’s account structure.

A CAD-listed ETF and a U.S.-listed ETF may provide similar market exposure while differing in important ways. The listing currency alone does not determine the investment’s overall currency exposure, cost structure, or tax treatment.

Currency-hedged vs. unhedged investments

Currency hedging and listing currency are separate features.

A currency-hedged fund attempts to reduce the impact of movements between the Canadian dollar and another currency. An unhedged fund allows currency movements to affect the Canadian-dollar value of the investment.

For example, a Canadian investor holding an unhedged investment with U.S. assets may experience changes in the investment’s Canadian-dollar value from both the performance of the underlying assets and movements between CAD and USD.

A currency-hedged version of a similar investment may attempt to reduce the currency-related impact, but it may involve different costs, structures, and performance characteristics.

Neither approach applies universally. The choice may depend on factors such as:

• The investor’s objectives.

• Investment timeline.

• Comfort with currency fluctuations.

• Existing exposure to foreign currencies.

• Overall portfolio composition.

Currency exposure can be one component of portfolio construction, but it is separate from whether an investment trades in CAD or USD.

A simple CAD vs. USD investing checklist

Before choosing between CAD and USD investments, investors may consider:

• Am I contributing in CAD, USD, or both?

• Do I already hold USD?

• Am I buying a CAD-listed or U.S.-listed security?

• What currency exposure does the investment actually have?

• Is the investment hedged or unhedged?

• How frequently will I invest or trade?

• Will distributions be received in CAD or USD?

• Does my account support holding both currencies?

• Is a comparable investment available in Canada?

• Have account and tax considerations been reviewed?

• Which option can be managed consistently over time?

The choice that fits an investor’s portfolio may depend on more than the currency displayed beside the investment. The overall investment structure, account setup, and ability to maintain the approach can all play a role.

Conclusion: choosing the structure that fits the portfolio

The decision between buying U.S. stocks in CAD or USD involves more than the currency shown when purchasing an investment. A CAD-listed holding keeps contributions and account activity in one currency. A USD balance avoids repeat conversions for investors who already hold or receive U.S. dollars. USD may be practical for investors who already hold U.S. dollars, regularly purchase U.S.-listed securities, or want access to specific investments.

Understanding trading currency, listing currency, underlying currency exposure, and currency hedging can help investors evaluate how different options fit within their overall portfolio. The approach that works best may depend on the investor’s goals, account structure, investment habits, and ability to manage the portfolio consistently over time.