Why I DON'T Use Wealthsimple - US Investing // Questrade vs Wealthsimple Part 1

Introduction

Investing can be a daunting task, especially for beginners. While Wealthsimple is a fantastic platform for Canadian investing, it becomes less attractive when it comes to US investments. In this article, I'll compare two popular Canadian brokerages: Wealthsimple and Questrade. I aim to highlight the significant differences in fees associated with US dollar investments and explain why I prefer Questrade for this purpose.

Wealthsimple Overview

I have been a fan of Wealthsimple since its inception, and it is one of my favorite platforms for Canadian investments. They truly simplify the investing process, making it user-friendly for those just starting. However, when it comes to US investing, the fees can add up quickly, costing you thousands in the long run.

Currency Conversion Fees

To buy US stocks using Wealthsimple, you need to convert your Canadian dollars into US dollars, which incurs a 1.5% conversion fee. While this fee may not sound substantial, it quickly becomes costly, particularly with larger investments. You will also pay the conversion fee again when you sell your US assets and convert back to Canadian dollars.

On the other hand, Questrade offers a strategy called "Norbert's Gambit." This technique allows you to convert your Canadian dollars to US dollars without incurring high conversion fees. Instead of paying a percentage, you pay a fixed fee, making it a much more affordable option.

Fee Comparison

Let’s break down the math for various investment amounts:

• $ 1,000 Investment:

  • Wealthsimple: $ 15 conversion fee (1.5%)
  • Questrade: Approximately $ 5.45 using Norbert's Gambit

• $ 10,000 Investment:

  • Wealthsimple: $ 150 conversion fee (1.5%)
  • Questrade: Approximately $ 12.32 using Norbert's Gambit

• $ 100,000 Investment:

  • Wealthsimple: $ 1,500 conversion fee (1.5%)
  • Questrade: Approximately $ 60.79 using Norbert's Gambit

As you can see, Questrade drastically reduces the fees you pay when converting currencies, which can save you thousands over time.

Wealthsimple Premium

A common misconception about Wealthsimple is that their premium account avoids conversion fees. This is not true. Paying $ 10 a month or maintaining $ 100,000 in the account only allows you to hold US dollars; it does not exempt you from conversion fees.

In contrast, Questrade allows you to hold US dollars for free and still offers the advantage of avoiding conversion fees when using Norbert's Gambit.

Example Transactions

Let’s look at a live example of purchasing a $ 1,000 investment in Procter & Gamble stock using both platforms.

1. Questrade:

   • I utilize Norbert's Gambit to convert my $ 1,000 into USD.
   • The total cost incurred is around $ 10.41 for the entire process.

2. Wealthsimple:

   • I directly purchase the stock for $ 1,000, incurring some conversion fees.
   • The overall cost ends up being approximately $ 14.

In this particular instance, waiting for the conversion process with Questrade turned out to be advantageous, as the price of Procter & Gamble shares dropped while I waited.

Long-Term Costs

Throughout my investing journey, I have put $ 722,000 USD into my portfolio; the contrast in fees becomes even more apparent over time. In total, using Wealthsimple could have cost me approximately $ 3,300 more compared to using Questrade, considering both the currency conversion and commission fees.

For those new to investing, it may seem tempting to use Wealthsimple due to their lack of commission fees, particularly if you are investing small amounts regularly. However, as your portfolio grows, so will the costs. It is essential to be aware of the hidden fees that can accumulate over time.

Ultimately, many investors choose to use both platforms—leveraging Wealthsimple for Canadian investments while using Questrade for US investments. Both platforms have their merits, but when it comes to US investing, the fees associated with Wealthsimple should give you pause.

I hope this article provides valuable insights into the differences between Wealthsimple and Questrade for US investing. If you're interested, check out my referral links for both platforms to receive sign-up bonuses.

Keywords

Wealthsimple, Questrade, US investing, currency conversion fees, Norbert's Gambit, commission fees, US stock purchasing, Canadian investing.

FAQ

1. Why are the currency conversion fees important for US investing?
Currency conversion fees can significantly increase your total investment costs, especially for larger sums of money. It's vital to understand these fees to avoid losing a sizeable chunk of your potential gains.

2. What is Norbert's Gambit?
Norbert's Gambit is a technique that allows investors to convert Canadian dollars to US dollars without incurring the high 1.5% conversion fees, typically associated with Wealthsimple.

3. Does Wealthsimple's premium account avoid conversion fees?
No, Wealthsimple's premium account does not avoid conversion fees. It allows you to hold US dollars, but you will still incur fees when converting currencies.

4. Can I use both Wealthsimple and Questrade together?
Yes, many investors opt to use both platforms for different types of investments—using Wealthsimple for Canadian assets and Questrade for US investments.

5. How can I minimize my investment costs?
You can minimize investment costs by being mindful of commission fees and currency conversion rates, utilizing strategies like Norbert's Gambit for USD investments, and selecting platforms that offer lower overall fees.