Investing

TD E-Series Questions

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  • Dec 27th, 2019 11:54 pm
[OP]
Deal Addict
Dec 16, 2012
2537 posts
471 upvotes
Vancouver

TD E-Series Questions

Hi

I got a few questions about e-series tracking. I been doing e-series funds since at least 2015 (though I think actually earlier) and they seem to be working out good for me(seems on average 4.65% a year) . I am now finally setup(had to do it 3 times as the first 2 people set it up wrong) my wifes RRSP accounts(with a spousal account) and choose aggressive investing as we got a 25 to 30 year time frame.

My question are a mix between my accounts and her accounts

1. I have never re-balanced my funds, I know they say you should but for the longest time they stayed roughly at the 25% mark (assertive investments). Now I am looking at it an I have

CDN Index, 23.53,
Us Index 32.08%,
CDN Bond - 20.64% and
Intil Index 23.75%.

I think it might be time to re-balance but I have no clue how to do it.

2. I set my wife up the same way I did my account through the td easy web and now have setup recurring transfers each month. I now see on "cough potato" they actually recommend "TD Direct Investing" should I have actually set her up with this and transfer over to this myself (if possible) ? I don't know much about so I am not sure why they recommend it if it is easier to use? or has lower fees or what.

3. I don't get what they mean "Consider the TD e-Series funds if: your household accounts with TD total at least $15,000." Other than my own e-series fund account we don't have any accounts with TD so I am not wondering if I made a mistake going with them? Like I said when I setup my TD stuff it was really the only option at the time and was recommended. I probably should have done this rechecking before going through all this stuff but I did not think it changed.
10 replies
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Feb 1, 2012
1468 posts
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Thunder Bay, ON
1. "Cough" Potato (it is the cold and flu season) has some good posts on rebalancing.
https://canadiancouchpotato.com/?s=rebalanc

Rebalancing is to keep your various asset classes at or near their targets. Asset classes historically have not outperformed or underperformed forever. In fact, something that has really strong recent performance usually has a trend to underperform later. So you want to keep your assets close to their original targets.

In your case the US fund has grown significantly and bonds have lagged. So you could sell some US fund and buy bonds. Or if you are making regular contributions you could stop buying the US fund and redirect that to the bond fund until they come back into balance. Your Canadian and Int'l fund are close enough they dont need rebalancing. Cough Potato has a rebalancing spreadsheet here:
https://canadiancouchpotato.com/2019/02 ... -for-etfs/

You could rebalance based on time, like annually. Or you could rebalance based on percent, like if any fund gets 5% above or below target you rebalance. Markets have a lot of random-like movements, so don't worry too much about rebalancing precisely, just get it close.


2. TD Direct Investing (TDDI) allows you to buy a broader range of products, including stocks, bonds, ETFs, and also many mutual funds. Investments at TD Canada Trust are limited to mutual funds and GICs. If you only want to buy e-Series you are good with TD Canada Trust / EasyWeb. e-Series funds are the same product and the same fees at TD Canada Trust and TDDI. Even if you want to move to TDDI later, TD can do a transfer for you, with no tax implications.


3. TD Canada Trust / EasyWeb has no minimum balance requirement and no maintenance fee.

TDDI on the other hand has a $25 quarterly maintenance fee unless your household assets (i.e. you and your wife together) are $15k, or you have a $100 monthly preauth contribution. So their $15k recommendation is for TDDI, not TD Canada Trust. Mutual fund orders are free on both TD Canada Trust and TDDI. You can see the details on fees here on p.5:
https://www.td.com/ca/document/PDF/forms/521778.pdf

You could get lower fees with ETFs, but TDDI charges $10 per order for stocks and ETFs, which is a lot if you are doing small monthly ETF orders. Questrade offers free ETF buys.

If you are happy with e-Series, just keep doing what you are doing, and rebalance once in a while.
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.
Member
Dec 1, 2012
245 posts
28 upvotes
Calgary
Deepwater wrote:
You could get lower fees with ETFs, but TDDI charges $10 per order for stocks and ETFs, which is a lot if you are doing small monthly ETF orders. Questrade offers free ETF buys.

If you are happy with e-Series, just keep doing what you are doing, and rebalance once in a while.
Don't mean to hijack the thread but since you mentioned ETFs I have a follow up question if you don't mind please.

If one is managing their e-series portfolio fine and rebalancing every year, is it actually worth switching to Questrade for commission free ETFs, depending on the portfolio (3 fund ETF or the asset allocation ETFs), are the returns going to be slightly better with lower MERs?

Thanks!
Jr. Member
Dec 1, 2019
129 posts
112 upvotes
mlallany wrote: Don't mean to hijack the thread but since you mentioned ETFs I have a follow up question if you don't mind please.

If one is managing their e-series portfolio fine and rebalancing every year, is it actually worth switching to Questrade for commission free ETFs, depending on the portfolio (3 fund ETF or the asset allocation ETFs), are the returns going to be slightly better with lower MERs?

Thanks!
MERs start to matter more the larger your portfolio is.

A $5,000 portfolio with a 0.50% MER will cost $25 every year compared to $5 at 0.10% MER.

A $50,000 portfolio with a 0.50 MER will cost $250 every year compared to $50 at 0.10% MER.

A $500,000 portfolio with a 0.50 MER will cost $2,500 every year compared to $500 at 0.10% MER.
Member
Dec 1, 2012
245 posts
28 upvotes
Calgary
095179005 wrote: MERs start to matter more the larger your portfolio is.

A $5,000 portfolio with a 0.50% MER will cost $25 every year compared to $5 at 0.10% MER.

A $50,000 portfolio with a 0.50 MER will cost $250 every year compared to $50 at 0.10% MER.

A $500,000 portfolio with a 0.50 MER will cost $2,500 every year compared to $500 at 0.10% MER.
Thanks, how about returns, with ETFs there are more options then just following the S&P right?
Deal Addict
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Feb 1, 2012
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mlallany wrote: Don't mean to hijack the thread but since you mentioned ETFs I have a follow up question if you don't mind please.

If one is managing their e-series portfolio fine and rebalancing every year, is it actually worth switching to Questrade for commission free ETFs, depending on the portfolio (3 fund ETF or the asset allocation ETFs), are the returns going to be slightly better with lower MERs?

Thanks!
Comparing CCP model portfolios for TD e-Series and ETF portfolios there are two primary differences: fees, and asset allocation.

For the cost difference, TD e-Series CCP balanced model portfolio has a blended MER of 0.44%, compared to VBAL MER of 0.25% so the difference is approx. 0.2%. On a $10k portfolio the cost difference will be $10,000 x 0.002 = $20/yr. On a $100k portfolio the difference will be $200/yr. So not a lot until you get to large portfolios.

For Asset allocation, the TD funds include a broad Canadian index of stocks, US and global developed market large cap stocks and Canadian investment grade bonds. The ETFs in the CCP portfolios have all that, plus they add small cap stocks in US and global developed markets, emerging markets, plus US and international investment grade bonds. The global bonds are there more for downside protection in a Canadian or US recession. Small cap stocks (especially small cap value) have historically outperformed large cap stocks, but with more volatility. Emerging market stocks are riskier so should have better long term results as investors want a risk premium for that.

So CCP ETF portfolios should slightly outperform e-Series if historical returns continue into the future. But investments tend to move in very long cycles. So long that some investors think current investing conditions will continue forever. The US market has outperformed since the financial crisis, largely due to tech stocks that are a much smaller portion of international companies. So global stocks have lagged in comparison. And commodity demand and pricing has not been strong, so emerging market countries that produce a lot of commodities have not had good returns. Eventually those cycles should reverse as the current tech bubble eventually wanes, and economic growth causes commodity demand to improve, but it may take a long time.

TL;DR: CCP ETF portfolios should slightly outperform over the long term due to lower costs and broad diversification, but due to long-term economic cycles it may not always be evident short term.
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]
Deal Addict
Dec 16, 2012
2537 posts
471 upvotes
Vancouver
Deepwater wrote: 1. "Cough" Potato (it is the cold and flu season) has some good posts on rebalancing.
https://canadiancouchpotato.com/?s=rebalanc

Rebalancing is to keep your various asset classes at or near their targets. Asset classes historically have not outperformed or underperformed forever. In fact, something that has really strong recent performance usually has a trend to underperform later. So you want to keep your assets close to their original targets.

In your case the US fund has grown significantly and bonds have lagged. So you could sell some US fund and buy bonds. Or if you are making regular contributions you could stop buying the US fund and redirect that to the bond fund until they come back into balance. Your Canadian and Int'l fund are close enough they dont need rebalancing. Cough Potato has a rebalancing spreadsheet here:
https://canadiancouchpotato.com/2019/02 ... -for-etfs/

You could rebalance based on time, like annually. Or you could rebalance based on percent, like if any fund gets 5% above or below target you rebalance. Markets have a lot of random-like movements, so don't worry too much about rebalancing precisely, just get it close.


2. TD Direct Investing (TDDI) allows you to buy a broader range of products, including stocks, bonds, ETFs, and also many mutual funds. Investments at TD Canada Trust are limited to mutual funds and GICs. If you only want to buy e-Series you are good with TD Canada Trust / EasyWeb. e-Series funds are the same product and the same fees at TD Canada Trust and TDDI. Even if you want to move to TDDI later, TD can do a transfer for you, with no tax implications.


3. TD Canada Trust / EasyWeb has no minimum balance requirement and no maintenance fee.

TDDI on the other hand has a $25 quarterly maintenance fee unless your household assets (i.e. you and your wife together) are $15k, or you have a $100 monthly preauth contribution. So their $15k recommendation is for TDDI, not TD Canada Trust. Mutual fund orders are free on both TD Canada Trust and TDDI. You can see the details on fees here on p.5:
https://www.td.com/ca/document/PDF/forms/521778.pdf

You could get lower fees with ETFs, but TDDI charges $10 per order for stocks and ETFs, which is a lot if you are doing small monthly ETF orders. Questrade offers free ETF buys.

If you are happy with e-Series, just keep doing what you are doing, and rebalance once in a while.
Thanks for the info. I won't be adding anything more to my personal RRSP for a while as going to be building up my wifes rrsp. I see TD has a "Switch Mutual Funds" which I think is what I would need to use to re balance using existing funds.

I am wondering though right now my portfolio would match the "Assertive Portfolio" from Couch Potato, I really think I should be doing aggressive since I got like 25 years before I should start thinking of going down to Cautious or even lower. The only reason I did Assertive is my company started doing RRSP matching so I am throwing my money at that first which gives me less personally so I really just started doing $100 a month personally and I can't do really do Assertive as some of the funds would not meet the minimum spend.

Now I am wondering if I should "re balance" into "Aggressive" or just stay with "Assertive"
Member
Dec 1, 2012
245 posts
28 upvotes
Calgary
Deepwater wrote: Comparing CCP model portfolios for TD e-Series and ETF portfolios there are two primary differences: fees, and asset allocation.

For the cost difference, TD e-Series CCP balanced model portfolio has a blended MER of 0.44%, compared to VBAL MER of 0.25% so the difference is approx. 0.2%. On a $10k portfolio the cost difference will be $10,000 x 0.002 = $20/yr. On a $100k portfolio the difference will be $200/yr. So not a lot until you get to large portfolios.

For Asset allocation, the TD funds include a broad Canadian index of stocks, US and global developed market large cap stocks and Canadian investment grade bonds. The ETFs in the CCP portfolios have all that, plus they add small cap stocks in US and global developed markets, emerging markets, plus US and international investment grade bonds. The global bonds are there more for downside protection in a Canadian or US recession. Small cap stocks (especially small cap value) have historically outperformed large cap stocks, but with more volatility. Emerging market stocks are riskier so should have better long term results as investors want a risk premium for that.

So CCP ETF portfolios should slightly outperform e-Series if historical returns continue into the future. But investments tend to move in very long cycles. So long that some investors think current investing conditions will continue forever. The US market has outperformed since the financial crisis, largely due to tech stocks that are a much smaller portion of international companies. So global stocks have lagged in comparison. And commodity demand and pricing has not been strong, so emerging market countries that produce a lot of commodities have not had good returns. Eventually those cycles should reverse as the current tech bubble eventually wanes, and economic growth causes commodity demand to improve, but it may take a long time.

TL;DR: CCP ETF portfolios should slightly outperform over the long term due to lower costs and broad diversification, but due to long-term economic cycles it may not always be evident short term.
Thanks for the explanations. My son's RESP is at $16k at the moment, he's only 4 years old, still has 14 yrs to go and way approx 6-8 yrs until I start turning down the risk and going more into bonds. I was thinking of switching to questrade with ETFs as even $50 a year in fees would be approx $600 in 14 years. And even though there is more risk in ETFs, like you suggested small cap stocks have better performance. It's just a question of whether it is worth the risk for only 6 years more in VGRO and then transitioning into VBAL, what's your suggestion on this?

I am currently investing in a company RRSP and when I leave or I have to pull out, I'll transfer those funds to questrade on VGRO or even a mix of VEQT and bonds.

Thanks!
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Feb 1, 2012
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Thunder Bay, ON
xiaobao wrote: Thanks for the info. I won't be adding anything more to my personal RRSP for a while as going to be building up my wifes rrsp. I see TD has a "Switch Mutual Funds" which I think is what I would need to use to re balance using existing funds.
Yes, you can use the switch function between e-series funds. Behind the scenes it does a sell/buy transaction for you.
I am wondering though right now my portfolio would match the "Assertive Portfolio" from Couch Potato, I really think I should be doing aggressive since I got like 25 years before I should start thinking of going down to Cautious or even lower. The only reason I did Assertive is my company started doing RRSP matching so I am throwing my money at that first which gives me less personally so I really just started doing $100 a month personally and I can't do really do Assertive as some of the funds would not meet the minimum spend.

Now I am wondering if I should "re balance" into "Aggressive" or just stay with "Assertive"
Think hard about you would handle a stock bear market or crash. Lots of people think they can handle volatility until they see their portfolio value plummet. Look at the "Lowest 12-Month Return" in the following link and think how you would handle a market crash.
https://cdn.canadiancouchpotato.com/wp- ... s-2018.pdf

Also you can look at this link to see more detail how an Aggressive (90% stocks) portfolio would have worked in the tech crash and financial crisis. In the table "Annual Portfolio Returns (2000 to 2018)" you will see that $1,000 invested at the start of 2000 would have dropped to $758 by the end of 2002, and taken until some time in 2009 before it recovered to its original value. Also look at the table "The Portfolio's Worst Years (2000 to 2018)" to see how it would have dropped in bad years.

Having said that, it's OK to have an aggressive portfolio with your investing timeline, but think carefully how you would feel and what you would do in a market crash.
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.
Deal Addict
User avatar
Feb 1, 2012
1468 posts
2047 upvotes
Thunder Bay, ON
mlallany wrote: Thanks for the explanations. My son's RESP is at $16k at the moment, he's only 4 years old, still has 14 yrs to go and way approx 6-8 yrs until I start turning down the risk and going more into bonds. I was thinking of switching to questrade with ETFs as even $50 a year in fees would be approx $600 in 14 years. And even though there is more risk in ETFs, like you suggested small cap stocks have better performance. It's just a question of whether it is worth the risk for only 6 years more in VGRO and then transitioning into VBAL, what's your suggestion on this?
I would take a good look at TD and Questrade and compare their user interface, range of available investments, costs etc and ensure you like Questrade enough to switch. Also if you want automated contributions make sure Questrade offers that. I have never used Questrade so cannot comment in detail.
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]
Deal Addict
Dec 16, 2012
2537 posts
471 upvotes
Vancouver
Deepwater wrote: Yes, you can use the switch function between e-series funds. Behind the scenes it does a sell/buy transaction for you.


Think hard about you would handle a stock bear market or crash. Lots of people think they can handle volatility until they see their portfolio value plummet. Look at the "Lowest 12-Month Return" in the following link and think how you would handle a market crash.
https://cdn.canadiancouchpotato.com/wp- ... s-2018.pdf

Also you can look at this link to see more detail how an Aggressive (90% stocks) portfolio would have worked in the tech crash and financial crisis. In the table "Annual Portfolio Returns (2000 to 2018)" you will see that $1,000 invested at the start of 2000 would have dropped to $758 by the end of 2002, and taken until some time in 2009 before it recovered to its original value. Also look at the table "The Portfolio's Worst Years (2000 to 2018)" to see how it would have dropped in bad years.

Having said that, it's OK to have an aggressive portfolio with your investing timeline, but think carefully how you would feel and what you would do in a market crash.
Yeah, well I try not to look at my RRSP other than just recording the gains/losses for the month/year otherwise I don't really try to think about it and try to remember I am trading over 25 plus years not day to day or month to month, of course it will feel shitty seeing your money go down but it is only a loss if you sell and like I said this money is to be used way in the future so there should be no reason to sell (if I got to sell my RRSPs before retirement then I got bigger problems).

The greatest challenge though right now is actually trying to buy the index funds. I am doing the aggressive profile and it keeps rejecting my orders due to it does not meet my investor profile, I got to now do for the 4th time around with setting up the account as first person was not qualified to setup the e-series, the 2nd person did not ask any questions and randomly choose the investor profile for us, 3rd person went through all the questions which I just rigged to show "aggressive profile" and said it now will allow me to put in my order as I want in but obviously that was untrue as it got rejected again.

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