[neilthewiz]

I've read a fair deal about the TD e-series mutual funds in various forums and articles. It appears that these are regarded as excellent no-load index funds with low MERs and low investment requirement. However, in digging a bit deeper, I noticed that in Part A of TD's Simple Prospectus, amongst the arsenal of fees and expenses listed, there is one called "Index Fund transaction charge."

Quoting from it:

The following Index Funds may, after 60 days’ notice (or
such shorter period as permitted by securities regulatory
authorities), charge a portfolio transaction fee of up to
0.50% of the amount invested on your initial investments
and subsequent purchases (except units purchased through
distribution reinvestment):
TD Canadian Index Fund
TD Dow Jones Industrial AverageSM Index Fund
TD U.S. Index Fund
TD U.S. Index Currency Neutral Fund
TD Nasdaq® Index Fund
TD European Index Fund
TD International Index Currency Neutral Fund
TD Japanese Index Fund​

Source: http://bit.ly/17OegJ

I'm wondering if anyone has experience with these charges and whether they have been applied to e-series funds in the past.

Regards,
Neil

 

[CanadianCapitalist]

I'm wondering if anyone has experience with these charges and whether they have been applied to e-series funds in the past.

Regards,
Neil

No. I don't think we were ever charged this fee when purchasing TD e-Series Index funds.

 

[neilthewiz]

Perhaps you don't see this as an explicit fee that's withdrawn from your account.

Have a look at this page: http://www.tdam.com/Content/Download/p_Download.asp?FILE_TYPE_ID=66

I chose, for example, the TD International Index Fund. Click on the Annual report. If you scroll down to page 6 in the PDF file, have a look under "Ratios and Supplemental Data." Under the e-Series category, it shows a Trading Expense Ratio (TER) of 0.09%. Granted this is small, i.e. if you held an average of $10,000 in this Fund over 2008, you paid $9 (in addition to the $48 in MERs). But, look at the year 2006, the TER was 0.38%! So that would've been $38 in addition to the $48 MER.

Even though this may be a small amount at the end of the day, it looks like the TER is a fee that is buried in the Fund. I'm not knocking the e-Series funds, just trying to get to the bottom of what the total fees and expenses truly are.

Thoughts?

 

[CanadianCapitalist]

Perhaps you don't see this as an explicit fee that's withdrawn from your account.

Have a look at this page: http://www.tdam.com/Content/Download/p_Download.asp?FILE_TYPE_ID=66

I chose, for example, the TD International Index Fund. Click on the Annual report. If you scroll down to page 6 in the PDF file, have a look under "Ratios and Supplemental Data." Under the e-Series category, it shows a Trading Expense Ratio (TER) of 0.09%. Granted this is small, i.e. if you held an average of $10,000 in this Fund over 2008, you paid $9 (in addition to the $48 in MERs). But, look at the year 2006, the TER was 0.38%! So that would've been $38 in addition to the $48 MER.

Even though this may be a small amount at the end of the day, it looks like the TER is a fee that is buried in the Fund. I'm not knocking the e-Series funds, just trying to get to the bottom of what the total fees and expenses truly are.

Thoughts?

Trading expenses for all mutual funds including index funds are borne by the mutual fund. Trading expenses are *not* included in the MER and charged to the fund directly.

Even though index funds have very low turnover, they do incur some trading. The trading expense reflects this. Note that turnover is typically much higher for active funds and hence their trading expenses are much higher too.

When looking at index funds, check out the tracking error: i.e. how well the fund tracks the index. The tracking error provides a very good estimate of total expenses of most plain vanilla funds.