Ask the Spud: Switching From e-Series Funds to ETFs

Q: “I currently have $30,000 invested in the TD e-Series funds. When the time comes to move to ETFs, what is the best way to do this while still making automatic contributions? Should I put my biweekly contributions into a money market fund and then make ETF purchases four times per year?” –  C.D.

Too many investors think of the TD e-Series funds as little more than a stepping stone, and they can’t wait to “graduate” to ETFs. The appeal is understandable, since a portfolio of ETFs will typically carry a management fee of about 0.15%, compared with about 0.45% for the e-Series funds. But when I get this common question, I encourage the investor to think carefully before making the leap to ETFs, especially if their portfolio is small and they’re making automatic contributions.

For starters, management fees don’t tell the whole story. Index mutual funds are more investor-friendly than ETFs, and while the cost difference can be dramatic on large portfolios, the gap is narrower on smaller accounts. A fee difference of 0.30% shaves off just $30 annually per $10,000 invested, and that will be reduced—perhaps eliminated—by $9.95 trading commissions,

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The Next Smart Beta Revolution

{Note: This post was an April Fool’s joke!] As the ETF industry in Canada matures, more and more providers are moving away from traditional cap-weighted index funds in favour of…
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Why Simple Is Still a Hard Sell

Last January, I overhauled my model portfolios to make them simpler. Some of the older options included small-cap stocks, preferred shares, and real estate investment trusts (REITs), but I switched…
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