Investing

First time investor, looking at investing in index funds and opening a TFSA

  • Last Updated:
  • Jul 21st, 2017 3:50 pm
[OP]
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Dec 28, 2005
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First time investor, looking at investing in index funds and opening a TFSA

It's my first time investing. I finished a few books that recommended index funds as the go to option. One book also recommended lifecyle funds. From what I gathered, I need to open either a RRSP account or a TFSA and then put money inside of their and then use that money to purchase index funds.

Questions:
1. Does it matter where I open a TFSA like at TD or RBC if there are certain index funds I am interested in investing in such as Vanguard or T.Rowe Price?
2. I heard there are minimum balances required like $3000 for Vanguard and $1000 for T.Rowe Price. I couldn't find this information on the Vanguard website
3. I noticed on the Vanguard Canada website, they are listing ETF index funds instead of regulard index funds. What is the difference and can I buy the regular index funds or is there an advantage between etf index funds vs regular index funds?
4. What about lifecycle funds, are those an even better option for those who want a hands off approach?

Sorry if there's questions have been asked before but I'm a complete newb to investing and it seems based on the vanguard's website that they don't discuss their products with individual investors. I'm hesitant to go book an appointment with a financial advisor at my local bank (TD and Tangerine) and suckered into some bullshit expensive fund.
26 replies
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Jul 23, 2007
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wolf30 wrote:
Jul 16th, 2017 12:39 am
It's my first time investing. I finished a few books that recommended index funds as the go to option. One book also recommended lifecyle funds. From what I gathered, I need to open either a RRSP account or a TFSA and then put money inside of their and then use that money to purchase index funds.

Questions:
1. Does it matter where I open a TFSA like at TD or RBC if there are certain index funds I am interested in investing in such as Vanguard or T.Rowe Price?

I don't think T. Rowe Price has mutual funds available here in Canada and as far as I know you can't buy mutual funds in the U.S. either. You can purchase ETF's (exchange traded funds) on the TSX or one of the stock exchanges in the U.S.
wolf30 wrote:
Jul 16th, 2017 12:39 am
2. I heard there are minimum balances required like $3000 for Vanguard and $1000 for T.Rowe Price. I couldn't find this information on the Vanguard website

I think you're getting mixed up with the U.S. based Vanguard site and the one here in Canada. For an ETF I usually wait until I have around $2000 before purchase.
wolf30 wrote:
Jul 16th, 2017 12:39 am
3. I noticed on the Vanguard Canada website, they are listing ETF index funds instead of regulard index funds. What is the difference and can I buy the regular index funds or is there an advantage between etf index funds vs regular index funds?

Broad based index ETF's usually have lower MER's (management expense ratios) than regular index funds like TD e-Series.
wolf30 wrote:
Jul 16th, 2017 12:39 am
4. What about lifecycle funds, are those an even better option for those who want a hands off approach?
I've read a thing or two about them over the last few years, and I'm not an expert on them, but I just run my own DIY lifecycle funds in the portfolios.
wolf30 wrote:
Jul 16th, 2017 12:39 am
Sorry if there's questions have been asked before but I'm a complete newb to investing and it seems based on the vanguard's website that they don't discuss their products with individual investors. I'm hesitant to go book an appointment with a financial advisor at my local bank (TD and Tangerine) and suckered into some bullshit expensive fund.
If you haven't already, I suggest you spend some time at Canadian Couch Potato where not only do they have model portfolios, but plenty of free advice. Also you may be able to find Andrew Hallam's second edition of "Millionaire Teacher" through your library.
[OP]
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That was actually one of the books that I read that lead to me wanting to invest with index funds.
[OP]
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I think I've nailed my three financial institutions down to where I want to open a TFSA to invest but having a very difficult time deciding between the 3 at the moment.

1. Tangerine investment fund.

Pros: No minimum account balance and no fees. Don't need to manage the fund. Don't need to rebalance portfolio
Cons: High MER ratio of 1.07 %. $45 fee if I want to transfer the fee to another financial institution. I don't get to pick the exact invest fund or ETF's that I want to invest in.

2. TD E-Series Funds and Direct Investing

Pros: No minimum account balance, lower MER fees of 0.33-0.5% MER ratio
Cons: $9.99 equity trading commisson

3. Questrade

Pro: Commission free ETF's on purchase, lower MER fees?
Con: $1000 minimum account balance. Can't find where the MER ratio is located at.

Any suggestions?
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Jan 25, 2016
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wolf30 wrote:
Jul 16th, 2017 5:57 pm
2. TD E-Series Funds and Direct Investing

Pros: No minimum account balance, lower MER fees of 0.33-0.5% MER ratio
Cons: $9.99 equity trading commisson

TD E-Series funds don't have any commission associated with them, unless you sell them within 30/90 days of purchase depending on the fund. My daughter's RESP is setup with them. They DRIP automatically to boot, even fractional units. Highly recommended!
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wolf30 wrote:
Jul 16th, 2017 5:57 pm
I think I've nailed my three financial institutions down to where I want to open a TFSA to invest but having a very difficult time deciding between the 3 at the moment.

1. Tangerine investment fund.

Pros: No minimum account balance and no fees. Don't need to manage the fund. Don't need to rebalance portfolio
Cons: High MER ratio of 1.07 %. $45 fee if I want to transfer the fee to another financial institution. I don't get to pick the exact invest fund or ETF's that I want to invest in.

2. TD E-Series Funds and Direct Investing

Pros: No minimum account balance, lower MER fees of 0.33-0.5% MER ratio
Cons: $9.99 equity trading commisson

3. Questrade

Pro: Commission free ETF's on purchase, lower MER fees?
Con: $1000 minimum account balance. Can't find where the MER ratio is located at.

Any suggestions?
I started off with Tangerine last year and moved to e-series this year, just transferred to TD Direct Investing. If I had to choose again knowing what I know now, I'd go e-series just to save on MER and get my feet wet in self-directing investing. Also free to buy and sell e-series even with TD Direct Investing. Just need to have $100/ month pre authorized contribution or 15,000 in the Waterhouse account to waive quarterly fees if going with TDDI.
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wolf30 wrote:
Jul 16th, 2017 5:57 pm
3. Questrade

Pro: Commission free ETF's on purchase, lower MER fees?
Con: $1000 minimum account balance. Can't find where the MER ratio is located at.
Questrade is just the broker, you aren't actually buying their own investments. What MERs you pay, will depend solely on what ETFs you decide to purchase. i.e. if you want a Vanguard ETF, then you would check the Vanguard website for MER on that specific ETF.
In general ETFs can have very different MERs depending on what type of ETF it is.
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Jun 19, 2009
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I think you might be confusing Index funds with Index ETFs.

An Index fund is like a mutual fund that mirrors an index (it has the same settling properties as a mutual fund, priced end of day, can settle in fractional units etc.). I don't believe many are available in Canada as they are more popular in the states

An index ETF is an ETF that mirrors an index (settlement properties of an ETF - so it trades intra-day, settles T+3, incurs buy/sell trade commissions).

They are very similar in performance but can differ in how they settle as they are 2 separate products. In Canada we're pretty much limited to ETFs but it's important to distinguish between the two.
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Jun 27, 2007
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Hi wolf30,

Glad to hear that you are thinking of us. If you do want to manage your own investments with a self-directed TFSA at Questrade the MER that you’ll pay for your investments would depend specifically on what you want to invest in.

If you have any other questions, please let us know. We’re here to help.
[OP]
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Dec 28, 2005
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Is there a minimum balance for TFSA's and I read there's no commission for purchasing ETF's correct?
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Jun 19, 2009
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wolf30 wrote:
Jul 18th, 2017 1:07 am
Is there a minimum balance for TFSA's and I read there's no commission for purchasing ETF's correct?
Correct, No minimum balance for TFSA and no commissions for purchasing ETFs, however there is a commission for selling.
Jr. Member
Apr 5, 2017
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Edmonton, AB
I'm new to investing so I just went along with first and foremost: Canadian Couch Potato, from there picked Tangerine, and used my intuition for someone with about 30k to invest and parked my money with one of their convenient low risk balanced portfolio funds. I also filled out the questionnaire when opening that account at Tangerine and it suggested that at my comfort & income, place in life, etc. it was the best way to go. That fee won't do much to my <30k.
Jr. Member
Jan 25, 2012
181 posts
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NORTH YORK
If your portfolio is larger than 50k, CCP recommends XAW (VXC) VCN and VAB at different ratios given your risk tolerance. A few things I'd like to add are:

1. If you're investing in RRSP using the aforementioned strategy, you're taking on 0.52% additional "MER" from US withholding tax, specifically from XAW or VXC. These are Canadian funds that hold US listed ETF, which means you waive your right to withholding tax exemption between Canada and US. So if you're not afraid of managing your account and doing the necessary math to rebalance extra funds, I would recommend holding the underlying funds: VV, VGK, VPL, VWO at 50/25/15/10 ratio. This would mean you need to open up a US side of your account and need to perform CAD to USD exchange (costly), which leads to another technique that I would highly recommend: Norbert's Gambit. Best brokerages for the gambit are RBC and BMO, which are real time, whereas TD and Questrade need T+3 settlement.

2. When it comes to deciding which registered account to place your ETFs, here are a few things to consider:
- US listed ETF (for example VV) should definitely be held in your RRSP - withholding tax exemption
- Canadian and International equity should sit in your TFSA as they help boost your contribution room over time
- Bonds sit in your RRSP as opposed to your TFSA as they don't grow as much, hence don't help to improve your contribution room
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Feb 11, 2015
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Just so you know Questrade's site and services have gone down 2/2 trading days this week. If reliability is important to you I would go with another broker.
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