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New Potato on the Block - Questions about CCP investing

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  • Apr 13th, 2017 2:31 pm
[OP]
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Apr 7, 2017
14 posts
1 upvote

New Potato on the Block - Questions about CCP investing

CCP seems to discourage ETFs if you plan to contribute small monthly amounts.

If you use a brokerage account like Questrade, where there is no commission on the recommended potato ETFs, why would small contributions pose a problem? Am I missing some sort of fee?

Myself and my husband (both 28 this year) are used to contributing small amounts (~$350 each per month) into an RBC aggressive growth mutual fund in our TFSAs. After 2 years of this, a lightblulb switched on and we are ready to dump the 2% MER and commit to index investing strategy for our retirement (30+ years).

At the very least we will start sending our money to Wealthsimple, but I'm wondering if we can't manage ETFs ourselves at a place like Questrade. Just when I think I have it figured out, I read a piece of advice that seems to steer me away.
Last edited by User353402 on Apr 8th, 2017 9:29 pm, edited 1 time in total.
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User353402 wrote: CCP seems to discourage ETFs if you plan to contribute small monthly amounts.

If you use a brokerage account like Questrade, where there is no commission on the recommended potato ETFs, why would small contributions pose a problem? Am I missing some sort of fee?

Myself and my husband (both 28 this year) are used to contributing small amounts (~$350 each per month) into an RBC aggressive growth mutual fund in our TFSAs. After 2 years of this, a lightblulb switched on and we are ready to dump the 2% MER fee and commit to index investing strategy for our retirement (30+ years).

At the very least, we start sending out money to Wealthsimple, but I'm wondering if we can't manage ETFs ourselves at a place like Questrade. Just when I think I have it figured out, I read a piece of advice that seems to steer me away.
Sure you can.

Questrade is a bit of a mixed bag. Some people say it's a great discount brokerage, others have said avoid like the plague.

If you're interested in diving head first into ETF Couch Potato, then Questrade may be the best, solely because you can buy ETF for free. Most other discount brokerages charge their standard commission for buying ETF as well as selling.
Last edited by Octavius on Apr 9th, 2017 2:06 am, edited 2 times in total.
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How does questtrade make money if buying ETF is free? They hope the customer would buy other stuff?
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zzricezz wrote: How does questtrade make money if buying ETF is free? They hope the customer would buy other stuff?
1) Selling ETFs is not free on Questrade
2) Yes
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1) Note Questrade says buy ETFs "commission-free", not completely free. Still a good deal though. See their FAQ:
http://www.questrade.com/ETFS/faqs
When you say buy ETFs for free, what do you really mean?
We mean buy ETFs commission-free. ECN fees may still apply, but you won’t pay a nickel of commissions when you buy ETFs with Questrade. If you decide to sell the ETF, you’ll pay the standard commission.

For clients trading in an RESP, you’ll be charged a flat, $5 fee on any day that you trade U.S. securities, ETFs included. This is a flat, per-day fee, no matter how many trades you make.

2) Justin Bender on Canadian Portfolio Manager has a video series on how to buy ETFs. Here is the one for Questrade:
http://www.canadianportfoliomanagerblog ... questrade/

Another alternative if you prefer to use ETFs at another broker is to make monthly contribution to a low fee balanced mutual fund, then once or twice a year sell the mutual fund and buy ETFs. You need to find a balanced mutual fund that is relatively low fee, low minimum purchase, and no fee to buy or sell. I use TD Balanced Index Fund (TDB965) but a lot of banks offer D-series low MER funds to discount broker clients.

Note I am not trying to steer you for or against Questrade since I have never used them.
I solemnly swear, to never assume I have an inkling at which direction the market will head, and to never make any investments based on a timing strategy.
[OP]
Newbie
Apr 7, 2017
14 posts
1 upvote
You are all awesome! Thanks :)

Almost ready to jump in! Would love some advice on choosing the specific ETFs.

Current thinking is:

1) Husband
10% ZAG
30% VCN
60% XAW

2) Mine
10% ZAG
20% VCN
20% VUN
20% XEF
20% XEC

We will keep these %s for about 10 years and then maybe put a little more weight in ZAG as we age.

Would also be curious to here critique and feedback on our overall strategy to max our TFSAs first, before opening (and continuing to buy potatoes) in RRSPs. We have quite a way to go before we max those TFSAs (only 20K and 10K total contributions so far).
The thinking is that since we are 28, it would be better to save the RRSP room until we are earning more. We currently gross 125k.
Last edited by User353402 on Apr 9th, 2017 12:26 pm, edited 1 time in total.
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Stick with the husband's AA.

Too many ETFs in your AA especially for such low amounts and you are making active bets by equally weighting regions with vastly different cap weights which goes against the principles of passive investing.

Personally I'd recommend e-series in your situation but nothing wrong with commission free ETFs if you are willing to put in the work, systematically buying according to the plan. Much easier to set the autopilot with mutual funds like e-series.
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Since you plan on putting in roughly 350$ per month and your portfolio size is well below 50k I would stick to e-series or wealth simple. They are less hands-on, dividends are generally invested right away without your input and great for frequent contributions. A portfolio size such as yours benefits greatly from regular frequent contributions more so than rate of returns and mers (the fact that you moved away from 2% is good enough. If you want greater impact look towards trying to save $500+ if you can )

Focus on building good financial habits and saving up continuously and consistently. Once you are both able to hit 50k or so you can take control of your investments completely and go etf. (You'll need to determine how often to contribute, when and how to rebalance and can use this time to educate yourself about etfs).
[OP]
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Apr 7, 2017
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Solid advice, thankyou!

I guess I thought more complicated meant more sophisticated and therefore better... but I'm starting to see simple is sometimes best.

I'm going to check our the e-series. With collective balance of 30k, should we be able to get around account fees? Is MER the only fee I will have to worry about?
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Jun 27, 2007
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User353402 wrote: CCP seems to discourage ETFs if you plan to contribute small monthly amounts.

If you use a brokerage account like Questrade, where there is no commission on the recommended potato ETFs, why would small contributions pose a problem? Am I missing some sort of fee?

Myself and my husband (both 28 this year) are used to contributing small amounts (~$350 each per month) into an RBC aggressive growth mutual fund in our TFSAs. After 2 years of this, a lightblulb switched on and we are ready to dump the 2% MER and commit to index investing strategy for our retirement (30+ years).

At the very least we will start sending our money to Wealthsimple, but I'm wondering if we can't manage ETFs ourselves at a place like Questrade. Just when I think I have it figured out, I read a piece of advice that seems to steer me away.
Hi User353402,

You can definitely manage ETFs yourself at Questrade. We also have managed accounts. If you have any questions about investing with us, let us know!
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May 31, 2007
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Lots of good advice here; personally I would stick to Questrade and do FREE etf purchases. Because you can't switch out of e-series directly into ETFs on day, because E-Series take 1 business day to settle. Then you are out of the market one day. If market opens up +1%, you lose. Might cost you a penny or two, which is nothing for ECN fees.

I manage an RESP with balance of about 9K and the cost of ECN fees is extremely small. Returns have been strong due to couch potato.

Also stick to the suggested couch potato funds and don't change it. Build the same portfolio for each account. If you need more help, you can PM me.
[OP]
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Apr 7, 2017
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So Jungle, do you make small monthly ETF purchases in that 9K RESP?

I am hanging onto bigjee's advice that "A portfolio size such as yours benefits greatly from regular frequent contributions more so than rate of returns and mers".

I understand the power of the dollar cost averaging, so this advice makes sense to me, but are you saying it's still possible to make small contributions with the ETFs at Questrade?

I'll just mention that we will be increasing contributions to $500 each per month. I've been playing with those projection calculators and was even thinking $250 bi-weekly.
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User353402 wrote: Solid advice, thankyou!

I guess I thought more complicated meant more sophisticated and therefore better... but I'm starting to see simple is sometimes best.

I'm going to check our the e-series. With collective balance of 30k, should we be able to get around account fees? Is MER the only fee I will have to worry about?
E-series are accessible in 2 ways.
1. A TD MF account comes with no account fees.
2. A TDDI brokerage account, account maintenance fees are waived with 15k in household assets.

MER is your only cost with e-series. No commissions, spreads or any other fees so long as you keep them for at least 30 days. Purchases can be automated according to your chosen AA.
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User353402 wrote: So Jungle, do you make small monthly ETF purchases in that 9K RESP?

I am hanging onto bigjee's advice that "A portfolio size such as yours benefits greatly from regular frequent contributions more so than rate of returns and mers".

I understand the power of the dollar cost averaging, so this advice makes sense to me, but are you saying it's still possible to make small contributions with the ETFs at Questrade?

I'll just mention that we will be increasing contributions to $500 each per month. I've been playing with those projection calculators and was even thinking $250 bi-weekly.
Yes I was making even smaller contributions than you $260/month with FREE etf purchase.

It's a couch potato with 25% bonds.

In fact, the returns have beat couch potato every year for 3 years (since inception) due to the timing of my contributions and having such a small amount invested. I did not plan to time the market it's just how it worked out. Most money was invested before the large run up over the last three years.

I believe the cost is about 1 penny in ECN fees per trade.

Trust me the day you decided to switch out of E-Series funds, you have to wait one day to settle the trade then you are in cash, out of the market. If market opens 1% higher, everything you've done is lost.
Free ETF trade at Questrade is better than e-series.
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Jungle wrote: Trust me the day you decided to switch out of E-Series funds, you have to wait one day to settle the trade then you are in cash, out of the market. If market opens 1% higher, everything you've done is lost.
Not sure why you are harping on such a meaningless issue. Settlement of MFs just like ETFs is 3 days in Canada(for now). Being out of the market for a few hours once in a blue moon will have absolutely zero impact on a person's financial objectives. Focus on the important stuff.

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