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Hi there, this is my first post in the community but I've been reading many threads for a while. A little about me, I'm 29, professional career, only debt is mortgage. I'm looking for advise on making the move from my all-mutual fund portfolio at a large bank to opening a discount broker account (TFSA) and having an all-stock portfolio.

I have about $40,000 to invest and currently make automatic contributions to my funds, about $300 biweekly. I've had a brokerage account before and did self-directed investing but when I switched banks, I was kind of coerced into buying funds. Ideally, I'd like to have an all stock, dividend paying basket of 10-15 stocks. But the thing I hate is paying for trades. Should I save more money to have a larger account before working with all stocks? Some sites have recommended you have at least $50,000 on hand before going from funds to stock picking. Thoughts? Should I use the dividends to pay for my trades?

Any advice is appreciate. Thanks so much.
 

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I would suggest you go with TDDI brokerage and purchase their TD e-Series Index Funds at no cost until you have built up an amount that would render the trading fee on a security acceptable. Their Index Funds are fairly well respected and offer a decent MER. This method would give you a good way to invest your biweekly injections at no charge and it would automatically reinvest any distributions.

ltr
 

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Yeah, if we want to invest small amounts bi-weekly stocks are probably not the way to go, at least for the new money coming in. If you're buying $300 of a stock or ETF the commission is potentially eating up over 3% of that trade (assuming $9.95 commission). Even at $6.95 it's well over 2%.

If you really want to get into stocks, there's nothing to say you couldn't invest the $40K in stocks and have your contributions build up in a mutual fund or savings account, then periodically pull from there to buy more stocks.
 

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Hi:

LTR has a very reasonable suggestion.

I have been stocks only for 35 years or so. Average transactions per year likely still under 10. Would $100 annually be that unreasonable on $50,000?

So you could consider 8 $5000 positions now, and add a new one every time you generate another $5000, about twice a year at your current savings rate. When you get to 15 positions, start buying more of what you already have.

The above is more or less what I do. Mostly buy low(ish) and sell high(ish) among the 20 or so companies I own with the goal of keeping position sizes (as a percentage of total holdings) roughly constant. Rarely add anything new or completely sell out a position. Some positions are near 20 years old with portfolio average likely about 10 years.

Hboy54
 

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... I'm looking for advise on making the move from my all-mutual fund portfolio at a large bank to opening a discount broker account (TFSA) and having an all-stock portfolio.
Is all the MF portfolio in a large bank TFSA or is part of it in a taxable account?

If it is all in TFSA account(s), then life is easier as any selling for cash will not trigger any income tax. There might be fees for selling MFs that haven't been held long enough though so you will have to check that and decide how to plan.

The other potential source of fees is that usually when transferred while being kept in the TFSA, there is a withdrawal or transfer fee. One way to deal with this fee is to negotiate with the receiving brokerage account to have them cover the transfer fee. The TFSA has a second method that avoids the fee. If you sell for cash around late Nov/early Dec, you can withdraw from the TFSA in late Dec. The withdrawal $$$ become fresh TFSA contribution room on Jan 1st the following year so the full withdrawal $$$ can be put into the new brokerage TFSA without any concerns about over-contributing to the TFSA.

My guess is that what would work best is to find out what the holding period is so that you can stop the automatic buying for more MFs far enough in advance so that early redemption fees are not charged when selling for cash. For example, if it is a 30 holding period where one plans to go the "sell in Nov, withdraw in Dec, contribute to new brokerage TFSA in Jan next year" then the automatic buying has to stop in late Sept or early Oct.


... I've had a brokerage account before and did self-directed investing but when I switched banks, I was kind of coerced into buying funds. Ideally, I'd like to have an all stock, dividend paying basket of 10-15 stocks. But the thing I hate is paying for trades ...
Pick your poison ... the types of investments such as the TD eSeries can allow you to avoid paying trading fees but the trade off is you don't pick the stock and money is sliced off each and every year you hold the fund. If you hold the stock, nothing is sliced off so as long as you have a plan to keep the trading commissions as cheap as possible and from being too large - it may end up being cheaper.

Or to put it another way, you will be paying something no matter what you choose to invest in.


... Should I save more money to have a larger account before working with all stocks?
Some sites have recommended you have at least $50,000 on hand before going from funds to stock picking.

Knowing I had decades to go where I wanted to buy quality stocks that would be held a long time, I only worried about having enough $$ to qualify for the cheapest commission possible at the time. Keep in mind that for 200 shares, at $10 a buy/sell - the cost works out to $0.10 a share, which the stocks I have bought have done gained far more in the time I have held them. Then too, as the dividends are paid on the 200 shares, there are no expenses.

If you prefer automatic buying on a schedule, something like the TD eSeries MF might be more interesting.


... Should I use the dividends to pay for my trades?
Selling commissions will come out of the proceeds. Buying commissions one has to have the $$ or equivalent on hand to cover the purchase amount plus the commission.

Keep in mind that if you like the stock itself and are comfortable having the dividends rolled over into new shares, most brokers have a dividend reinvestment program. If you call up to enroll for say Enbridge, then if there is enough dividends to pay for at least one whole share - it will be bought without a commission being charged.

There is usually a remainder so there will have to be a plan for what to do with the dividends one does not want automatically rolled into more stock plus any remainder amounts. Most brokers offer a deposit MF that has no commission to buy/sell and that typically pays better interest than the broker does on cash.
http://www.canadiancapitalist.com/high-interest-savings-accounts-at-discount-brokers/


Personally, I'd work out what the investing plan is as well as check what the different broker's fees and offerings are before making a decision.


Cheers
 

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Yeah, if we want to invest small amounts bi-weekly stocks are probably not the way to go, at least for the new money coming in. If you're buying $300 of a stock or ETF the commission is potentially eating up over 3% of that trade (assuming $9.95 commission). Even at $6.95 it's well over 2%.
Good point ... though it seems the OP has to decide whether spreading around small chunks is the better way to do or stocks for the long term.


... If you really want to get into stocks, there's nothing to say you couldn't invest the $40K in stocks and have your contributions build up in a mutual fund or savings account, then periodically pull from there to buy more stocks.
YMMV ... if the MF in question is a TD eSeries index fund where the account is a taxable account, selling to move the built up $$ into individual stocks triggers a capital gain.

It sounds like the OP only has a TFSA where the capital gain won't matter but it is something to keep in mind.



Cheers
 

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...

I have about $40,000 to invest and currently make automatic contributions to my funds, about $300 biweekly. I've had a brokerage account before and did self-directed investing but when I switched banks, I was kind of coerced into buying funds. Ideally, I'd like to have an all stock, dividend paying basket of 10-15 stocks. But the thing I hate is paying for trades. Should I save more money to have a larger account before working with all stocks? Some sites have recommended you have at least $50,000 on hand before going from funds to stock picking. Thoughts? Should I use the dividends to pay for my trades?

Any advice is appreciate. Thanks so much.
... what was in your self-direct brokerage account before you were coerced into buying mutual funds on the bank switch? I would presume your current mutual funds would be no load since you hate to pay for trades. And what is wrong with your current mutual funds' performance? There is no getting around in paying for commissions in buying stocks unless your brokerage offers some free trades. so yes, you could use your dividends to pay for your trades. So you could set up an all stock portfolio with $40K with 8 stocks of $5K each as hboy suggested but you would still have to pay for the 8 commissions to buy (unless free trades offered) and then 8 or more commissions to sell them.
 

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But the thing I hate is paying for trades. Should I save more money to have a larger account before working with all stocks? Some sites have recommended you have at least $50,000 on hand before going from funds to stock picking. Thoughts? Should I use the dividends to pay for my trades?
Well, you are probably currently paying about $1000 EVERY year in management fees. The only difference is they are well hidden, but they are there all the same.

Buying 8 stocks will cost you around $80 plus or minus a little. Add another $80 for trading. You may say you will not be doing much trading, but you will, so factor it in. Put the $300 bi-weekly into an e-series fund (or any fund for that matter) that replicates your portfolio as closely as you can and when it grows to around $5,000 buy some more stocks.
 

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I did a study of trading costs vs return lost on waiting to invest.

For a stock/ETF w a return of 7%/yr, tx cost $10 you are best to wait until you have $1,000.
 

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I did a study of trading costs vs return lost on waiting to invest.

For a stock/ETF w a return of 7%/yr, tx cost $10 you are best to wait until you have $1,000.
That is the old 1% 'rule of thumb'. When one accumulates more capital, it is better to follow a 0.1% rule....or even less.
 

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That is the old 1% 'rule of thumb'. When one accumulates more capital, it is better to follow a 0.1% rule....or even less.
No it isn't. I just used $1000 for a round #.

In his ex he has $300 every 2 weeks. $600/mo. His tx costs is 1.67% ( $10/600) if he waits 1 month He also loses 7%/12 in return = .58% so total loss is 2.25%.

If he waits 2 months, and puts in $1,000 tx cost is 1% and he loses .58 x 2 months (1.16%) so total loss is = 2.16%. So wait until you have $1000 or more.
 

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Regardless, the assumption has been for some time to keep trading costs below 1% regardless of what one might assume markets will do. The former is guaranteed. The latter (being in the market) is 50/50.
 

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Regardless, the assumption has been for some time to keep trading costs below 1% regardless of what one might assume markets will do. The former is guaranteed. The latter (being in the market) is 50/50.
7% is a long run return avg for the TSX. You always have to make an assumption of what the market will do. You can be more conservative use 3-4% if you like and then wait 2 months until you have $2,000. It is better than sitting on your cash.
 

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7% is a long run return avg for the TSX. You always have to make an assumption of what the market will do. You can be more conservative use 3-4% if you like and then wait 2 months until you have $2,000. It is better than sitting on your cash.
But the premise we're suggesting here is to invest biweekly into TD eSeries Funds and so there will be no sitting on your cash. Once the Fund has reached an appropriate amount, then a stock can be purchased and the trade commission paid. I see no reason not to wait until the fund reaches $10,000 so that the commission is 0.1% when a stock is purchased. There's no real loss in waiting if you buy a market fund.

ltr
 

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But the premise we're suggesting here is to invest biweekly into TD eSeries Funds and so there will be no sitting on your cash. Once the Fund has reached an appropriate amount, then a stock can be purchased and the trade commission paid. I see no reason not to wait until the fund reaches $10,000 so that the commission is 0.1% when a stock is purchased. There's no real loss in waiting if you buy a market fund.

ltr
Ok. I know the TD e series idea was discussed earlier but just not in the posts above so was wondering where the .1% tx cost was calculated . Understand now.
 

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Discussion Starter #18
No it isn't. I just used $1000 for a round #.

In his ex he has $300 every 2 weeks. $600/mo. His tx costs is 1.67% ( $10/600) if he waits 1 month He also loses 7%/12 in return = .58% so total loss is 2.25%.

If he waits 2 months, and puts in $1,000 tx cost is 1% and he loses .58 x 2 months (1.16%) so total loss is = 2.16%. So wait until you have $1000 or more.
I never thought it if like this before. Good point to wait until I have enough saved up and then purchase more stock. Thanks for the tip, I like the math behind the logic. Also, sorry to late for replying to my post...I didn't get notifications of the replies! :)
 
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