Investor Commission

[DawsonAurora]

So I have a question as a new investor.  My bank charges $6.95 for each trade, I went to the FAQ and found out that this commission is charged every day that a trade is made. I believe that any trades set up on a recurring basis (such as investing a portion of your monthly income) would result in a charge for every occurence. I do not have confirmation on this next part but I believe that a trade would be one request for each ticker, within each account. So, if I have an RRSP and TFSA (retirement and tax free, to maximize my investments under tax breaks) but I use both of thhem to invest in the same fund, I would still be charged twice.

While this fee is on the lower end of the fees available in my area, the fee still seems quite high and I feel that a significant portion of my investments would end up being commision fees. Note: this is for a self managed portfolio, investor managed portolios are more than 5x this amount.

I am wondering what calculations I should do to figure out what the optimal frequency for investing is, given that I have a steady income (getting paid twice a month) and can afford to contribute on a recurring basis.

Those of you who are/have been in similar positions, what worked for you?

[seattlecyclone]

This comes down to a question of how large the fee is compared to the amount you're investing, and also how fast you expect your investment to grow. I put together a quick spreadsheet to play around with it. Feel free to make a copy with your own assumptions.

Assuming a 0.5% monthly growth rate on your investments (roughly 6% annually), if you have $1,000/month to invest investing every two months is a little bit better than investing monthly or quarterly. If you have $300/month to invest, quarterly is better than every two months or every six months. If you have $5,000/month to invest, investing monthly or even more often is the best idea.

If you were in the US I would just tell you to get an account with Vanguard or Fidelity or Schwab or someplace else where you can invest in index funds with no trading commissions so that this isn't even an issue, but I'm not as familiar with what the options are in Canada. Maybe you'll be stuck paying commissions wherever you invest.

[Retire-Canada]

Those of you who are/have been in similar positions, what worked for you?

I liquidated all my high fee investments and moved the $$ to Questrade. It's $0 to buy ETFs so I can buy them in any quantity and frequency my budget allows.

I can't see any reason to pay for buying ETFs in Canada when QT is so easy to use.

[Greenway52]

Like Retire-Canada, I also use ETFs with Questrade. Purchasing ETFs is almost free in Questrade (you have to pay an ECN fee, but it's a very small amount - as in just a few cents). If the recurring purchases you're making are ETFs, Questrade will likely be your best choice in terms on commission.

Buying stocks is also pretty cheap at Questrade. The fee is $0.01 per share with a $4.95 minimum per trade and a $9.95 maximum per trade.

[Heckler]

This is where the slightly higher fee index mutual funds can come into play - if your investment amount is low enough that the commission negates the savings of buying ETFs.

I use my works Sunlife plan to buy slightly higher MER index funds biweekly, then transfer them for free to my self directed annually.  Then one large purchase of the same index in an ETF once a year.  Works for me. 

[GreatLaker]

Don't feel too bad. My broker charges $9.95 per trade.

Similar to Heckler, I use a low cost balanced mutual fund for my monthly contributions to avoid trade commissions, and invest distributions from ETFs. Then once or twice a year I sell the mutual fund and buy ETFs. I also rebalance at the same time.

Unfortunately there are not a lot of low-cost balanced funds in Canada. I use TD Balanced Index fund (TDB965). It's not an eFund so should be available from any broker that allows you to buy TD funds.
https://www.tdassetmanagement.com/fundDetails.form?fundId=2099
http://canadiancouchpotato.com/2010/09/27/under-the-hood-td-balanced-index-fund/