A reader recently e-mailed me with a question. Here it is:
Just a quick question, please.
I saw that you included Vanguard funds in your RRSP holdings but I am confused about that. I thought Vanguard only sells their funds to Americans (not to Canadians) so how are you doing that within the RRSP?
Nope, anyone can by Vanguard ETFs. Not sure what you mean by “funds”. If Vanguard also has mutual “funds” those might be different. But their ETFs are just like stocks so you can buy them in the same way that you can by stock in other US companies.
I am ready to open a self-directed RRSP for the first time. My wife is an American and has Vanguard funds and we just can say enough about them. I would love to include Vanguard funds (read index/ETFs) in my RRSP as well but how do I do it? Can I acquire them within any self-directed RRSP account company?
I see, you DO mean index/ETFs. Yes all companies should allow you to buy them. The only annoying part is that no broker allows you to keep US cash in your RRSP (even though by Canadian law that is allowed). The consequence of that is that if you own VTI in US dollars and want to change it to VWO in US dollars you have to sell it, at which point it gets converted to Canadian dollars and then buy VWO at which point it gets converted to US dollars. So you get dinged on the exchange. If you only did this every 10 years or something like that, it would not be a huge deal (compared to the gains/losses you made on the underlying investments). See an article of mine, “Foreign Exchange Costs Associated With USD Investments in an RRSP” for related calculations. There is currently a lawsuit going on against BMO to stop the practice of not allowing Canadians from holding US cash in their RRSPs (even though it is allowed).