I use the Global Couch Potato with e-Series funds in my TD Waterhouse account, but I eventually want to use the Complete Couch Potato. Once my portfolio gets to $50,000 and I qualify for $9.95 trading commissions, should I move everything to ETFs? — Mark V.
If you’re a client of any other brokerage, it makes sense to use ETFs to build the Complete Couch Potato portfolio. But with TD Waterhouse you have the unique opportunity to combine the e-Series mutual funds and ETFs in the same account. For five-figure portfolios (and perhaps even much larger accounts) a hybrid approach is likely to make more sense than using all ETFs.
The Complete Couch Potato has three asset classes that are absent in the Global Couch Potato: real estate, real-return bonds, and emerging markets. There are no e-Series funds for these asset classes, nor are there low-cost index funds from other providers. But that doesn’t mean you can’t create a hybrid portfolio of e-Series funds and ETFs. It would look something like this:
Asset class | Â % | Fund name (ticker) | MER | |
Canadian equity | 20% | TD Canadian Index – e (TDB900) | 0.33% | |
US equity | 15% | TD US Index – e (TDB902) | 0.35% | |
International equity | 10% | TD International Index – e (TDB911) | 0.50% | |
Emerging markets equity | 5% | Vanguard MSCI Emerging Markets (VEE) | 0.55% | |
Real estate | 10% | BMO Equal Weight REITs (ZRE) | 0.62% | |
Real return bonds | 10% | iShares DEX Real Return Bond (XRB) | 0.39% | |
Canadian bonds | 30% | TD Canadian Bond Index – e (TDB909) | 0.51% | |
100% | 0.45% | |||
A few words of explanation. Vanguard Total International Stock (VXUS), which makes up 15% of the Complete Couch Potato, includes both developed and emerging markets. TD International Index Fund (TDB911), however, includes only the former. So to keep the asset mix close you can use the TD fund for 10% and an emerging markets ETF for the other 5%. I’ve suggested Vanguard MSCI Emerging Markets (VEE) here because it’s the cheapest available on the TSX. The US-listed version has a much lower MER, but an investor with such a small allocation will find it more efficient to trade in Canadian dollars and pay the higher annual fee.
To reduce ETFs commissions further, you might even substitute the PH&N Inflation-Linked Bond Fund (PHN650) for XRB. While this is not an index fund, its MER is just 0.55% and there isn’t a whole lot of active management going on: the Canadian government has issued only six real-return bonds and these make up the lion’s share of every fund in this asset class. Over the last three years the PH&N fund has lagged XRB only slightly. And again, in a small account ETF commissions would likely overwhelm that small difference.
Tallying the costs
The MER of the hybrid portfolio is just 0.16% more than the all-ETF Complete Couch Potato. On a $50,000 portfolio that works out to $80 a year. But it should save you more than that in trading commissions, bid-ask spreads, and currency conversion costs. It will also be far more convenient, since the mutual funds allow you to make preauthorized contributions and all the distributions are reinvested automatically.
As your portfolio grows much larger you can gradually phase out the e-Series funds, starting with those that have the largest price difference compared with ETFs. TD Canadian Bond Index (TDB909) should be the first to go: it has the largest allocation in the portfolio and iShares DEX Universe Bond (XBB) has a fee 0.19% lower. The comparable Vanguard Canadian Aggregate Bond (VAB) would knock off a further 10 basis points.
The larger the portfolio, the greater the advantage of using all ETFs. But you shouldn’t be in a huge rush to get there, especially if you have the opportunity to use the lowest-cost index mutual funds in Canada.
As alway I enjoy reading your articles investments and especially couch potato portfolio. But as most of the investors I am facing one problem – I have multiple investment accounts. To simplify my investment accounts are:
– My RRSP
– My TFSA
– Spouse RRSP
– Spouse TFSA
– Joint CDN and Joint US account.
In reallity I have even more accounts as my spouse has Group RRSP account and we have another Joint CDN/US account in different bank just in case our primary bank ever goes into trouble.
With multiple accounts creating Couch Potato portfolio gets more complicated – for example US dividends are withheld in TFSA but not in RRSP. Transaction fees with multiple accounts can grow 3-4 times, etc.
I would love to hear what strategies other people are using in distributing their Couch Potato portfolio between family accounts.
Hah, thanks a lot; I just finished reading through your entire archive last week and was preparing an email asking about mixing e-Series and ETFs. Great timing!
Did we ever establish what the easiest way to get access to the e-Series funds is? The only thing I have with TD right now is a VISA; I don’t even have a regular bank account with them.
@Vidas: A very common question, and I’ve written about this before. Hope these posts help:
https://canadiancouchpotato.com/2012/03/12/ask-the-spud-investing-with-multiple-accounts/
https://canadiancouchpotato.com/2012/03/15/a-spreadsheet-to-manage-multiple-accounts/
@Scott: As long as you have more than $25K to invest, opening a brokerage account with TD Waterhouse is probably the best solution. That way you don’t need to go through the hassle of opening TD Mutual Funds Account and converting it to an e-Series account while being upsold by TD staff. You don’t need a TD bank account to do this, and at $25K or more there are no annual admin fees at TD Waterhouse. Once you get to %50K you qualify for $9.95 ETF trades and can implement a strategy like the one I’ve described here.
Hi Dan, I am wondering your reason for putting more weight for the Canadian index over the US and int’l equities. I understand that we do need more Canadian stocks because we live in Canada, and there is no currency risk. Also, it is most tax-efficient in taxable account, and in a registered account, the dividend is paid in full.
However, I tend to put more allocation towards US and int’l equities because Canada is only about 5% of world capitalization? Hence, for equities, I usually split it as 20-25% Canadian versus 30% of each for US and int’l. [My bond portion is around 15-20% for my risk tolerance.] Of course, with this asset mix, there is more of a currency risk (for US and int’l) as well as higher MER for TDB911 (EAFE). But do you think it is still a sensible allocation? I noticed that the Canadian Capitalist has a similar weighting in his Sleepy Portfolio.
Thanks in advance Dan!
Hi Dan, thanks for the great article, this is exactly what I am looking for.
Scott, I had no trouble opening a Waterhouse account. In fact, I went in to the branch to open a regular mutual fund account and my rep actually suggested going Waterhouse, and got me all setup in minutes! I have seen several articles about difficulties getting a Waterhouse account at the branch, but it could not have been easier for me. I don’t even have any other TD accounts and I have my PC account linked up so I can transfer funds at any time. The online interface is very easy to use, and setting up your own re-balancing spreadsheet makes allocation a snap.
Thanks again for your help Dan!
@Peter: Another great question I’ve addressed before:
https://canadiancouchpotato.com/2012/05/22/ask-the-spud-does-home-bias-ever-make-sense/
@Mark V: Just to clarify, there is rarely a difficulty in signing up for a brokerage account with TD Waterhouse. The problems usually arise if you try to set up a TD Mutual Funds account, especially if you specifically tell the branch staff you want to use e-Series funds. Often they don’t know what they are, or they try to talk you out of it. But I’m glad to hear your branch was helpful in this case.
When you say $25k or more for no admin fees, is this for the entire portfolio you keep at TD Waterhouse, or only your RRSP? My portfolio is >$25k, but I don’t have that much room on my RRSP yet.
@Scott: I believe it has to be the RRSP only:
http://www.tdwaterhouse.ca/apply/forms/521778.pdf
See the line on page 7: “The annual administration fee for the above noted registered plan accounts will be waived when the plan market value is $25,000 or more.”
However, the $50,000 threshold to qualify for low ETF commissions applies to household assets with TDW, not the individual account.
Dan – I did a search on this and haven’t found much that covers a situation like this.
I am designing an index portfolio for someone who is under 60 and retired with $2M in the bank, no pension, and is salivating at the fact that in Ontario one can earn $47,888 tax free in Canadian dividends, which is a bit more than their annual total expenses. They want to invest enough in Canadian dividend equity ETFs to earn this amount of dividend income and invest the balance in other equities. Given they are in excellent health (parents are too and over 90), have no dependents or debt, have a long term time horizon ability to accept risk and desire to accept risk, they have no problem not having any of their portfolio allocated to bonds (unless they are entirely allocated to their low six-figure RRSP) and are not worried about fluctuations in the value of the portfolio that is not invested in the Canadian dividend equity ETFs (or fluctuations in the latter since as long as dividends are collected they are happy). Also, they don’t think bonds will have the potential to exceed equity returns as they have been able to in the last 30 years, given rates are at a 60-year historical low.
None of your model portfolios really apply to this situation, except, in a way, the Yield Hungry CouchPotato. Would one just modify that one to cut out the bonds (or keep any in the RRSP if they can be convinced) and cut out the global dividend equity and spread enough capital over the CDZ, XDV & XPF in a 40/40/20 split (mimicking the % those ETFs are of the total of them) and the rest in VXUS, VTI and ZRE as in the Complete Couch Potato? I am not sure that adding XIC would be appropriate as there is already a high Canadian equity component.
I do realize that there will be some income generated from the remainder of the equity portfolio and this will result in some tax being paid. Also, they are hoping that dividend increases will take care of any increased expenses due to inflation. At the same time, the cap on how much one can earn in Canadian dividends will increase over time to shelter some or all of the increased dividends being paid.
Any thoughts?
@Mark V – I just recently opened a new e-series account at TD branch. The process was very easy as I came prepared fully expecting to get the sales pitch and the sale rep was fully aware beforehand what I wanted. He never set up the e-series before so it took a few extra minutes. Basically I opened a regular TD investment account with zero money in it, filled out the 3 page conversion form for the e-series account and with in 48 hours I was setup and putting money into it by transferring from my credit union account (bring void cheque). I actually found it quiet easy to deal with TD. One tip: if you are not with TD yet, get a bank card for their easyweb access (I opened a saving account with no fees and just dropped $10 in it). I have been using the e-series for about a month now and just set up the automatic payments. I’m below 50,000 right now with my wife and I, but I was told once I get over 50,000 it’s a very simple conversion back to TD Waterhouse account.
@Dan -I’m a first time poster and I have to say I love this blog. I new to investing and can unfortunately say I was at a full service brokerage until recently. I fell for the sales pitch then decided to do my research. Needless to say I’m paying for it now. By the time I took account fees, DSC and commissions on stocks, i lost close to 6% of my retirement fund just to end that 9 month relationship. I’m younger and just starting to really sock the money away so I should recoup pretty fast. Reading your book now, just finished Millionaire teacher and threw out stock picking books altogether. Indexing is for me. Thanks again for the great blog and opening this investor’s eyes. I’ll be recommending this blog to anyone who will wants to take control of their future.
@Scott: If you don’t have the household assets to qualify for $10 trades, check out the TD Waterhouse Basic RRSP. It’s a self-directed RRSP that doesn’t allow you to trade stocks/ETFs, but you can still purchase TD’s e-Series mutual funds and the admin fee is only $25/year (compared to $100/year for the full SDRSP).
Postcript on my Canadian dividend post above. I constructed the $2M high-yield portfolio as follows:
55% Canadian high-dividend paying equity – 10% CDZ /20% XPV/25% XPF
35% US & International equity – 17.5% VXUS/17.5% VTI
10% Cdn REITs & Global Real estate – 5% ZRE/5% RWO
The $49,820 in Canadian dividends resulted in about $450 tax. I didn’t realize the remaining portion of the portfolio would generate as much dividend and income as they did, $20,420 on which foreign dividend withholding tax would be paid but then recovered when filing taxes. Total dividends + income on the entire portfolio = $70,720, resulting in total tax of about $7,250, or about 10% tax on the entire portfolio.
I guess one could play around with the allocations that are non-Canadian dividend paying and get more fancy but I want to keep it simple. The resulting $63K in net income after tax would handily cover their yearly expense with at least $15K to spare. The total MER was $9,790 or 0.49%. There would be no or little commission expense as the non-Canadian dividend income would be DRIP’d and no stock would be ever sold or otherwise purchased.
@Noel: Glad you found a potential solution. It really would be inappropriate for me to comment on such a specific situation without knowing the important details.
@Passive Architect: Welcome to the blog, and glad you’re finding it eye-opening! I’m also pleased that TD was helpful in opening your account. Clearly the experiences vary dramatically from branch to branch.
Dan – I appreciate that. I was looking more for input on approach or things to consider rather than whether than this portfolio was suitable for this particular individual. I guess what I realize is that there is no escaping tax on the non-Canadian dividend paying portion of the portfolio other than buying individual non-dividend paying non-Canadian stocks which in itself is not a prudent diversified approach, not to mention not being simple to manage. At least a portion of the excess dividends + income can be transfered to a TSFA, with the remainder being DRIP’d.
@Noel: You might be interested in this post. There are some options for reducing the tax bill on equity income from non-Canadian equities:
https://canadiancouchpotato.com/2012/01/26/tax-efficient-investing-with-etfs/
This might also be of interest:
https://canadiancouchpotato.com/2012/01/23/dividends-not-as-tax-friendly-as-you-may-think/
Great timing! This is exactly what I do. I do use VCE and VEE and am slowly moving from TDB909 into vanguards bond funds. I did notice that costs add up really quickly giving the e-series funds an edge until the holdings are large. A blend of e-series and etfs seem to work really well. Originally I started with only e-series and am glad I did. All the rearranging I did in the first year (wasn’t confident and decided in my approach) would have been an expensive lesson with ETFs:)
Hi Dan,
As a new investor with less than $25k in funds, I was wondering if it would be better to invest in the e-series funds or go ahead to ETFs using a Virtual Brokers account. The latter, as you mentioned in one of your posts, doesn’t charge sales commissions when purchasing ETFs.
@New Investor: It really comes down to how comfortable you are managing a discount brokerage account. The e-Series funds allow you the convenience of automatic contributions, which is helpful and shouldn’t be overlooked. VB seems like a pretty no-frills brokerage and I wonder how easy it will be for a new investor to navigate.
With respect to real return bond ETFs….don’t overlook BMO’s ZRR with an MER of 0.28%. PHH is fine if the account minimum of $25K is not an issue.
@Rob: I believe the $25K minimum for the PH&N fund only applies if you are opening an account directly through PH&N. Discount brokerages can set their own minimums, which are usually much smaller.
One of the first questions was about how to allocate funds across multiple accounts. The articles and explanations here are excellent. I had to think thru this issue myself and so I thought I’d share my take.
I have the same situation. Two RRSPs (mine and wife’s), two TFSAs and one unregistered account. I treat my RRSPs as stand alone. Because these are clearly long term, and also carry substantial costs to remove money, and deposit limits, I decided for myself that my RRSPs must be “stand alone”. Each has an allocation to bonds, canadian, International equity, etc, and is essentially a complete portfolio. I duplicate this in mine and my wife’s. I know this duplication increases trading costs, but in my opinion given the rules around those accounts, that’s the only way for me to fly. I wouldn’t want to have all of the equities in my account, and all of the bonds in my wife’s, for example, because of the inability to rebalance.
TFSAs and unregistered accounts I treat more like one. Yes there are some contribution limits, which could limit your ability to rebalance, but only really for a max of one year, at which time you can withdraw or add more to a TFSAS and get the room back. Sites like this and others have led me to believe that there’s likely little benefit to rebalancing more than once per year anyway,and a combined TFSAS/unregistered setup will allow you to do this just fine. So in the case of those accounts, I use a spreadsheet like the one here on CCP to help me keep track of those accounts as a whole, and then I allocate within in the most tax friendly manner (bonds in the TFSAs first, equities, in the unregistered, etc).
It’ll obviously be different for everyone based on your circumstances, but I just thought I’d share my take.
I understand Dan’s point about VB, but if a person has multiple small accounts and has to pay $100 per account at TDW + $9.95 a trade + the somewhat higher MER for efunds they may well be better off at VB especially in the accumulation stage. Buying index ETF is not complicated and there are good articles available explaining the process.
Personally I recently moved from TDW to Questrade and I am happy as I only make a few trades a year and they have no fees for RRSP or US registered accounts. That said I moved my money before seeing the VB article written by Dan.
Great timing on the article! I was also exploring various ETF and mutual fund options and this simply validates my selection.
I am waiting until January 2013 before opening up a TD Waterhouse account because of the capital gains accounting that goes on in December.
Can I expect some pushback from the mutual fund company when they discover that 1/3 of the portfolio is transferring out?
Thanks again for a great article.
@robert_m: Are you saying that you currently have an account with an advisor and that you’re planning on transferring one-third of it to a self-directed account? If so, then yes, you can probably expect some pushback.
http://www.moneysense.ca/2012/01/11/when-your-adviser-hates-index-funds/
@Danno:
re: One joint unregistered account for you and your wife.
– How do you handle taxes for this account? For example, do you each contribute equally and split the tax bill? I am curious because I am considering combining the unregistered accounts for my wife and I into one joint account. Just not sure how to deal with the taxes.
Hi,
I have probably a dumb question, but I’ll ask it anyway….
I implemented a hybrid ETF / eSeries portfolio a few years ago. A lump sum went into ETFs in my TD Waterhouse Self Directed RSP account, then monthly contributions go into my Mutual Fund RSP (eSeries funds). I now have over $50K in eSeries funds so it’s long overdue that I moved this money into ETFs (and rebalance in the process).
My question is, how to do that? I’m assuming I start by clicking “Redeem Mutual Funds” then do a Transfer? I haven’t redeemed them yet, but when I click “Transfers” in WebBroker, the “From Account” just lists Canadian Cash (I expected to see my Mutual Fund RSP account listed).
TL;DR: “How do I move my money out of eSeries funds and into my TD SDRSP account?”
Any advice appreciated!
Thanks,
Mike
@Mike: I’m not too familiar with TD’s setup, but it sounds like the e-Series funds are in a TD Mutual Funds account, which is separate from TD Waterhouse. I doubt you can simply transfer the amounts from one of these accounts to another online. You’ll likely have to fill out a transfer form. Just call call TD Waterhouse customer service and I’m sure they’ll be able to walk you through it.
@Passive Architect, Mark V, others:
Can someone try to write a short pros/cons list to help in choosing between going with TD Banking (TDB) and TD Waterhouse for investing in e-series funds? I do most of my other banking with PC Financial, although I do have a Visa with TDB that I don’t use much.
Two key points I’m interested in are what are the differences in fees associated with TDB, TDW, and how easy is it to get money to/from PCF to each of them without incurring fees? On this last point, I’ve heard people say you can set up a TDW account as a bill payee from PCF, so that’s one free way to transfer. I’ve also heard of someone setting up a TDB investing account to direct withdraw from a PCF account so that when you make a fund purchase, it just pulls that money from your PCF account. I’m wondering are both of these methods available with both TDB and TDW?
Also, for those of you who are using either TDB or TDW to do a regular monthly contribution from another account, what exact process are you using? E.g. do you set up that other account to automatically pay out a certain amount monthly to TD and then set up TD to make some set of purchases automatically a few days later? And if you’re using PCF, can you set this whole thing up to work from a PCF savings account, as opposed to chequing?
Thanks.
FYI, for anyone who hasn’t noticed yet, the TFSA limit for 2013 will increase to $5,500 to keep up with inflation, i.e. if you’ve never put money in a TFSA before, in 2013 you can contribute up to $25,500 (assuming you were 18 or older in 2009 when the program started). This change was announced on November 26th. Details here: http://www.fin.gc.ca/n12/12-151-eng.asp
@niagara: In my case, my wife and I have pretty similar income. In fact just about equal to within $5k per year. And neither of us have anything else that materially impacts our tax brackets. So with respect to the Joint Unregistered account, we just split everything (any cap gains, losses, income) 50/50, half goes on her return and half goes on mine. I’m not an accountant or tax planner by any means, but I suspect that if you had materially different taxable incomes, that this may not be the best approach for you? I’m sure there are a million factors.
Thanks Dan, that article on reducing the tax bill on equity income from non-Canadian equities was exactly what I was looking for. Too bad there aren’t any other equity ETFs designed like HXS, such as a global one or a total US market one.
Dan,
A groopy comment:
Thanks for these forums. I’m muddling along, reading various books, talking to lots of ‘savvy investors’, making some mistakes, but I always look forward to your next article and the scrum that follows. I don’t know how you do it.
Thanks,
Jamie
A little late to the party, but I do have one question about your recommendation to sell off the eSeries bond fund first once your portfolio is large enough, because that’s exactly what I’m about to do. You wrote “TD Canadian Bond Index (TDB909) should be the first to go: it has the largest allocation in the portfolio and iShares DEX Universe Bond (XBB) has a fee 0.19% lower. The comparable Vanguard Canadian Aggregate Bond (VAB) would knock off a further 10 basis points.”
My question is, is there a good reason to consider XBB instead of VAB if VAB is that much cheaper? XBB has been around more than 10 years longer and its assets are nearly a factor of 10 higher than those of VAB, but apart from that is there anything I should consider when choosing between the two? I’m planning to sell my shares in TDB 909 and put them into ETFs when I rebalance (I’ve been pretty aggressive to date but bonds are currently only 18% of my portfolio and now that I’m in my 50s I’m feeling the desire to at least double that!). Thanks.
@Brad: I think there is some value in using a large, well-established ETF with plenty of trading volume and a proven record of low tracking error. All other things being equal, I would choose that over a new, small, thinly traded ETF. In this case, however, things are not equal: VAB has a significantly lower fee, and the two funds do not track the same index (although they are almost identical).
The question then becomes, how much is XBB’s long track record worth? Is it 10 basis points, or $10 a year on a $10,000 investment? I don’t have a strong opinion here: I think both ETFs are well run and the differences between them are likely to be extremely small. I certainly would not let this decision distract me from making the larger decision of how much you want to hold in bonds.
Thanks very much! That’s good perspective, and I’ll consider it when making my decisions.
@Simon I have only dealt with TD bank for an e-series account so I can’t comment on the TD watrerhouse account, Although it has fees if you don’t have the proper minimum balances. As for the e-series, there is no account fees or transfer fees. The account only has $100 minimums to purchase each fund and usually $25 minimum monthly contributions on there pre-authorised payment plan(PPP). When I set up the account I gave them a void cheque from my credit union chequing account. You can either setup the PPP at the bank or do it online (very easy) for each fund (I use the 4 from CCP sample portfolio’s). It comes out as a direct deposit each month – no fees (for me, check with PC). Takes about 24 hours to show up as a transaction in both accounts. Very simple. For me, with a smaller portfolio balance, I can basically for get about my investments until I need to rebalance next year, everything is automatic. Also, with basically no fees (except a 90 day 2% early withdrawl fees) this is the cheapest, easiest way for me to invest. Hope this helps.
And one thing to consider when talking about e-Series is that distributions are fully reinvested as opposed to ETF where you can’t buy partial units so you have small amounts left for each fund every time there’s a distribution.
Great article Dan.
I like to share my own plan to deal with multiple accounts as it took me close to 6 months to figure out. I had my RRSP, my wife’s RRSP, spousal RRSP, LIRA, RESP, my TFSA and my wife’s TFSA and non reg accounts at 3-4 different banks/brokerage houses with small amounts. I consolidated all of the accounts at one brokerage(Scotia iTrade). Combined my wife’s RRSP and spousal RRSP into one.
Plan: dividend the money into 3 categories(all of our non reg accounts are joint)
1. Short Term(Emergency, savings for the new car, car/house repairs, etc): High Interest Savings accounts at ING
2. RESP
3. Long Term: Retirement
RRSP accounts
my RRSP: VAB, HXT
my wife RRSP: VAB, VTI
TFSA accounts:
my: VAB
my wife’s: XRE, will replace it with from vanguard evenutally
non-reg accounts
VSB
HXT
VXUS
LIRA: CBO, will replace with one from vanguard.
In RRSP accounts, I hold a pair: bond and equity etf so that I can re-balance. I modified the rebalancing spreadsheet that Dan has posted on this site. This is probably not the most tax efficient setup but I feel comfortable. The MER of overall portfolio: 0.17% and will go down one I replace the XRE and CBO with etfs from vanguard.
In RESP account, I use HXT, HSX, CBO, VAB
Hi Dan,
This is a long-time question I had been asking myself, so I was excited to see this article.
What do you think about having your eSeries funds with TD, but your ETFs held at QTrade? Does it make any difference? Reason I ask, is there might be some commission-free ETFs that could be used.
@Michael: The problem with that idea is that you have to manage two accounts with two brokerages and there is no opportunity for rebalancing across those accounts. For simplicity it usually makes sense to hold your account at one brokerage whenever possible.
Hi Dan,
Love this post; I’ve been thinking about how to best combine TD e-series with other investments for a while, so it’s great to see your take on it!
Just a note – I’ve had a TD Waterhouse account for several years, and I’ve never paid annual admin fees regardless of my balance (unregistered account and TFSA, total value <$10k.) That's one of the main reasons I chose TD over the other options at the time. There aren't even inactivity fees if you sign up for eServices. Looking at their fee schedule (https://www.tdwaterhouse.ca/document/PDF/apply/forms/tdw-apply-forms-521778-pdf.pdf), it appears the admin fees that disappear at the $25k asset level are specifically for RRSP/RRIF/RESP etc. accounts.
I am new to the Couch Potato website. I find the idea interesting as it seems to match what I have naturally done as an investor. Honestly, I am not sure my financial literacy is what it needs to be in order to understand a lot of the postings and responses here. After reading a number of threads, I think I will go with the Index Funds rather than ETF because the ETF seems really intimidating. I currently bank with CIBC and I saw this article: http://www.newswire.ca/en/story/881779/cibc-launches-new-classes-on-cibc-index-funds-offering-highly-competitive-lower-priced-fee-options . It would seem to me that the MER on the CIBC funds are not quite as low as TD, but lower that some of the others that you mention as good choices. I know they say a minimum of $50 000 in order to get the premium rate — would that be in EACH fund or total? Am I misunderstanding this, or would these index funds be pretty good choices if you have $50 000 to invest, but are not comfortable with ETFs?
@Beginner Jen: I can empathize with your feeling that ETFs are intimidating, as I felt the same way in the beginning myself. The process for buying and selling ETFs is more complex and requires more learning than buying funds, and because I only buy and sell once or twice a year I often have to go back to the instructions to remind myself how to do it. But it’s worth using the spreadsheet that Dan created (https://canadiancouchpotato.com/2012/07/30/comparing-the-costs-of-index-funds-and-etfs/) to compare how much it would cost you to use funds vs. how much you’d save with ETFs. The dollar savings get more and more significant as your portfolio grows. Someone with a really big nest egg who keeps everything in funds instead of ETFs could be spending tens of thousands of dollars needlessly in fees every year.
My reading of the press release for those premium CIBC funds is that each one requires a minimum investment of $50K to get that lower fee.
@Beginner Jen: Welcome to the blog. As Brad points out, the CIBC index funds require a minimum investment of $50K per fund, not overall.
My suggestion would be to stick with index mutual funds, not ETFs at this point. You need to be very comfortable making trades with an online brokerage before you use ETFs, and it doesn’t sound like you’re confident about that yet. Keep things simple for now so you don’t get discouraged!
@Beginner Jen: I’m in a similar situation about not really being comfortable making ETF trades, since I’m new to this whole thing. Since I’m coming from literally no where (savings in a plain-old savings account), my plan is to start with the TD e-Series funds, mainly due to their simplicity. When I go to do my first rebalancing, I will take some small portion of my new contributions and put them towards ETFs. It won’t be cost effective at first, but it will get me comfortable with the system. Hopefully I get enough experience that by the next rebalancing, I am prepared to move everything over from e-Series to ETFs.
Hi Dan
Thanks again for the great information.
I see above that you recommended VEE rather than the US listed VWO for emerging markets, for people with small allocations.
I am not sure I understand the benefit of VEE over VWO in this situation. The ETF trade will be the same cost, there is currency conversion with dividends for large and small accounts. With VWO you don’t have the withholding problem if held in a RRSP. I remember you did a post on this topic once.
Del
@delboybc: The main issue is that VWO must be purchased with US dollars, and converting currency in a discount brokerage account is expensive. If you are able to convert the currency cheaply, then by all means, US-listed ETFs are preferable. But for small allocations it may not be worth it.
Hi Dan,
I was wondering, do you know what’s the minimum investment for PH&N Inflation-Linked Bond Fund (PHN650) at TD Waterhouse?