For the sake of simplicity, all blog posts so far have treated passive income reportings simply as a $ amount – without any differentiation between USD$ and CAD$. This blogger is based in Canada and this was fine in the past as the Loonie (the nickname for the Canadian dollar) was on par with the US$. However, over the last couple of months, the loonie has dropped down below the US$ and for the sake of more transparency, I have decided to differentiate the currency reporting unit.
|The Loonie and The Greenback
My brokerage allows me to hold US$ and CAD$ and funds are converted back and forth depending on availability of funds. All my deposits are in CAD$ (local currency) and are held as CAD$ in cash until I execute a trade (although the brokerage has a provision for me to deposit in US$ if I choose to).
If I don’t have any US$ funds in my account and buy a US$ denominated security, the brokerage converts the funds from CAD$ to US$ (with a little cut for the brokerage, of course) and executes the trade. When I sell a US$ denominated stock or fund, the cash is held as US$ (and not automatically converted back into CAD$) – this way, if I buy a different US$ denominated stock of fund, I am not losing more with the constant exchanges of currency. In case of dividends, as expected, the dividends paid out by US holdings is held as US$ and the dividends paid out by Canadian holdings is held as CAD$.
A note about my investments
The drop in the loonie is a good news for me – as I invested heavily in the US market over the last couple of years when the loonie was trading either on par or above par the greenback. This means, I was able to buy more US-based stocks for the same CAD$ amount in companies such as Archer Daniels Midland (ADM), Chevron (CVX), Johnson & Johnson (JNJ), Omega Healthcare Inc (OHI), Realty Income Corp (O), Kinder Morgan (KMI), The Southern Company (SO), Wells Fargo & Co (WFC). The dividends that are paid out by these companies – when now converted from US$ to CAD$ will yield more!
This is also good news for my passive income streams such as advertising revenue for this blog and payouts from writing Seeking Alpha premium articles – which are paid in US$.
For all future passive income updates, I will indicate the different US$ and CAD$ amounts and a total for the month (exchange rate calculated at the time of reporting) converted to my local currency – CAD$.
As an overview, my passive income is in the following currencies:
- US-based stocks, funds and options: US$
- Canada-based stocks, funds and options: CA$
- Interest on cash holdings: CA$
- Cash back rewards credit card: CA$
- Advertising revenue from this blog:
US$ CA$ (Google has changed my unit of ad revenue from US$ to CA$, as of last week).
- Earnings from publishing premium articles on Seeking Alpha: US$
Feel free to leave a message if you have any questions or comments.
Full Disclosure: Long all stocks mentioned above. My full list of holdings is available here