Author Topic: A Cdn getting out of mutual funds into ETFs - best strategy?  (Read 5465 times)

elaine amj

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A Cdn getting out of mutual funds into ETFs - best strategy?
« on: April 02, 2015, 07:26:41 PM »
I'm rather embarrassed to ask as usually I am a lurker and a researcher but to be perfectly honest, this whole investing thing has me completely confused. UGH - I never thought I would not be able to understand all this. But the more I read, the more confused I get. I understand the overall ideas - but having a lot of difficulty with the actual specifics. I have been reading like crazy and think I have reached overload to the point where I have no clue what I should do. I need to quit trying to find optimal and just find "good enough" or I will keep putting this off (have put this off for over 2 years now).

Anyway, we absolutely need to get out of our mutual funds. What I read says ETFs are the best way to go since we have 200-300k to invest (although also considering TD e-series since we bank with TD). We have our funds primarily in 3 different companies (with 3 different advisers, etc etc). We're in Canada -  I do like the Cdn Couch Potato and will likely follow one of his portfolios. What steps do we need to take to get all our money into ETFs?

1. Choose a discount brokerage and open an account. Looks like this is best if we sock our money in a separate bank account and invest quarterly? Maybe use TD e-series for my kids' RESP?

2. Fill out paperwork to transfer money out of mutual funds - will the discount brokerage assist with this? just where do we get these forms anyway?  We have RRSPs, TFSAs, RESPs, and some non-registered. Does that make any difference?

3.Do we transfer our money all at once and suck up any fees (I think we had a commitment with Edward Jones or something like that). Do we put our money in ETFs all at once or over time? What about dollar cost averaging?

4. Figure out asset allocation. I think we will just pick something (ANYTHING!) to get out of this inertia as doing nothing is probably worse.

5. Commit to rebalancing at least 1x a year. We are not so good at this but I think we can force ourselves to commit. FIRE is pretty important to me.

Maybe we should just give our money to someone to manage. I was checking out wealthbar.com last night and I liked that they also offer planning services - we need to figure out this RRSP vs TFSA thing and I do not think we have been doing it right. Part of the issue is DH feels we can do it ourselves. And..I do too. But our past 15 years show that we just have not been doing a good job.I just want to set it and forget it and feel like we should be smart enough to figure it out. Budgeting and saving I get. Living withing our means I get. Reducing expenses and wants to FIRE - makes complete sense to me. So I am embarrassed that I JUST DON'T GET how to handle our investments! This means the nasty cycle of inertia keeps going.

Give me a kick in the butt. Point me in the right direction. Where do I start?

Heckler

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Re: A Cdn getting out of mutual funds into ETFs - best strategy?
« Reply #1 on: April 02, 2015, 08:34:35 PM »
Simple.  Buy the CCP guide ( or borrow/library/ebook if you've learned anything from MMM)

http://canadiancouchpotato.com/resources/

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Re: A Cdn getting out of mutual funds into ETFs - best strategy?
« Reply #2 on: April 02, 2015, 08:57:41 PM »
I prefer ETFs but there's not a big difference to switch out of mutual funds to move them into equivalent ETFs if you are already invested in mutual funds since they could be built on same index and would just cost you fees to switch to ETFs

not sure how Canada works in tax system though

Retire-Canada

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Re: A Cdn getting out of mutual funds into ETFs - best strategy?
« Reply #3 on: April 02, 2015, 09:56:42 PM »


I'm in the process of getting out of MFs in Canada at the moment into ETFs so I feel your pain.

Figure out all the fees regarding withdrawals from the MFs you are in.

In my case I can take out 1/3rd with no fees in one shot and a bunch more each year with no fees until I've got 'em all out.

I setup a Questrade account. Buying ETFs are free.

Just fill out the appropriate forms at Questrade and your money will transfer across.



Decide on your asset allocation and buy in those proportions.

To me it's not worth the withdrawal fees to pull out all my MF money now. As long as I am making regular progress and will be out of them soon that's okay with me.

-- Vik

elaine amj

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Re: A Cdn getting out of mutual funds into ETFs - best strategy?
« Reply #4 on: April 03, 2015, 08:24:09 PM »
Thank you. Figuring out withdrawal fees has me a little worried, so knowing what u faced gives me an idea of what lays ahead.

Also had a long discussion with DH today and he is not convinced about ETFs. He thinks our mutual funds are doing just fine and the extra fees probably doesn't amount to all that much so we will probably do as well/better with our current mutual funds..or at least the best performing 2-3 funds.

Heckler

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Re: A Cdn getting out of mutual funds into ETFs - best strategy?
« Reply #5 on: April 03, 2015, 10:21:55 PM »
Have you compared your mutual funds to the relevant index?

Heckler

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Re: A Cdn getting out of mutual funds into ETFs - best strategy?
« Reply #6 on: April 03, 2015, 10:24:55 PM »
For example, my wife's fund we finally ditched, even sucking up the 6% deferred service charge.


Heckler

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Re: A Cdn getting out of mutual funds into ETFs - best strategy?
« Reply #7 on: April 03, 2015, 10:27:23 PM »
Her $10K would have been $20K with VCN, but it's only $14K now, thanks to our financial "advisor".  She had us convinced we were doing "just fine".

How's yours doing over ten years?
« Last Edit: April 03, 2015, 10:36:39 PM by Heckler »

Retire-Canada

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Re: A Cdn getting out of mutual funds into ETFs - best strategy?
« Reply #8 on: April 04, 2015, 09:17:53 AM »
Her $10K would have been $20K with VCN, but it's only $14K now, thanks to our financial "advisor".  She had us convinced we were doing "just fine".

How's yours doing over ten years?

+1 - that difference in cost between a 2%+ MF and a 0.25% ETF is massive when you look at the lost investment growth.

If hubby isn't ready to switch start your Questrade account and buy some ETFs with new money or transfer a small portion of MF $ over and see what happens.

-- Vik

cjottawa

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Re: A Cdn getting out of mutual funds into ETFs - best strategy?
« Reply #9 on: April 04, 2015, 10:37:37 AM »

RichMoose

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Re: A Cdn getting out of mutual funds into ETFs - best strategy?
« Reply #10 on: April 04, 2015, 11:49:48 AM »
If you decide to go with a discount brokerage, like Questrade, make sure you plan your move over. The brokerages often offer promotions to pay for transfer fees. I'm just saying this because you don't want to open an account, start funding it, and then plan to transfer the money down the road because at that point they will not pay for transfer fees anymore.

If you do all your banking with TD, it may be most beneficial to do your investing with TD Waterhouse Direct. Yes you will pay around $9 in trading fees when you buy ETFs, but if you buy in larger chunks (couple thousand $ at a time) that fee is negligible. Also, your existing relationship with TD may help in negotiating them to pay for more of your transfer costs. Even with TD Waterhouse you can buy Vanguard ETFs and follow the CCP portfolio of your choice.

Don't get too frustrated with your move because it will be tough. Bets are that every "financial advisor" you work with will do a hard sell on their products and the costs of leaving, some will even point out how much better their products do than the CCP. Just come armed with information because my bet is that your existing portfolio returns after fees are far lower that CCP returns since you started investing. My question to these advisors is: if you have products that have consistently beat the CCP, then why haven't you been investing my portfolio in them for the past X years?

Also, right now you are likely paying over 2% in fees every year. On $250k that's costing you $5k per year. Your savings will pay off in less than 1 year. This is also why your "advisors" don't want you to leave. With CCP your fees will only be $500 per year.

elaine amj

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Re: A Cdn getting out of mutual funds into ETFs - best strategy?
« Reply #11 on: April 05, 2015, 08:00:50 AM »
Very very very helpful! I showed DH the chart and he was impressed. I will check out those spreadsheets - it would be best if I can create a chart like that to compare his favorite funds and we can visually see the actual difference in how much we earned vs how much we could have earned. The hard numbers will make us feel better.

Now I just have to figure out how to find out the exact MERs of his current favorite funds.

We are on the road right now so only have our cellphones. When I get home this week, I'll start looking up the spreadsheets on my laptop.

Heckler

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Re: A Cdn getting out of mutual funds into ETFs - best strategy?
« Reply #12 on: April 05, 2015, 08:08:04 AM »
Just go to Morningstar and key in your fund/stock ticker at the top.  Make sure to take the ten year look at it. 

http://quote.morningstar.ca/quicktakes/Fund/f_ca.aspx?t=F0CAN05MZD&culture=en-CA&region=CAN
« Last Edit: April 05, 2015, 08:10:02 AM by Heckler »

Heckler

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Re: A Cdn getting out of mutual funds into ETFs - best strategy?
« Reply #13 on: April 05, 2015, 08:14:58 AM »
Then take a look at how an index fund tracks the index, as advertised.

http://quote.morningstar.ca/QuickTakes/ETF/etf_chart_ca.aspx?t=VCN&region=CAN&culture=en-CA

Only problem is that you can only see performance of a fund from after it was started.  However, if VCN existed ten years ago, it would have tracked the TSX instead of diverging like my AIM did.
« Last Edit: April 05, 2015, 08:17:14 AM by Heckler »

Heckler

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« Last Edit: April 05, 2015, 08:41:08 AM by Heckler »

Heckler

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« Last Edit: April 05, 2015, 05:10:11 PM by Heckler »

elaine amj

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Re: A Cdn getting out of mutual funds into ETFs - best strategy?
« Reply #16 on: April 06, 2015, 08:27:18 AM »
This is great! Thank you all so much for pointing me in the right direction :) I'm feeling like I have a better understanding of "what next" and not as lost and frustrated.

My plan is (let me know if there is anything else I should be looking at):

1. Read that Getting Started boglehead wiki

2. Use morningstar to look at our current stock performance vs a CCC portfolio (create a pretty "compare" chart like Heckler did)

3. Use this spreadsheet to calculate the difference in MER costs - http://wheredoesallmymoneygo.com/detailed-breakdown-of-the-real-impact-of-mers-on-an-investment-portfolio-over-time/. I don't know if I entirely understand how to input all the correct info - but will give it a shot. I did find the Vanguard calculator tool (https://www.vanguardcanada.ca/individual/insights/fundcompare.htm#target=fct) easier to understand for me - but again a lot of fields to input (bid/ask spread, advisor fee, initial purchase fee, transaction fee)and I'm not sure how to go about finding all the different info.

4. Figure out if TD e-series or ETFs with Questrade/TD Direct Investing will work best for us (we do have a longstanding relationship with TD and DH dabbles with penny stocks). I do feel we should be able to figure out how to use ETFs if the cost savings justify it.

5. Discuss with whichever broker we choose exactly how to go about transferring the funds over and the best way to avoid extra fees, etc.

I'm sure there's lots more to do but this should hopefully get me started.

My Own Advisor

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Re: A Cdn getting out of mutual funds into ETFs - best strategy?
« Reply #17 on: April 06, 2015, 04:06:49 PM »
You may wish to check this out as well Elaine:
http://beta.images.theglobeandmail.com/static/ebooks/Guide_to_ETFs_-_The_Globe.pdf

A bit dated but Rob's information is good.