Canadian looking to move from mutual funds to ETFs

[MrsPB]

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[Le Barbu]

MrsPB, first thing you got to know, RBC got some index funds with lower MER like 0.7% (if I rembember, rbf556 for canadian stock, rbf557 for US stock, rbf559 for international (unfortunatly edged) and rbf563 for bonds. Then, you cut your fees by 50% rigth away with no transaction cost. Those are available on the bank side AND at DI. With your account size, I would not rush to transfer. You are actually better using the "no trading fee" feature of their funds. This would give you the flexibility to contribute regularly, diversify each account through asset allocation, rebalance, etc for free. I would wait ´till there is about 50k$ Per account before to buy ETFs...

I got about the same number of accounts than you and treat them as a whole big portfolio. I also allocate to be tax efficient (see Canadian Couch Potato "put your assets in their places"). As an exemple, both RRSP could be 100% VXC, RESP 100% VAB and TFSA 100% VCN (invert RESP and TFSA if you prefer, depends of your goals). Then, use the index funds for regular contribution and buy ETFs once a year.

Finaly, make sure to max out every other accounts before investing more than 2,500$ per child per year into RESP because this is the max for the grants.

[MrsPB]

MrsPB, first thing you got to know, RBC got some index funds with lower MER like 0.7% (if I rembember, rbf556 for canadian stock, rbf557 for US stock, rbf559 for international (unfortunatly edged) and rbf563 for bonds. Then, you cut your fees by 50% rigth away with no transaction cost. Those are available on the bank side AND at DI. With your account size, I would not rush to transfer. You are actually better using the "no trading fee" feature of their funds. This would give you the flexibility to contribute regularly, diversify each account through asset allocation, rebalance, etc for free. I would wait ´till there is about 50k$ Per account before to buy ETFs...

I got about the same number of accounts than you and treat them as a whole big portfolio. I also allocate to be tax efficient (see Canadian Couch Potato "put your assets in their places"). As an exemple, both RRSP could be 100% VXC, RESP 100% VAB and TFSA 100% VCN (invert RESP and TFSA if you prefer, depends of your goals). Then, use the index funds for regular contribution and buy ETFs once a year.

Finaly, make sure to max out every other accounts before investing more than 2,500$ per child per year into RESP because this is the max for the grants.

Thank you! Regarding the RESP, that's for 2 kids so we will be contributing $2500 per year per child.
As I've been looking through things and all the fees etc, I had come to the (hopefully correct) conclusion that at this point there's not a lot of difference in overall fees/costs between DI and Mutual funds, but in 5 yrs time and as our contributions hopefully go up as planned, we should start looking to move more to managing our investments ourselves. My husband has been looking at the RBC index funds too, so that's on the radar.

[Le Barbu]

MrsPB, first thing you got to know, RBC got some index funds with lower MER like 0.7% (if I rembember, rbf556 for canadian stock, rbf557 for US stock, rbf559 for international (unfortunatly edged) and rbf563 for bonds. Then, you cut your fees by 50% rigth away with no transaction cost. Those are available on the bank side AND at DI. With your account size, I would not rush to transfer. You are actually better using the "no trading fee" feature of their funds. This would give you the flexibility to contribute regularly, diversify each account through asset allocation, rebalance, etc for free. I would wait ´till there is about 50k$ Per account before to buy ETFs...

I got about the same number of accounts than you and treat them as a whole big portfolio. I also allocate to be tax efficient (see Canadian Couch Potato "put your assets in their places"). As an exemple, both RRSP could be 100% VXC, RESP 100% VAB and TFSA 100% VCN (invert RESP and TFSA if you prefer, depends of your goals). Then, use the index funds for regular contribution and buy ETFs once a year.

Finaly, make sure to max out every other accounts before investing more than 2,500$ per child per year into RESP because this is the max for the grants.

Thank you! Regarding the RESP, that's for 2 kids so we will be contributing $2500 per year per child.
As I've been looking through things and all the fees etc, I had come to the (hopefully correct) conclusion that at this point there's not a lot of difference in overall fees/costs between DI and Mutual funds, but in 5 yrs time and as our contributions hopefully go up as planned, we should start looking to move more to managing our investments ourselves. My husband has been looking at the RBC index funds too, so that's on the radar.

You are on the rigth path then! No need to open new accounts or transfer anything now, but I would recomend to transfer to the RBC index funds I listed you ASAP. You can manage your things and be your own advisor even without transfering to DI. Start savings 700$/year now!

[GreatLaker]

It sounds like your concerns are:

• Getting lower MERs while still minimizing trade commissions and maintenance fees
• Minimizing cash and keeping your monthly contributions invested, which is a concern with ETFs

First, let me refer you to Finiki: the Canadian Financial Wiki, which is an excellent online resource for Canadians. It has good sections on ETFs, mutual funds and low-cost index portfolios, and it's companion Financial Wisdom Forum.
http://www.finiki.org/
http://www.financialwisdomforum.org/

You mentioned monthly contributions to RBC DI to avoid quarterly maintenance fees. Their fee schedule says if you maintain a balance of $15k across all your RBC DI accounts there is no maintenance fee. You may have to call them and tell them to combine all your accounts under one household. I know that TDDI does not automatically consider all accounts under one household address.... I had to call and tell them.
https://www.rbcdirectinvesting.com/pdf/commission-fees-July-2-English.pdf

For lowest MER, ETFs are really the best choice, but have some drawbacks in terms of trade commissions, only being able to hold full shares, no partial units like with mutual funds, cash tending to build up in the account from distributions, and most brokers won't do automatic monthly contributions into ETFs.

One alternative is a lower cost broker. Questrade has no commission to buy ETFs. I am not familiar with them, but if you search the investing forum at Red Flag Deals you will find lots of info on Questrade. http://forums.redflagdeals.com/investing-f134/

Another method is to put your holdings into ETFs then your monthly contributions into low-cost mutual funds. Then when you get enough in the mutual funds, sell them and buy ETFs, rebalancing your portfolio at the same time. I do this with TD Balanced Index Fund (TDB965). It is not an eSeries fund so should be available in any broker. MER is ~0.9%, not super low but better than ~2%. https://www.tdassetmanagement.com/fundDetails.form?fundId=2099

If you want to stick with mutual funds, TD eSeries are the lowest cost choice, but they are only available from TD Canada Trust or TD Direct investing. MER is in the 0.3 to 0.5% range.  Stick to the 4 basic funds - Bond Index, Canadian Index, US Index and International Index.
https://www.td.com/ca/products-services/investing/td-direct-investing/investment-types/mutual-funds/index-investing.jsp

I use TDDI with ETFs for my core holdings and TD Balanced Index for my monthly contributions and am satisfied with TD, but there are lots of great choices out there.

Hope this helps.

[Heckler]

+1 for Finiki.org as a good source for basic information.

then start here, and explore CCP:

http://canadiancouchpotato.com/2013/02/19/why-index-mutual-funds-still-have-a-place/

Don't rush to ETFs.  With relatively low account values, switching now for no trading fees within RBC managed mutual funds to lower cost RBC index funds could be a first baby step.  I spent a year and half getting up to speed on self management and financial planning before going all in with ETFs.   During that year, I was buying BMO Index funds - higher MERs, but no trading fees.

Make a long term plan first, with the right amount of knowledge.  Implement the right plan once.  That can take time.

[Heckler]

Be careful about annual fees with minimum account values for self directed investing accounts - for a low value account, a $100/year can easily offset a reduction in MER.

Also be aware if your current funds have any service fees - for example a 4% DSC deferred service charge.  Hopefully not, but possible.

[Heckler]

do you know your level of risk tolerance and planned asset allocation?

http://canadiancouchpotato.com/2014/07/28/do-you-really-know-your-risk-tolerance/

what is your allocation and location plan to treat your multiple accounts as one?

http://canadiancouchpotato.com/2014/08/13/managing-multiple-family-accounts/

[Heckler]

and if you're really into making a solid plan, get started with Bogle.

https://www.bogleheads.org/wiki/Getting_started

It's US-centric, but the fundamentals are the same in Canada.

[Heckler]

Before you make any changes, what is your IPS?

https://www.bogleheads.org/wiki/Investment_policy_statement

[joonifloofeefloo]

Further to all of the excellent stuff others have posted, I just wanted to add that I needed to go with three firms to achieve the best results.

1. TD Wealth (long story, not needed by most people)
2. TD direct investing
3. RBC direct investing

Each had different options for my different variables. I had really wanted everything in one place, but there was too much benefit in having some with one, some with another. So, be open to the possibility of mixing and matching where you have your low-fee index funds, in case that makes a $ difference in your case too :)

[MrsPB]

Thanks everyone, this is all helpful stuff as I educate myself further on our financial management!

[Heckler]

I collect RSP contributions off my paycheck into Sunlife index funds, call them medium to low fee US, and EAFE indices.  Once a year I transfer a large amount to my self directed ETFs, where my selfdirect account provider pays me back the $25 Sunlife fee to pull out.  Just an option to consider, depending on your situation. 

[Retire-Canada]

If you are going to open a new account just move everything to Questrade. It's not very hard to setup and you can buy ETFs free which is nice. I can buy each month in quantities as low as 1 share or ~$30.

I hold a globally diversified set of Vanguard ETFs at Questrade and my combined MER is 0.14%.