Currency Risk Exposure: How do my fellow Canadians feel about this?

[AJDZee]

I'm curious to know how much of your portfolio is equities in USD$, and what your thoughts are the potential risk with that?

Recently I've been thinking long term, setting up my portfolio so I can put it on auto pilot and simply contribute to market ETFs, and keep my fees as low as possible.
My biggest holding is VTI (25% of my portfolio), which is of course in USD$, because it has lower fees than the CAD$ equivalent. (and had plans to add VTI going forward)

Considering we're talking 20+ years - and a lot can happen between now and then - I'm a little concerned to save 0.12% in fees may not be worth the currency risk exposure.
Do you guys agree? Does your portfolio look like mine, or are you smarter than me and thought of this earlier?

[erp]

I've generally stuck with VGRO (which is denominated in CAD). It's not so much to avoid currency risk as it is that I'm lazy and it seems to work (yes, I pay a higher MER for that laziness - so far the cost hasn't been big enough for it to worry me that much). I figure during accumulation (and while I have a relatively small net worth) I'm better served by paying more attention to how I'm spending than working to juice returns or manage currency risks as long as there's virtually no chance of wipeout.

I guess that the specific risk you'd be worried about is that USD drops precipitously relative to the CAD? This scenario doesn't seem super likely in the near term, although anything is possible. At the end of the day VGRO is still holding a bunch of American companies who price in USD, so I have some currency risk too. My hunch is that an autopilot, low-cost index fund heavy strategy is going to be fine whether or not you're dealing in USD or CAD (indeed, I'd expect you to outperform me because of the lower MER - but not so much that it'll hurt my lifestyle).

[GilesMM]

Probably safe to buy USD any time it is under 1.25 and to sell when over.

[Metalcat]

I'm VGRO too and I just don't worry about it.

[FLBiker]

With the HUGE caveat that I'm a US citizen (soon to be dual citizen) we have the vast majority of our investments in USD (>95%).  Initially, I was worried about the currency risk, but the (amateur) research I did seemed to suggest that hedging, while generally a good idea, has not historically been beneficial in this particular relationship.  A saying I ran into a few times was "when the US sneezes, Canada catches a cold".

Here's an article that links to a few (admittedly a bit old) studies: https://canadiancouchpotato.com/2014/03/06/why-currency-hedging-doesnt-work-in-canada/

Probably safe to buy USD any time it is under 1.25 and to sell when over.

This is the same rule of thumb that I follow.  I recently exchanged a chunk that we're going to put towards our house in 1.5 years (now sitting in CAD in a 5.65% GIC at EQ bank).  Our FIRE plan is to keep more cash (~2 years worth, 1 each in CAD and USD) to reduce the risk of having to do exchanges when the rates are bad.  That won't fully mitigate the risk, but at the same time, I feel like there are also potential benefits -- so far, we've done two big conversions -- 1 of $100,000 when we bought our house in CAD, and 1 of $60,000 recently, both of which were at rates of 1.37 or higher.

[AJDZee]

Thanks all for your input.
VGRO seems to be the popular choice. And funny enough, behind VTI, VGRO is my 2nd largest individual holding.

And to be clear, I'm not 'buying' or selling USD at any given price for the sake of buying currency, I convert using NG, to invest in USD$ a couple times a year.

If the relationship between CAD:USD stays relatively the same for the rest of my life, then no harm, I'm just left with market returns in my portfolio.

But I'm old enough to remember when CAD$ was $1.10 to USD$... if the same were to happen again (or worse) and I'm holding $1M+ investments in USD, that could mean the difference between FI and not, as I pull money out into CAD to live off of.

Of course the opposite is true too, CAD$ could weaken relative to USD and it would be a boost to my NW.
But this 'could be this... could be that...' mentality sounds more like gambling, it would better practice to eliminate the risk in the first place.

[daverobev]

This is a frequent misunderstanding. You don't own USD. It's just listed in USD.

That's not relevant. It could be listed in bananas, troy ounces of gold, or anything else - but you own shares of companies that, yes, report and transact (mostly) in USD. But they "aren't" their currency. They trade globally, they do all sorts of things, but it's all just not relevant.

Owning a Canadian-domiciled ETF that owns US companies is just a wrapper around owning the same companies directly or in a US-domiciled ETF.

Again - if you own VTI, VT, whatever - you *don't* own USD. There is ZERO currency risk.

[erp]

...There is ZERO currency risk.

I'm not exactly sure that's true.

If your assets are denominated in USD and you're spending in CAD then there is some risk that the USD and CAD values will diverge wildly in some way while you're in the (long) drawdown phase.

I don't think it's something to be overly concerned about, but if the day you retired something absolutely bonkers happened and 1 CAD = 5 USD, then a CAD denominated ETF would appear increase in value while the underlying USD denominated fund would not. You'd own the same 0.21 unit of Apple or whatever, worth exactly the same amount that it had been in USD before the wild currency swing, but it would be worth more CAD because of that swing.  At least, that's how I've always understood it ... currency doesn't generally do this unless a regime is falling or something so I have no first hand tests to demonstrate that I'm right.

I'd certainly appreciate it if you could illustrate what exactly the misunderstanding is though, I haven't thought especially hard about this.

[daverobev]

...There is ZERO currency risk.

I'm not exactly sure that's true.

If your assets are denominated in USD and you're spending in CAD then there is some risk that the USD and CAD values will diverge wildly in some way while you're in the (long) drawdown phase.

I don't think it's something to be overly concerned about, but if the day you retired something absolutely bonkers happened and 1 CAD = 5 USD, then a CAD denominated ETF would appear increase in value while the underlying USD denominated fund would not. You'd own the same 0.21 unit of Apple or whatever, worth exactly the same amount that it had been in USD before the wild currency swing, but it would be worth more CAD because of that swing.  At least, that's how I've always understood it ... currency doesn't generally do this unless a regime is falling or something so I have no first hand tests to demonstrate that I'm right.

I'd certainly appreciate it if you could illustrate what exactly the misunderstanding is though, I haven't thought especially hard about this.

No the CAD denominated ETF would fall in value in CAD while the US one wouldn't change in USD.

Say I put oh pretend the current exchange rate is 1.3CAD:1USD.

So 130 CAD into a global ETF

And 100 USD into a global ETF that tracks the same index.

If the exchange rate goes from 1.3:1 to 0.2:1 and pretending no stocks have changed in price at all, and that they were all in USD to begin with (this is impossible but..!!), how much would the ETF shares be worth?

The CAD ETF would now trade at 0.2/1.3x the initial price = $20 CAD

The USD ETF would trade at $100 USD

The $100 USD investment you have would be worth $20 CAD. So the currency is irrelevant.

[daverobev]

It's like going to a Walmart in Ontario and buying 10 bananas for $2 CAD, or going to Michigan and paying $1.50 USD.

You no longer have that money, you have 10 bananas. The bananas (stocks) aren't CAD, they aren't USD. They are bananas. You can sell them back to Walmart and get your money back at the prevailing exchange rate... and if CAD goes up vs USD, you will get fewer CAD back (because 1 CAD is worth more than it was before).

Currency is just temporary, for trading. When you own assets you don't own currency (ignoring debt/cash on hand etc etc!)

Sorry I'm not good at explaining this stuff clearly. If you own a car you don't have cash. If you have a house you don't have cash. You can convert work -> cash -> house, and house -> cash, and cash -> work. They all float in value. What 1 CAD is worth vs all the other possible things in the world isn't fixed.

[erp]

You're absolutely correct. I got the sign wrong in my example - I agree with your math.

I guess in this (admittedly absurd) scenario the thing that's catastrophic is that your CAD have less buying power (and that'd presumably going to lead to all sorts of things like inflation), not that the CAD-USD ratio has changed.

Thanks for the clarification!

[daverobev]

Right, but the thing is in that case - you don't own CAD!

Owning companies that own things is a really good protection against all that. Especially consumer staples, utilities, etc - assuming we're not hitting the end of the world (or at least the end of capitalism, or whatever due to climate change), then inflation, deflation, general crisis - people will still need toothpaste, electricity, bread, clothes.

[erp]

Right, the only time that you actually own cash (CAD or otherwise) is when you're selling assets (or not reinvesting distributions, I guess) - at that point you do actually own cash and the value is relevant because you want to buy something.

This is a really good nuance, it's something that I was kind of dimly aware of but hadn't thought very hard on.
I appreciate the time you took to walk me through it!

[Gerard]

Sorry I'm not good at explaining this stuff clearly.

Actually, the banana thing was really clear and helpful. Thanks.

[AJDZee]

woah ok hold on, we've gone a little bananas here :)  let me unpack this...

Owning a Canadian-domiciled ETF that owns US companies is just a wrapper around owning the same companies directly or in a US-domiciled ETF.

Again - if you own VTI, VT, whatever - you *don't* own USD. There is ZERO currency risk.

VTI & VT are not canadian-domiciled ETFs, they are listed on a US exchange and in USD$, you have to buy them with US currency, and when you sell them you get US currency - As a Canadian who holds an investment in USD$ that I will use to live off of to pay my bills in CAD$, there absolutely is currency risk.

And I'd like to demonstrate you don't need 'regime change' levels of disruption for it to have an significant impact...

Let's say my FI target is $53,200 CAD/year, with 4% SWR I need $1.3M CAD portfolio to FIRE, assume 4% SWR.

Scenario 1: If the current CAD:USD conversion of ~1.33:1 remains unchanged
After years of hard work and saving I get my portfolio, only holding VTI, up to $1M USD, my portfolio NW is $1.33M CAD.
I'm good to retire... every year I will sell $40k worth of VTI (USD$), and when I bring it back to CAD to live off of, it will be $53k CAD$. All good.

Scenario 2: The CAD:USD conversion shifts to 0.95:1 at any point in my 40-year retirement
(like it did for 5 years, 2007 - 2012, and let's say that's it's new equilibrium for whatever geopolitical reason, or stays there for many years)

My same $1M VTI portfolio, when I sell $40k USD of VTI will be worth $38k CAD when I convert it, suddenly I don't have enough to retire if my lifestyle needs $53k CAD.
I would need to increase my withdrawal rate from 4% to 5.6% to live off of in this scenario, or keep working long enough to build my portfolio of VTI to $1.4M USD (40% more!) to retire to live off the same $53k CAD lifestyle.

We are so used to the CAD:USD currency range being between 1.25 - 1.4 that we think it will always be that way - but that doesn't mean it couldn't shift for some reason - like I said in the OP lots can happen in 30,40,60 years.

[Metalcat]

woah ok hold on, we've gone a little bananas here :)  let me unpack this...

Owning a Canadian-domiciled ETF that owns US companies is just a wrapper around owning the same companies directly or in a US-domiciled ETF.

Again - if you own VTI, VT, whatever - you *don't* own USD. There is ZERO currency risk.

VTI & VT are not canadian-domiciled ETFs, they are listed on a US exchange and in USD$, you have to buy them with US currency, and when you sell them you get US currency - As a Canadian who holds an investment in USD$ that I will use to live off of to pay my bills in CAD$, there absolutely is currency risk.

And I'd like to demonstrate you don't need 'regime change' levels of disruption for it to have an significant impact...

Let's say my FI target is $53,200 CAD/year, with 4% SWR I need $1.3M CAD portfolio to FIRE, assume 4% SWR.

Scenario 1: If the current CAD:USD conversion of ~1.33:1 remains unchanged
After years of hard work and saving I get my portfolio, only holding VTI, up to $1M USD, my portfolio NW is $1.33M CAD.
I'm good to retire... every year I will sell $40k worth of VTI (USD$), and when I bring it back to CAD to live off of, it will be $53k CAD$. All good.

Scenario 2: The CAD:USD conversion shifts to 0.95:1 at any point in my 40-year retirement
(like it did for 5 years, 2007 - 2012, and let's say that's it's new equilibrium for whatever geopolitical reason, or stays there for many years)

My same $1M VTI portfolio, when I sell $40k USD of VTI will be worth $38k CAD when I convert it, suddenly I don't have enough to retire if my lifestyle needs $53k CAD.
I would need to increase my withdrawal rate from 4% to 5.6% to live off of in this scenario, or keep working long enough to build my portfolio of VTI to $1.4M USD (40% more!) to retire to live off the same $53k CAD lifestyle.

We are so used to the CAD:USD currency range being between 1.25 - 1.4 that we think it will always be that way - but that doesn't mean it couldn't shift for some reason - like I said in the OP lots can happen in 30,40,60 years.

Yep, I think this is what some readers are missing, that the way you have set up your investments forces multiple currency exchanges. Whenever currency must be exchanged, the exchange rate matters.

This is why so many of us non-Americans stick with investments that we don't need to exchange currency to buy or sell.

OP, my question is why on earth you would choose an investment plan that would force you to constantly exchange currency? I understand having some allocation American-domiciled ETFs, it's not an approach I personally care for, but I understand why some people want to diversify that way, but why would you want the majority of your investments to be like that?

If you're talking about the majority of your annual retirement withdrawal being subject to exchange risk, you're talking about virtually ALL of your retirement funds being in USD for some reason.

What are you thinking you would gain from that?

For me, I'm seriously considering snow-birding in Mexico, so there might be a significant advantage to keeping some funds in USD. However, I wouldn't have this as the bulk of my portfolio, I would probably have it as some kind of hedge/contingency fund if something were to happen to transiently drop the CAD relative to US and Mexico.

If I'm already living in a currency conversion situation, then I'm not adding exchange risk, I'm trying to stabilize it through diversification. But if you are planning to just stay in Canada, how does adding currency exchange risk help you??

Especially since you can essentially invest in the same companies with a CAD-based Canadian index fund, and buy the same bananas without the exchange risk?

Unless I'm missing something?

[daverobev]

Goodness me.

All right, so here's what happens:

You own VTI (listed in USD).

You want to get your year's spending. So you sell the equivalent of let's say $12,000 CAD. THE CAD:USD RATE IS NOT RELEVANT BECAUSE

You exchange the USD for CAD immediately.

I forget what the Vanguard Canada ticker is for the equivalent of VTI, but the amount you would get IN CAD is virtually the same.

Except the fees are generally a little higher, so over 20 years... eh.

Oh and in an RRSP, if you hold a US ETF you don't lose the 15% withholding tax on dividends. If you hold a Canadian one, you do.

If you use a broker with expensive forex trades and can't use Norbert's Gambit, stick with CAD-listed, absolutely.

But the point still stands - owning VTI vs the Canadian equivalent does NOT expose you to exchange rate risk because you only own USD for literally seconds if you're tech savvy.

[Metalcat]

Goodness me.

All right, so here's what happens:

You own VTI (listed in USD).

You want to get your year's spending. So you sell the equivalent of let's say $12,000 CAD. THE CAD:USD RATE IS NOT RELEVANT BECAUSE

You exchange the USD for CAD immediately.

I forget what the Vanguard Canada ticker is for the equivalent of VTI, but the amount you would get IN CAD is virtually the same.

Except the fees are generally a little higher, so over 20 years... eh.

Oh and in an RRSP, if you hold a US ETF you don't lose the 15% withholding tax on dividends. If you hold a Canadian one, you do.

If you use a broker with expensive forex trades and can't use Norbert's Gambit, stick with CAD-listed, absolutely.

But the point still stands - owning VTI vs the Canadian equivalent does NOT expose you to exchange rate risk because you only own USD for literally seconds if you're tech savvy.

Yes, it all depends on how the exchange is being done, but it does introduce exchange risk into the system, at least to some degree, and I can't figure out what the benefit would be??

In my example, the benefit would be that I have USD accounts and can hold money in USD while living in Mexico if needed. But that's a larger exchange issue.

You're right that if you basically never hold USD that exchange isn't all that relevant, but it's still adding complexity for reasons I can't understand.

[AJDZee]

Especially since you can essentially invest in the same companies with a CAD-based Canadian index fund, and buy the same bananas without the exchange risk?

Unless I'm missing something?

haha *laughs in monkey*

Totally get your questioning, that's what lead to my post in the first place to see if other Canadians are in a similar situation as me.

But to answer why I have VTI in the first place...

1. I had USD$ in my account from previous investments I held 10+ years ago, and just kept it in there
2. I was aggressively trying to reduce my MERs as low as possible, VTI MER = 0.03%, VUN MER = 0.17%
3. The US-based ETFs seem to outperform their CAD-domiciled counterpart every year by a few % (more than I would expect from MER adjustment)

I appreciate your points and sounds like you're set up good for your plans.
Despite it's short history, lack luster results, and higher fees, I'll simplify things by transition to VEQT, VGRO, etc. over time.

[daverobev]

If in an RRSP, you don't lose the 15% dividend withholding on US domiciled non-Canada ETFs.

IOW if MERs are equal, a US ETF yielding 2% will yield 1.7% in the CAD version.

In addition to the decreased MER and probably higher volumes (meaning lower friction - the ETF is matching the index better), it's probably worth bothering with in an RRSP, if you are an optimiser.

If not, stick to CAD.

[AJDZee]

Goodness me.

All right, so here's what happens:

You own VTI (listed in USD).

You want to get your year's spending. So you sell the equivalent of let's say $12,000 CAD. THE CAD:USD RATE IS NOT RELEVANT BECAUSE

You exchange the USD for CAD immediately.

I forget what the Vanguard Canada ticker is for the equivalent of VTI, but the amount you would get IN CAD is virtually the same.

Except the fees are generally a little higher, so over 20 years... eh.

Oh and in an RRSP, if you hold a US ETF you don't lose the 15% withholding tax on dividends. If you hold a Canadian one, you do.

If you use a broker with expensive forex trades and can't use Norbert's Gambit, stick with CAD-listed, absolutely.

But the point still stands - owning VTI vs the Canadian equivalent does NOT expose you to exchange rate risk because you only own USD for literally seconds if you're tech savvy.

Interesting... I didn't expect this to be a point of contention

daverobev,
if I transferred 4,250 share of VTI to your account today, what would it be worth? If you wanted to use it buy a $1.3M CAD house in Canada, could you?

Now, if you waited a year and the CAD gained strength compared to the USD, and the conversion was 0.95:1 (like it was for 5 years, less than 15 years ago), how much would those 4,250 shares of VTI be worth? Could you buy that same $1.3M house in canada with it?

I'm prepared to use bananas if you want but figured the house analogy would be ok :)

[Posthumane]

Instead of VTI I hold VUN, which is the same thing but listed in CAD on TSE. In reality, the exchange risk is still there, I just don't have to manage the exchanges myself so it results in slightly less hassle (in exchange for slightly less control). That being said, I also hold some TLT in addition to Canadian bonds, and there is some currency exchange risk there, but I look at currency diversification the way I look at market class diversification - one currency could go up or down relative to the other and you balance it the same way as if stocks went up or down relative to bonds, or cash, or gold.

[AJDZee]

If in an RRSP, you don't lose the 15% dividend withholding on US domiciled non-Canada ETFs.

IOW if MERs are equal, a US ETF yielding 2% will yield 1.7% in the CAD version.

In addition to the decreased MER and probably higher volumes (meaning lower friction - the ETF is matching the index better), it's probably worth bothering with in an RRSP, if you are an optimizer.

If not, stick to CAD.

correct, for all my shortcomings as an investor, this is the one thing I did right, any VTI I have is in RRSP / LIRA... VRGO, VEQT stuff is in TFSA

[AJDZee]

Instead of VTI I hold VUN, which is the same thing but listed in CAD on TSE. In reality, the exchange risk is still there, I just don't have to manage the exchanges myself so it results in slightly less hassle (in exchange for slightly less control). That being said, I also hold some TLT in addition to Canadian bonds, and there is some currency exchange risk there, but I look at currency diversification the way I look at market class diversification - one currency could go up or down relative to the other and you balance it the same way as if stocks went up or down relative to bonds, or cash, or gold.

Thanks, posthumane, agree on your points. Above I stated the reasons why I didn't originally go VUN, but of course I'm now reconsidering, thanks

[daverobev]

Goodness me.

All right, so here's what happens:

You own VTI (listed in USD).

You want to get your year's spending. So you sell the equivalent of let's say $12,000 CAD. THE CAD:USD RATE IS NOT RELEVANT BECAUSE

You exchange the USD for CAD immediately.

I forget what the Vanguard Canada ticker is for the equivalent of VTI, but the amount you would get IN CAD is virtually the same.

Except the fees are generally a little higher, so over 20 years... eh.

Oh and in an RRSP, if you hold a US ETF you don't lose the 15% withholding tax on dividends. If you hold a Canadian one, you do.

If you use a broker with expensive forex trades and can't use Norbert's Gambit, stick with CAD-listed, absolutely.

But the point still stands - owning VTI vs the Canadian equivalent does NOT expose you to exchange rate risk because you only own USD for literally seconds if you're tech savvy.

Interesting... I didn't expect this to be a point of contention

daverobev,
if I transferred 4,250 share of VTI to your account today, what would it be worth? If you wanted to use it buy a $1.3M CAD house in Canada, could you?

Now, if you waited a year and the CAD gained strength compared to the USD, and the conversion was 0.95:1 (like it was for 5 years, less than 15 years ago), how much would those 4,250 shares of VTI be worth? Could you buy that same $1.3M house in canada with it?

I'm prepared to use bananas if you want but figured the house analogy would be ok :)

Today VTI is worth $316 CAD at time of posting. Your 4250 shares of VTI are therefore worth $1.343 million CAD. After taxes I don't know if you could buy a house but if it was in a TFSA, then yes you could buy that $1.3M CAD house. Just about.

I can't answer the second part because if I waited for the USD to weaken like that the value of the shares held by the ETF would have changed. If the value of alllll the shares in the ETF hadn't changed in USD, then of course, the value of those units in CAD would be lower.

However if you sold your 4250 shares of VTI today, converted the proceeds into CAD (=$1.343 million CAD), and bought ~15,600 shares of VUN.TO, I can say that if you again waited for the CAD to gain strength, the value of those units would have dropped in exactly the same way as VTI did when converted to CAD.

In other words the 4250 VTI shares would have the same value as 15600 VUN.TO shares - in either currency, in bananas, or indeed in houses.

[Heckler]

So the currency is irrelevant.

^^This.

If you are investing in US markets by buying VTI in $USD, or VUN in $CAD (which holds VTI).  The $CAD value of your holding fluctuates day to day the same percentage with the current rate fluctuation.

PS - your VGRO holds a portion in VUN, which holds VTI.

One risk holding VTI instead of VUN (which holds 100% VTI) I just learned about is US estate tax, which I don't yet fully comprehend.

Bender & Bortolotti wrote:
US estate taxes. Wealthy Canadians may be subject to US estate taxes if they have significant holdings in US-listed ETFs, even if these are held in an RRSP. These investors may be better off holding Canadian-domiciled funds to avoid this risk, even if it means incurring foreign withholding taxes.

https://www.pwlcapital.com/wp-content/uploads/2018/06/2016-06-17_-Bender-Bortolotti_Foreign_Withholding_Taxes_Hyperlinked.pdf

https://www.taxtips.ca/personaltax/us-estate-tax-for-canadians.htm

[Heckler]

Because I hate trying to prove a point without data.  (and I'm really curious myself).

The day-to-day fluctuations don't follow exactly at 7 AM price.  But the 10-month price difference in $CAD looks to be the MER difference. I'm really curious why 4 years delta is pretty much exactly the same!

And the biggest Fx fluctuations and panic dates in the past five years - Pandemic Top was in March 2020, to Inflation Top May 2020!  Same return when measured in $CAD.

I am now very curious as to where the higher MER is hiding.

[Heckler]

But absolutely yes - if you earn $CAD, choose to invest in US markets, and spend in $CAD, there will be currency risk, regardless of which vehicle you choose to eat your bananas in.

[Heckler]

I'm curious to know how much of your portfolio is equities in USD$, and what your thoughts are on the potential risk with that?

US market holdings:
20% VTI (in $USD bananas), in a sole holding that is no longer getting added to.  Planning to spend the $USD dividends on travel.
5% VFV, (in $CAD bananas) that's getting added to, but gets mostly bonds bought with the additions to the account.  VFV because there's no commission fee to buy or sell, whereas VTI costs $40 commission with Fx.

The rest is bonds, TSX, EAFE, and EM globally diversified, bought in $CAD.

[Maverick1]

My wife and I hold ~16% of our investments in US denominated accounts, and allocate ~17% of contributions to USD.  Our rationale is we plan on spending time in retirement in the United States, as do a lot of Canadians.  We will withdraw USD from our RRSP's to a USD account, from which we will pay expenses when in the United States.  Our US retirement income will not fluctuate with exchange rates as we will have these USD savings to draw on.  We don't pay much attention to the exchange rate, we convert the same amount of $CAD to $USD every contribution (twice per month).  We've been doing this for 7 years now and it's working for us.

[Sisko]

Just to add a bit that might help understand all this.
What currency the ETF is denominated in doesn't matter, as others have said. You can, however buy an ETF that is hedged against Canadian dollars.

An easy comparison is VTI vs VUN vs VUS

VTI is listed USD
VUN is listed in CAD but will perform the same as VTI - you just have to buy/sell currency yourself
VUS is listed in CAD but also hedged. If CAD becomes worth more, this is good. If CAD becomes worth less, this is bad.

So if you want to protect against "currency risk" you would buy VUS.

I would personally never do that... So much exposure to Canada anyways, I think there is more diversity in owning VTI/VUN... Also the banana argument.

[techwiz]

I am not worried about currency risk exposure.

I hold VTI in US$ in both my RRSP and TFSA. To me it's worth it for the lower management costs and avoiding the 15% foreign withholding tax on the dividends when held in my RRSP.  Although I also hold VUN in my taxable account.

Vanguard Total Stock Market Index ETF (NYSE:VTI)
MER 0.03% plus the avoiding the 15% foreign withholding tax on the dividends if held in RRSP.   

Vanguard U.S. Total Market Index ETF (TSX:VUN)
MER 0.17%

The Motley Fool did a good article on this:
https://www.fool.ca/2022/05/12/vun-vs-vti-should-canadians-buy-cad-or-usd-listed-total-u-s-market-etfs/

[Rockies]

Okay I must admit the whole currency risk thing confuses me. If I have my canadian money invested in a US Index fund, am I not hedged against the risk of the canadian dollar falling in value in comparison to the USD?

I am worried that CAD will be worth 1.7 or 1.8 in 10 or so years. So I just purchase a US Index in my canadian RRSP. My reasoning is that if the US ecnomony and stocks and dollar do well then that fund will increase in value. Yes the fund was purchased in CAD and will be cashed out in CAD, but isnt buying US based companies a currency hedge?

And then equivalently just holding some CAD and some canadian dividend mututal funds hedging against the risk that the USD will drop in value in comparison to CAD?

I have money in both, but am more heavily weighted US because I dont have a ton of confidence in the long term of the Canadian economy, I think they will continue to be isolated and marginalized and shut out from trade deals with the US moving forward.

[OttawaNeal]

Okay I must admit the whole currency risk thing confuses me. If I have my canadian money invested in a US Index fund, am I not hedged against the risk of the canadian dollar falling in value in comparison to the USD?

No, it’s not really a hedge.  Unless the Canadian fund is specifically “hedged”, the price of its units/shares in Canadian dollars is just going to be whatever the US version ends up being, but with the exchange rate also applied.

So, in an extreme example, say VTI rises 100% on a given day, and the Canadian dollar falls 50% on the same day. Then the unhedged Canadian version of VTI will be flat for that day. It takes twice as many Canadian dollars to buy an equal amount of ownership in those US companies.

[daverobev]

Okay I must admit the whole currency risk thing confuses me. If I have my canadian money invested in a US Index fund, am I not hedged against the risk of the canadian dollar falling in value in comparison to the USD?

I am worried that CAD will be worth 1.7 or 1.8 in 10 or so years. So I just purchase a US Index in my canadian RRSP. My reasoning is that if the US ecnomony and stocks and dollar do well then that fund will increase in value. Yes the fund was purchased in CAD and will be cashed out in CAD, but isnt buying US based companies a currency hedge?

And then equivalently just holding some CAD and some canadian dividend mututal funds hedging against the risk that the USD will drop in value in comparison to CAD?

I have money in both, but am more heavily weighted US because I dont have a ton of confidence in the long term of the Canadian economy, I think they will continue to be isolated and marginalized and shut out from trade deals with the US moving forward.

You own tiny fractions of those American companies, not USD. You can value those companies in CAD. If you think the CAD is generally going to decline yes holding foreign assets is good... but then if CAD declines Canadian businesses will charge more and presumably go up in (CAD) value as well.

Side point, if you're holding stuff in an RRSP it is cheaper to hold the US version of whatever ETF - because you do not pay US withholding of 15% of dividends in that case. With US yields low not a massive issue but over 30 years, worth swapping over, probably. Also probably lower MER on the US side.