Investing

New Potato on the Block - Questions about CCP investing

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Dec 14, 2006
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Montreal
Is this a general concencus that investing a small amount < 50k$ in EFTs is NOT recommended ?

Can someone explain ?

Thanks,
I was there at the 32$ price error at dell.ca day AND at the 150$ off price error at fs.ca
RFD price error moto: "Buy now, think later." -Ahzuz
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May 11, 2014
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Ahzuz wrote: Is this a general concencus that investing a small amount < 50k$ in EFTs is NOT recommended ?

Can someone explain ?

Thanks,
It depends on the brokerage used. As stated previously, Questrade allows for essentially free purchases of etfs (some others do too, but limit the types of etfs). So if you use Questrade, then it doesnt really matter which one you use.

I side with going into etfs right away. Why? You do still save on MER(although this isnt as big), there is no second learning curve in that you learn one plan right at the start, and you dont get a chance to become complacent. Ive seen a few posts and people I know end up sticking with e-series because they become scared of transferring, get lazy, or just say meh. Not that it is the end of the world mind you.

I would say go with whichever you are more comfortable with or which you value more.
Ease of convenience? e-Series, Tangerine, roboadvisors from the start.
Starting early, saving a bit on MER, no need for transfers later on? Questrade and etfs.
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May 31, 2007
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S5 wrote: 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.
.
It's not a few hours- when you sell e-series there is no buying power or cash in your account, until the next day. VS (When you sell stock or ETF, cash buying power is there immediately.)
Then next morning, you are out of the market.
Of course this only matters if you are switching back into ETFS.
If stock market opens 1% higher this could very well impact you .
Best to stick with ETFs and since they are free to buy @ questrade. Also lower MER than e-series. Easier to open account as well vs e-series.
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May 31, 2007
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Ahzuz wrote: Is this a general concencus that investing a small amount < 50k$ in EFTs is NOT recommended ?

Can someone explain ?

Thanks,
This is old advice on the internet during the days of $10-$30 commissions.
No longer applies, you can buy free now at questrade. You will pay about 1 penny for ECN fees. This is well worth it for building ETF portfolio and really won't impact your costs over long term.
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Oct 4, 2009
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Montreal
Jungle wrote: .
It's not a few hours- when you sell e-series there is no buying power or cash in your account, until the next day. VS (When you sell stock or ETF, cash buying power is there immediately.)
Then next morning, you are out of the market.
Of course this only matters if you are switching back into ETFS.
If stock market opens 1% higher this could very well impact you .
Best to stick with ETFs and since they are free to buy @ questrade. Also lower MER than e-series. Easier to open account as well vs e-series.
When selling e-series, as long as your order is in before 3PM ET you have market exposure until market close at 4PM. You are then free to reinvest in ETFs the very next morning since both transactions have 3 day settlement. Assuming you wait until 10 to put in your orders that's 18 hours.

For some bizarre reason you keep bringing up the market going up 1% in that timeframe as if that's the base scenario. If that were the case, stocks would go up over 1100% a year. If we assume an aggressive mostly stock portfolio achieves 8% a year(likely high) and there are 250 trading days in a year then we can expect an average of 0.03% return per day. In this case we aren't missing an entire day, just the overnight so let's call it 0.02%. On a 30k portfolio that's a one time $6 cost, hardly anything that will make or break the OP.

This assumes registered accounts or no available cash to maintain fixed market exposure by buying the ETFs just before market close unregistered.

Why something so trivial requires repeated emphasis is hard to understand.
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Oct 4, 2009
2557 posts
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Montreal
Ahzuz wrote: Is this a general concencus that investing a small amount < 50k$ in EFTs is NOT recommended ?

Can someone explain ?

Thanks,
Not necessarily now that commission free ETF buys are attainable. However if making regular small purchases there is work involved each time you need to invest your small contributions. MFs can be run on autopilot and studies show that behaviorally humans often get in their own way when plans are not on autopilot.

If you have less than 50k and plan to make small regular contributions then lump summing into ETFs while accumulating the regular contributions into e-series can be a good option until enough is accumulated to overcome the switch trading commission.

Too many people sweat the small stuff and miss the bigger picture. They'll quote you MERs till the cows come home all the while not realizing they paid a premium several times the size of the MER when buying. Most ETF buys of odd lots are not going to be at NAV.

Just to be clear, I take no issue with buying ETFs regularly for no commission if that works for an investor. Not sure that it's worth the trouble for the vast majority of people.
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May 31, 2007
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S5 wrote: When selling e-series, as long as your order is in before 3PM ET you have market exposure until market close at 4PM. You are then free to reinvest in ETFs the very next morning since both transactions have 3 day settlement. Assuming you wait until 10 to put in your orders that's 18 hours.

For some bizarre reason you keep bringing up the market going up 1% in that timeframe as if that's the base scenario. If that were the case, stocks would go up over 1100% a year. If we assume an aggressive mostly stock portfolio achieves 8% a year(likely high) and there are 250 trading days in a year then we can expect an average of 0.03% return per day. In this case we aren't missing an entire day, just the overnight so let's call it 0.02%. On a 30k portfolio that's a one time $6 cost, hardly anything that will make or break the OP.

This assumes registered accounts or no available cash to maintain fixed market exposure by buying the ETFs just before market close unregistered.

Why something so trivial requires repeated emphasis is hard to understand.
That's why I said IF the market opens higher the next day, you lose. Take your gamble, it may, or may not. But starting in ETFS is now better because they are free to buy. This cannot be disputed. Based on math of cheaper MER, and the fact that you have no "buying power" when e-series are sold that day (but locked in the day's closing price) is pretty lame (and risky) for rebalancing into ETF the next day.

There have been many days the market opens higher from stock futures surging over night . We have watched this bull market rally for a long time now, I have seen this many days and not something I suggest to time. A simple 1% loss on the portfolio that day if rebalancing could add up to much more over a long period of time, due to compound interest. Not just 1% loss that year because E-series hold your buying power hostage.

The game has changed guys.. this is not risk you need to take anymore with E-series now that ETFS are (free and cheaper) to buy. E-series had their day; now etfs are better for any size portfolio because of FREE TRADEs :)
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Oct 4, 2009
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Jungle wrote: That's why I said IF the market opens higher the next day, you lose. Take your gamble, it may, or may not. But starting in ETFS is now better because they are free to buy. This cannot be disputed. Based on math of cheaper MER, and the fact that you have no "buying power" when e-series are sold that day (but locked in the day's closing price) is pretty lame (and risky) for rebalancing into ETF the next day.

There have been many days the market opens higher from stock futures surging over night . We have watched this bull market rally for a long time now, I have seen this many days and not something I suggest to time. A simple 1% loss on the portfolio that day if rebalancing could add up to much more over a long period of time, due to compound interest. Not just 1% loss that year because E-series hold your buying power hostage.
I take it the market never opens down 1%...

Same silly argument 4 times in this thread. I already showed it was meaningless, averaging at best 0.02%.
The game has changed guys.. this is not risk you need to take anymore with E-series now that ETFS are (free and cheaper) to buy. E-series had their day; now etfs are better for any size portfolio because of FREE TRADEs :)
CCP disagrees. For some reason you equate what works best for you with what everyone else should be doing.

On the topic of bad investor behaviour which is much more prevalent when using ETFs, this example might be of interest to readers of this thread. There is value in automating decisions.
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May 31, 2007
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S5 wrote: I take it the market never opens down 1%...

Same silly argument 4 times in this thread. I already showed it was meaningless, averaging at best 0.02%.



CCP disagrees. For some reason you equate what works best for you with what everyone else should be doing.

On the topic of bad investor behaviour which is much more prevalent when using ETFs, this example might be of interest to readers of this thread. There is value in automating decisions.
I disagree the argument is silly-you can accomplish the same thing by starting an ETF portfolio with the advantage of (liquid) funds listed on the stock exchange for a cheaper MER. If they were not free to purchase, e-series would probably be the best option. I believe questrade also offers an automated contribution set up (as most brokers do) and e-series does not take away the risk of bad behaviour. In fact their funds are easier to switch if one wanted to time the market/change allocation, I don't believe this can stop an investor.

Balancing multiple accounts and asset allocation can be a challenge- you dug up a thread from 5 years ago? on another forum. The discussion is e-series VS ETFs, not asset allocation and balancing multiple accounts.
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Jan 4, 2017
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It mostly depends on your needs as an investor. ETFs are not automagically better on the sole basis of being an ETF. There are some ETFs that are more expensive than some index funds. You have to consider the size of your portfolio vs how tangible any difference in costs are. If you really want auto-pilot, then you have to ask whether the ETF has its distributions automatically reinvested, or if you have to be looking after it. So again, depends entirely on your needs and how much time you want to spend with it. There is rarely any cut and dry black and white answer that applies equally to everyone. If you're looking at an ETF that covers roughly the same thing as an index fund you're looking at, and its distrubtions are automatically reinvested, and the overall costs are notably less, then I'd say that's worthwhile. As always, due diligence is required.

If you use a brokerage that offers free ETF trades, and the ETF suits you - then there is no compelling reason to avoid it, even if you're working with a smaller portfolio.

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