Archive | August, 2017

How T+2 Settlement Affects ETF Investors

These days we’re used to financial transactions that happen instantly. Buy groceries with your debit card and you see your bank account updated immediately. Send a friend money with an Interac transfer and it’s in their hands in seconds. Yet when you buy or sell an ETF or mutual fund, the trade doesn’t settle for three business days, a practice known as T+3. It’s a convention that seems as outdated as traveller’s cheques.

The good news is this is about to change: on Tuesday, September 5, markets in Canada and the United States will be moving to a T+2 cycle, with settlement two business days after the trade.

This change will mostly affect financial institutions and their intermediaries, but if you regularly buy ETFs, mutual funds, and other investments through an online brokerage there are a number of details you should understand.

Out of order

Before diving into the details, let’s review what settlement means in this context. A trade is considered settled when the buyer has delivered the cash to the seller, at which point ownership of the security officially changes hands. Strictly speaking, you don’t have to pay for your ETF or mutual fund units until three business days after you make the purchase.

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Podcast 10: MoneySense, We Hardly Knew Ye

If you’ve been a reader for a while, you know that I have a long association with MoneySense, a magazine I contributed to for some 15 years as a feature writer, columnist, and editor. MoneySense didn’t invent the Couch Potato strategy, but the magazine brought the idea to Canada around the turn of the millennium, when index funds were rare and ETFs were almost completely unknown to the public.

But times are tough for print media, and at the beginning of this year MoneySense published its last magazine and made the transition to an all-digital format, including a lineup of free newsletters.

In my latest podcast, I sit down with David Thomas, who was named editor-in-chief at the magazine in late 2015 and still oversees the MoneySense and Canadian Business brands at Rogers Media. We chat about the magazine and as well as the evolving role of the financial media.

Worlds apart

Do you still need international diversification in your portfolio? That’s the question I tackle in this episode’s edition of Bad Investment Advice.

I’ve recently received questions from readers and listeners about whether investors really need international diversification in their portfolios.

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