[joncnca]

hi all,

i've been reading a lot about the whole index funds vs. etf debate, strategies when starting off small, etc. but i'm still confused about what's possible in terms of the pure logistics of investing

i've read that with small regular contribution to my rrsp, i ought to go with something like the td eseries index funds, then when i've accumulated enough, perhaps switch over to questrade and buy etfs because the fees/mer considerations end up favouring etfs when my trades significantly outweigh the fees and i can benefit from the low mer with etfs.

anyway, much as i'd like to set it and forget it, i'd like to have some control over what i buy. but are index funds organized specifically by the brokerage themselves?

that is, TD offers 5 index funds for the eseries investments. so does that mean if i open an eseries account, i can invest in these 5 index funds however i want, but that's all i can do...this is the limit of the selection? i couldn't buy any other index funds? and if so, if i really want more control, i'd need to open up a tdwaterhouse account and start buying mutual funds/stocks, etc, if i really want more selection?

in contrast, if i want to buy etfs, since they're basically traded like stocks, i could sign up with any brokerage and buy and etfs in any available markets? i.e. if i had an account with questrade, i wouldn't be bound by whatever questrade offers, i could by any etf in any market, all i need is the ticker symbol and i can purchase?

i'm trying to figure out which one to go with. maybe since my contribution right now is pretty small (<10K) it wouldn't really make sense to buy etf cause the fees would eat away at any mer advantage?

thanks

 

[mogul777]

You pretty much have it figured out. With TD e-series what you see is what you have to pick from. The idea of index funds is buy a few and you're done... there's no reason to own more. That said at some point you are bound to want to branch out into stocks, bonds, etc. which will require a brokerage be it Questrade, TDW, or some other option.

The index mutual funds (TD, RBC, etc.) and ETFs (Barclays - or whoever they are now, Vanguard, Claymore, etc.) are put together by the issuing company not the brokerage. Which in turn are based on market indices put together by other companies.

 

[joncnca]

thanks!

i guess i shouldn't get too far ahead of myself. starting off with the eseries would probably be easier to hold onto for the time being.

i just want to be able to get as much practice as i can with researching/buying now while i'm only 25 (which is why i was considering etfs), but it seems like a balance between maximizing returns with the low MER etfs, and actually accumulating enough to actually capitalize on these low MERs, eh?

if index funds/etfs are put together by the issuing company, doesn't that mean i should be able to buy any index funds/etfs through the brokerage? or i guess these issuing companies restrict who can buy their funds/etfs (i.e. only eseries account holders can buy eseries funds, and you can't buy it through some brokerage).

also, i guess this means that having an eseries account is not actually like having a waterhouse account. it's kind of like a pseudo-investment account, which lets you buy eseries indexes but no other securities, right? like having theme park money, that only lets you buy things in the theme park

although, i've also heard that you can buy index funds through questrade. not specifically the eseries indexes (because they're issued by td), but are there index funds out there that just float around, which you can buy through any brokerage? i imagine i wouldn't be able to buy these with an eseries account because it's not a "real" brokerage; i'd have to get a waterhouse account to do that, right?

is there any way to find which index funds are available through a brokerage like questrade? is it like a search through google finance for 'index funds' or something like that? all of this is pretty ephemeral to me, i find it astounding that all of this is so complex and yet, all really theoretical. nothing's tangible at all and it's like creating money out of thin air!

 

[ChrisR]

With a TD e-Series mutual fund account you will be able to buy e-Series funds as well as any other from TD's full line of mutual funds. Of course, if you buy one of the non e-Series funds you will pay its normal high MER.

I don't really know why people buy mutual funds through non-affiliated brokerages. Presumably you would pay a commision as well as the fund's normal MER. I guess it makes sense if you're looking for something rather exotic that is not offered by your normal mutual fund provider.

 

[mogul777]

I don't really know why people buy mutual funds through non-affiliated brokerages. Presumably you would pay a commision as well as the fund's normal MER. I guess it makes sense if you're looking for something rather exotic that is not offered by your normal mutual fund provider.

Most discount brokerages don't charge extra fees for most funds. I'm not aware of one fund company that has the best fund in each category... which would be the reason to use a brokerage rather than sticking to one company. That said there are some fundcos that do have enough decent choices to construct an entire portfolio. Personally though I prefer the choice of a discount brokerage account over being locked in to a fund company.

 

[mogul777]

thanks!

i guess i shouldn't get too far ahead of myself. starting off with the eseries would probably be easier to hold onto for the time being.

i just want to be able to get as much practice as i can with researching/buying now while i'm only 25 (which is why i was considering etfs), but it seems like a balance between maximizing returns with the low MER etfs, and actually accumulating enough to actually capitalize on these low MERs, eh?

if index funds/etfs are put together by the issuing company, doesn't that mean i should be able to buy any index funds/etfs through the brokerage? or i guess these issuing companies restrict who can buy their funds/etfs (i.e. only eseries account holders can buy eseries funds, and you can't buy it through some brokerage).

also, i guess this means that having an eseries account is not actually like having a waterhouse account. it's kind of like a pseudo-investment account, which lets you buy eseries indexes but no other securities, right? like having theme park money, that only lets you buy things in the theme park

although, i've also heard that you can buy index funds through questrade. not specifically the eseries indexes (because they're issued by td), but are there index funds out there that just float around, which you can buy through any brokerage? i imagine i wouldn't be able to buy these with an eseries account because it's not a "real" brokerage; i'd have to get a waterhouse account to do that, right?

is there any way to find which index funds are available through a brokerage like questrade? is it like a search through google finance for 'index funds' or something like that? all of this is pretty ephemeral to me, i find it astounding that all of this is so complex and yet, all really theoretical. nothing's tangible at all and it's like creating money out of thin air!

You have two basic choices. Option one sign up with TD for an e-series account and buy all the TD funds you want (e-series or "regular" funds) OR sign-up with a discount brokerage such as Questrade and buy ETFs, which as you know trade as equity (stocks).

Each transaction would cost you zero with TD and say $4.95, the min rate, with Questrade. The ETF MERs may be lower to offset some or all of that trading cost, which you also pay when you sell. Note the funds have a 90 day min hold that ETFs don't.

Questrade sells index funds, other than TD's e-series, including TD's other funds. The caveat being that they charge $9.95 per MF trade. AKA, you'd have to be an idiot to trade MFs through Questrade when ETF trades would likely be less expensive, not to mention stocks. Other brokerages such as TDW would also give you access to other company funds as well as stocks, and most of the other investment options out there. While their trading fees are much higher in general they in many cases are no cost for fund trading.

 

[Liz]

You pretty much have it figured out. With TD e-series what you see is what you have to pick from. The idea of index funds is buy a few and you're done... there's no reason to own more. That said at some point you are bound to want to branch out into stocks, bonds, etc. which will require a brokerage be it Questrade, TDW, or some other option.

I think that another reason for ETFs is if you want to branch out to specific areas (ie real estate, small cap, emerging markets). ETFs are a nice middle ground between buying specific stock and paying high MER fees for non-eseries mutual funds. (since eseries only offers general index funds)

However, you will still have to pay commissions, so you need to wait until you have the cash for it to make sense. I've read that the commission should be somewhere in the vicinity of 1% - 2% of the cost of the ETF. (anyone have a differing opinion?)

 

[joncnca]

ok, so then if i have an eseries account, since it's a td account, i can buy any other regular fund for just the MER, no other commissions. but if i actually want to buy anything else (stocks, real estate, emerging markets, etc) then i'd actually have to either get a waterhouse account or another brokerage (e.g. questrade), right?

my understanding is that if i only have an eseries account, it would be free (excluding MER) to buy the eseries or normal mutual funds. but a waterhouse account costs $100/a if your account is below 25K and trades are $30 if your account is below 100K. but that means i could buy mutual funds without opening a waterhouse account, but that's all i would be able to buy, right?

1% of 1000 is $10, which is how much questrade charges for a trade ($5-10), and mutual funds costs $10 in commission, so would it be worthwhile to go with questrade if i make a purchase of $1000 at a time (every 1 or 2 months). are there other hidden fees and considerations?

 

[mogul777]

You don't need an investment account to buy many different investments including real estate.

Real estate stocks or the more common REITs you would.

No, you actually wouldn't as TD has emerging markets funds, etc. For stocks yes of course an e-series fund won't allow that. A poor guy starting out doesn't want a TDW account unless you just want to trade mutual funds, stocks go with Questrade or another newbie fee-friendly brokerage.

You can peruse the fee schedules on the respective brokers websites.

 

[joncnca]

there's so much selection out there, and all these hidden fees with everything.

i've been looking at morningstar to figure out what other funds are available. i couldn't figure out how one finds funds to invest in, i mean i don't see tv commercials for funds...or do i?

anyway, i'm looking into other fund management companies. e.g. fidelity. for the funds offered by fidelity, it means i need to open an account with them, and buy into their funds, right?

is there no one stop shopping, where i sign on with a brokerage, and then through the brokerage i can purchase funds offered by numerous issuing companies? i guess the fund itself has value added because of the stocks that comprise the fund, right? my one stop shopping could alternatively be achieved by simply signing on with a brokerage and buying the individual stocks that are held in whichever fund i was interested in, right?

if that true, i don't imagine mutual fund companies release the specific securities held within their funds, do they? would this information be available to investors who've bought into the fund?