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Scotia iTrade and eSeries Funds

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  • Dec 17th, 2009 12:41 pm
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Deal Addict
Mar 3, 2009
1913 posts
1221 upvotes
Ottawa, ON

Scotia iTrade and eSeries Funds

Good afternoon:

For the last several years I have made bi-weekly contributions to Canada Savings Bonds and held them in the Canada RSP.

I have decided that the interest made on the CSBs is getting pretty bad and I want to invest it in something that is more likely to do better.

I was thinking of investing in TD eSeries funds. So here is my question. I have a iTrade account, can I buy eSeries funds through the iTrade account or do I have to buy through TD?

I think I am starting to get very confused.....
15 replies
Jr. Member
Oct 6, 2009
130 posts
Markham
You would need to open an Investment account with TD and use the money in that account to buy TD eSeries funds.
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Deal Addict
Mar 3, 2009
1913 posts
1221 upvotes
Ottawa, ON
You are going to have to excuse my ignorance here, as I am very new to this.

However, if I look at "TD Canadian Bond Index", this has a fund code of TDB909.

If I search that fund code on iTrade, I get "TD Canadian Bond Index Fund-e", Price 10.85$. This appears to be the fund. I can select BUY.

It would seem that I can purchase it? Am I missing something?

Actually, I am sure I am missing something, hopefully one of you can tell me what it is.

Thanks.
Deal Addict
Feb 9, 2005
4172 posts
20 upvotes
dr_torch wrote: You are going to have to excuse my ignorance here, as I am very new to this.

However, if I look at "TD Canadian Bond Index", this has a fund code of TDB909.

If I search that fund code on iTrade, I get "TD Canadian Bond Index Fund-e", Price 10.85$. This appears to be the fund. I can select BUY.

It would seem that I can purchase it? Am I missing something?

Actually, I am sure I am missing something, hopefully one of you can tell me what it is.
I just tried the same at RBC Direct Investing and I can get a quote for TDB909 but if I click "buy" I get the message "The mutual fund symbol entered is not valid. Please try again."

I have a feeling if you try to buy TDB909 through iTrade the transaction will be rejected at some point, because as far as I know, even if iTrade wanted to sell you TDB909, TD wouldn't let them.
Deal Addict
Mar 3, 2009
1913 posts
1221 upvotes
Ottawa, ON
AllWheelDrift wrote: I just tried the same at RBC Direct Investing and I can get a quote for TDB909 but if I click "buy" I get the message "The mutual fund symbol entered is not valid. Please try again."

I have a feeling if you try to buy TDB909 through iTrade the transaction will be rejected at some point, because as far as I know, even if iTrade wanted to sell you TDB909, TD wouldn't let them.
Thanks. I figured it was going to be something like that.
Deal Addict
Feb 20, 2006
1186 posts
48 upvotes
Vancouver
If you can purchase it, however, that would be very interestig information indeed, since the conventional wisdom is that this isn't possible. So perhaps you should just go ahead with a test purchase?
Deal Addict
Feb 9, 2005
4172 posts
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Sanchez wrote: If you can purchase it, however, that would be very interestig information indeed, since the conventional wisdom is that this isn't possible. So perhaps you should just go ahead with a test purchase?
+1 you've got nothing to lose, so might as well see how far you can get.
Deal Addict
Mar 3, 2009
1913 posts
1221 upvotes
Ottawa, ON
Sanchez wrote: If you can purchase it, however, that would be very interestig information indeed, since the conventional wisdom is that this isn't possible. So perhaps you should just go ahead with a test purchase?
I get this:
Your order for Account: 9***** to Buy $100.00 of TDB909 has generated the following error(s):
- This fund is not available for purchase through Scotia iTRADE.
I guess I could of answered my own question :)
Deal Addict
Feb 20, 2006
1186 posts
48 upvotes
Vancouver
Oh well, as expected I guess.
Deal Addict
Mar 3, 2009
1913 posts
1221 upvotes
Ottawa, ON
Ok, while we are on this topic, eSeries funds seemed great for a longer term investment because of there low MER.

Is there anything somewhat equivalent to purchase with Scotia iTrade? I just opened the account with iTrade! I guess I should of done some more research first. Oh well, nothing lost.

I was also thinking about ETFs but I think I would prefer to do a bi-weekly contribution which would not work well with ETFs because of the fees.

I guess I am drifting off topic a little, maybe I should start a new thread....
Deal Addict
Feb 9, 2005
4172 posts
20 upvotes
Buy the lowest MER index funds you can in the iTrade account, and flip them over to ETFs when it makes financial sense.

That's what I do in my RBC DI account. For example, if I buy a Canadian Index fund with an MER of .68% (high compared to the e-Series, I know) and when I have about $2000 in the fund I sell it all and buy XIU instead (MER of .17%) then I save .51%/year which is about $10.20 on the $2000. Coincidently, I pay about $10/trade, so the switch to ETFs will pay for itself in about a year.

Of course with a TDW account and eFunds I could still do a similar thing and maybe save a few 10's of dollars over a year or two. I'm too lazy to work out the math, but basically the lower MER would mean you'd pay less on the portion in index funds and also switch to ETFs less often thus saving on trading costs as well.
Member
Sep 28, 2009
338 posts
1 upvote
London
AllWheelDrift wrote: Buy the lowest MER index funds you can in the iTrade account, and flip them over to ETFs when it makes financial sense.

That's what I do in my RBC DI account. For example, if I buy a Canadian Index fund with an MER of .68% (high compared to the e-Series, I know) and when I have about $2000 in the fund I sell it all and buy XIU instead (MER of .17%) then I save .51%/year which is about $10.20 on the $2000. Coincidently, I pay about $10/trade, so the switch to ETFs will pay for itself in about a year.

Of course with a TDW account and eFunds I could still do a similar thing and maybe save a few 10's of dollars over a year or two. I'm too lazy to work out the math, but basically the lower MER would mean you'd pay less on the portion in index funds and also switch to ETFs less often thus saving on trading costs as well.
AllWheels,

Are the index fund and the ETF tracking the exact same index? Do they always move together?
Deal Addict
Feb 9, 2005
4172 posts
20 upvotes
LondonTown wrote: AllWheels,

Are the index fund and the ETF tracking the exact same index? Do they always move together?
Well, the Canadian index fund I use tracks the S&P TSX Composite while I use XIU as the ETF which tracks the S&P TSX/60, so no, there aren't the exact same index. To me the TSX/60 is "close enough" though if you wanted to stick with the S&P TSX Composite you could buy XIC instead. The downside is less liquidity and higher MER for XIC, but in exchange you get broader coverage of the Canadian market.

For my EAFE exposure, both the index fund and ETF I use track the MSCI EAFE index, but the index fund is currency hedged, while the ETF is not. Personally I don't want the currency hedging but for some reason currency hedged index funds have a substantially lower MER so I live with it. Then again, the hidden cost of currency hedging might be high enough that I should suck it up and pay the higher MER of the unhedged index fund.

For my US exposure the index fund tracks the S&P 500 while the ETF I use tracks the MSCI US Broad Market Index. (Though at various points in time I've used currency hedged S&P 500 based mutual funds and ETFs.)

The index funds are just my way to be able to DCA my way into the markets on a monthly basis without paying a lot of comissiond. The ETFs I've selected are the ones I really want to be in. Even though the indecies aren't identical, the correlations are extremely high so the index funds let me get my money into the markets ASAP and behave approximately like the ETFs. It's very unlikely that the S&P TSX/60 and S&P TSX Composite would move in different directions for example, thought they obviously won't follow eachother perfectly. Personally I think the important part is to have a low cost index for the right market. How broad or narrow it is will have a lesser effect. Generally I favour a broader index, but cost is a factor as well (hence my choice of XIU over XIC.)

Also, the ETFs are the bulk of my portfolio, so the mutual funds tend to reach a maximum of around 10% of the corresponding ETF.

BTW, for the index fund to ETF roll over strategy things like minimum investment and early redemption fees play a factor as well. You can't really roll over your entire mutual fund because you'll want to keep the minimum so you can continute to contribute, plus you don't want to end up selling any units which are still subject to early redemption fees. The Altamira funds have particularly high minimums and longer early redemption fees so I sometimes pick other funds even though they have a slightly higher MER. Again, the index funds are just temporary holdings to make investing smaller amounts more often less expensive. An extra .1% on $2000 would be $2/year, and the reality is the average in a mutual fund over the course of a year is less than $2000. Also, a higher minimum will result in keeping more money in an index fund rather than the ETF, so $500 more in an Altamira fund than a more "expensive" fund may actually cost you more.
Deal Addict
Feb 9, 2005
4172 posts
20 upvotes
The Ivory Actuary wrote: Something to consider (of which I'm sure you're aware) is that XIC tracks a capped index, whereas XIU is not capped, so you may be subject to the "Nortel effect" in XIU.
Yup, I'm pretty sure I've seen that brought up before, though it wasn't forefront in my mind at the moment. I'm always debating whether to switch to XIC, or buy XIC next time. If I stick with XIU, hopefully I'll notice if someone is starting to pull a "Nortel" and gets too overweight in XIU.
Not to harp on Altamira, but their unhedged index funds recently had their mandates changed. They have management fees of 0.45%, just like the hedged funds. The MERs reported are trailing 12-month MERs, and so reflect the higher expenses before the manadate was changed. I expect the MER on those unhedged funds (Altamira International Index and Altamira American Index) to be between 0.5% and 0.6% when the dust settles.
I like Altamira, in fact their hedged currency neutral fund is what I'm currently using. Guess maybe I should switch that. Too bad changing my preauthorized purchase plan requires faxing my broker, what a pain.
That's interesting. My broker (who just ranked dead last in the G&M survey :rolleyes :) has a minimum buy order of $1,000 on all mutual funds (except MMF and regular investment plans, where the minimum buy is $100/mo) and a minimum holding time of 90 days. This levels the playing field, in a way, and allows (forces?) me to choose based soley on MER. YMMV.
I can pick from funds with minimum initial investments ranging from $100 (TD) to $1000 (Altamira), and minimum subsequent investments as low as $25 (RBC) to as high as $500 (Altamira). The minimum subsequent sometimes factors in a bit if I'm sitting on some extra cash or wanting to rebalance. I think most of the funds have a minimum holding time of 30 days, in fact, I think I was surprised to find even Altamira fell into the 30 day category last time I checked. (It's a pain to look up because I have to wade through the prospectus since the minimum holding time is determined by the fund company alone since my broker stopped adding their on penalties on top.)

Sometimes I think I should just switch to TDW for eFunds and wash trades, though my broker has the more flexible mutual fund purchase options and a better inventory of GICs which I can purchase online.
Newbie
Dec 15, 2009
5 posts
Fredericton
Hi,

This is all very complicated to someone who never had anything more complicated than a credit card. I just got my first well paying job out of university and am looking into investing early.

I have been reading for hours each day for the last couple of days and I think the best thing for the little bit of money I have (but to grow with monthly contributions) would be the eSerise mutual funds from TD. I think I got that much figured out. I am not currently a TD customer but I would like to open a TFSA.

But now I am wondering what is the best account to set up. From reading this thread and looking at the TD website I think I need to open a "TD Mutual Funds TFSA". I think (looking for confirmation here) that will allow me to contribute to various eSerise accounts without any fees except for the early redemption fees and the MER. No commissions or fees of any other kind beyond that?

Also, when I go to set up the account, is that all I have to ask for is a "TD Mutual Funds TFSA"? I don't have to switch it to anything else after I get the account? I don't think a TD Waterhouse brokerage account is for me.

Thanks,

David
Deal Addict
Jul 28, 2005
3237 posts
27 upvotes
dapayne12 wrote: But now I am wondering what is the best account to set up. From reading this thread and looking at the TD website I think I need to open a "TD Mutual Funds TFSA". I think (looking for confirmation here) that will allow me to contribute to various eSerise accounts without any fees except for the early redemption fees and the MER.
If you are not already a TD customer, the normal way to open up a eSeries TFSA mutual fund account is to:
  • First open up a regular Mutual Funds TFSA account. This can be done at a branch and I believe, by mail as well. They will try to convince you to deposit money into the account when opening. You probably want to decline and say you will deposit later.
  • Then, once it is opened, you need to convert the regular account to an eSeries account. To do that, fill out the form found here: http://www.tdcanadatrust.com/mutualfund ... t_acct.jsp
No commissions or fees of any other kind beyond that?
Correct.

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