1ab. I would like to open an investing account to put all 10K (+interest) somewhere this year. I don't have 100k in any account and so probably have to pay higher fees for trading. Any suggestions for where to open a REPUTABLE TFSA account with minimal trading costs (and I'm not just talking cheapest trading possible, but cheapest trading for the least hassle)?
2.I would also like to do DRIPs, but have no experience in this. Do I just ask the trading account company I decide to go with? Thanks for your time.
Hello dauphin:
1a. as Mario said, CIBC charges $6.95 per trade until June 30/10 for
registered TFSA trading, so for example, if you just wanted to buy & hold a few stocks long term, this would be a good option, say you bought 5 stocks, it would cost you $34.75. To my knowledge, no charges or minimum balances apply to this account as remember it is considered a government account. Please someone correct me if I am wrong.
1b. CIBC's Investor's Edge Advantage Account gives you 50 trades for $395/year, ie: $7.90 per trade & if you exceed your 50 trades in the same year, additional trades are just $6.95, I believe the lowest in the industry. They do charge a $60 yearly administration fee for balances under $10K.
I'm not sure what problems Mario has had, but I bank with CIBC and I have had no problems with the system itself, except with CSR's.
From their website:
"Value. Pay from $7.90 down to as low as $6.95 per online equity trade when you purchase the annual trade package. (Option trades are an additional $1.25 per contract.)
Simplicity. All fees are in Canadian dollars, even if you trade U.S. equities or options.
Convenience. No monthly or quarterly quota to meet. Just one low price for an annual package of 50 online equity and option trades executed anytime during the calendar year. (The initial fee of $395 and trade count are pro-rated depending on the date of enrolment. After you exceed your annual trade count, your price per trade drops to $6.95.)"
2. With respect to your 2nd question, there are 2 types of DRIP programs:
i) the one offered directly by the companies you're purchasing stock from and
ii) the one offered by your broker. The 2nd one is initially more convenient, but the 1st one is a much better option and I'll explain why, it may seem complicated at first, but it isn't.
The one offered by the broker (referred to as a synthetic drip) is only available in whole numbers, meaning that they won't reinvest partial shares for you. For example if your dividend payment for a Royal Bank stock was $30/quarter, but a Royal Bank share costs $60, the bank would not reinvest your dividend as it would not have enough funds to buy a whole share, so the $30 would just sit in your account.
But if you deal with the companies directly, then they would reinvest your partial shares. For example, using the same example above, they would buy 1/2 a Royal Bank share for you with your $30 dividend. If your quarterly dividend was $90, the broker would reinvest 1 share, ie: $60, whereas the company would reinvest your full dividends and purchase 1.5 shares on your behalf - 1 share at $60 and 1/2 share at $30 for a total of $90.
However, in order to DRIP directly with the companies you'll invest in, you must first purchase a certificate, which cost $50 + tax, but this is a one time fee, this certificate essentially transfers the shares to YOUR name & after this, you don't have to pay commissions again, so for example, if in addition to reinvesting your dividends, you wanted to buy additional Royal Bank stock 4 times in a year, at $7.95 per trade, you would be paying $31.80 a year in commissions, but with the certificate, you would bypass such costs & could continue purchasing additional stocks every year without any commission fee (of course this could be subject to change in the future I suppose, but I don't think anytime soon). Banks/brokers won't advertise this fact because obviously they don't want to miss out on commissions & want you to keep buying from them rather than directly from the company. Your broker will issue this certificate to you, but only at your request & it takes about 2 weeks to get (not the 6 weeks they will tell you over the phone).
Another advantage is that companies offer a discount on the dividend reinvestments, most are 3%, but I believe some pay as high as 5%, this discount however, does not apply to ASP or SPP purchases (additional stock purchase), which you can also do without paying commissions by buying directly from the company. For example, in addition to reinvesting my dividends, I also purchase BMO shares monthly directly though the company, if I did this through my CIBC broker, I would be paying $7.95 x 12 months for a total commission of $95.40 & if you wanted to do this with 10 of your companies, the commission would be a whopping $954, so as you can see, the $50 certificate/per company is well worth the money!.
One other advantage is the dollar cost averaging. There are disadvantages too, and that would be the real time factor.
One last thing, as you're interested in Drip's, make sure you buy a stock that pays dividends as NOT all do.
Here are some links that might be useful:
http://cdndrips.blogspot.com/
http://sites.google.com/site/cdndrips/canadiandriplist
http://dripinvesting.org/
I hope I have not confused you!
Good luck & happy investing, but remember to do your homework & be cautious. Rule of thumb: don't invest in something you don't understand.
