about Northern Raven last modified Novermber 11, 2010
US ETF breakeven calculator
The calculator tries to estimate the breakeven point between an US-based ETF and a Canadian equivalent. The default case is iShares' S&P 500 index funds. IVV is the US-based fund. The Canadian-based XSP holds IVV shares, but also hedges against $US currency risk, and measures itself against the slightly different S&P 500 CAD-Hedged index. Calculating the US/CDN ETF breakeven point as per Canadian Couch Potato's article and spreadsheet involves the currency conversion costs of buying $US-dollar ETF, and the US withholding tax lost by Canadian-based ETFs when held in an RRSP. The grey line on the calculator's results table shows the year that all these start to work in favor of the US-based ETF.
However, in the real world there are fluctuations in exchange rates, which can cause the US ETF advantage to evaporate (or, of course, grow larger). The "Cushion" column estimates the exchange rate the Canadian dollar would have to reach before the US ETF advantage is completely lost. Also, hedging used by the Canadian-hedged funds is imperfect and imposes a cost (check out Canadian Capitalist's article which describes an academic paper on currency-hedging of US equity index funds). You can use the calculator's Advanced Options to include these costs by turning on the RCE and/or Other Drag options and supplying values.

Help on hover held in RRSP?
Help on hover Initial Lump Sum $ Annual Contribution $
Help on hover Capital Gains (%) Dividend (%)

Advanced Options click to open
Help on hover Foreign Exchange cost (%):
Annual & Dividends Initial Lump
CAD->US rate:
Help on hover RCE(%) Other drag(%)
Show details

The US ETF has an annual advantage of %BasisDifferenceStr% basis points (%BasisDifferencePercentStr%%).
US CAD Cushion
Year Year End
before costs
Forex on Dividends MER $ IRS
Year End
after costs
Year End
Value in $CAD
Year End
before costs
MER $ RCE $ Year End
after costs
Difference % $CAD


Notes and Caveats: