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November-29-16

ETF Commissions Are History

When I first heard that National Bank Direct Brokerage (NBDB) was now offering commission-free trades on all Canadian ETFs, I was impressed. Questrade has been the fan favourite in this low-fee space for awhile now, but their commission-free deal only applied to ETF purchases (not sales).

After opening an account with NBDB and placing my initial ETF trades, I quickly realized I was still being charged commissions on a number of trades. I reviewed their website again, and noticed a little red star after one of their marketing pitches:

Source:  National Bank Direct Brokerage as of November 24, 2016

 

Turns out, you need to buy or sell at least 100 shares of an ETF in order to qualify for their commission-free ETF promotion. This is still a better deal than most of the big banks, but I couldn’t help feeling misled by their advertising.

Avoiding the $9.95 trading commission

As mentioned above, 100 shares of an ETF must be traded in order to qualify for zero commissions. ETFs with higher share prices will require a larger trade size to be eligible for zero commissions.  For example, you’ll need to buy or sell over $4,000 worth of the Vanguard U.S. Total Market Index ETF (VUN) in order to avoid the trading commission.  

I’ve included the approximate commission-free ETF dollar amounts in the chart below, to help you with your ETF choices.

Approximate Commission-Free Trading Amounts at NBDB

Asset Class Security Commisson-Free Amount
Canadian Bonds iShares Core High Quality Canadian Bond Index ETF (XQB) $2,122
Canadian Bonds Vanguard Canadian Aggregate Bond Index ETF (VAB) $2,618
Canadian Bonds BMO Aggregate Bond Index ETF (ZAG) $1,613
Canadian Stocks iShares Core S&P/TSX Capped Composite Index ETF (XIC) $2,345
Canadian Stocks Vanguard FTSE Canada All Cap Index ETF (VCN) 2,988
Canadian Stocks BMO S&P/TSX Capped Composite Index ETF (ZCN) 1,999
U.S. Stocks iShares Core S&P U.S. Total Market Index ETF (XUU) $2,190
U.S. Stocks Vanguard U.S. Total Market Index ETF (VUN) $4,081
U.S. Stocks BMO S&P 500 Index ETF (ZSP) $3,150
International Stocks iShares Core MSCI EAFE IMI Index ETF (XEF) $2,646
International Stocks Vanguard FTSE Developed All Cap ex North America Index ETF (VIU) $2,433
International Stocks BMO MSCI EAFE Index ETF (ZEA) $1,634
Emerging Markets Stocks iShares Core MSCI Emerging Markets IMI Index ETF (XEC) $2,357
Emerging Markets Stocks Vanguard FTSE Emerging Markets All Cap Index ETF (VEE) $3,045
Emerging Markets Stocks BMO MSCI Emerging Markets Index ETF (ZEM) $1,751
Global ex Canada Stocks Vanguard FTSE Global All Cap ex Canada Index ETF (VXC) $3,039
Global ex Canada Stocks iShares Core MSCI All Country World ex Canada Index ETF (XAW) 2,118

Sources: BMO ETFs, BlackRock Canada, Vanguard Canada as of October 31, 2016

Avoiding the annual administration fee

NBDB also charges $100 plus tax if you don’t invest at least $20,000 with them (so this should be the recommended minimum starting point for any investor).

How to Build an ETF Portfolio at National Bank Direct Brokerage

For those investors who are eager to set-up an ETF portfolio at NBDB, I’ve included a tutorial below that will show you how to get started. In the video you’ll see examples of commission-free ETF trades (as well as the other kind). To reduce the number of trades, consider swapping out VUN, XEF and XEC for the iShares Core MSCI All Country World ex Canada Index ETF (XAW) – this would have resulted in zero-commissions payable for the initial portfolio set-up.

 

By: Justin Bender | 2 comments
November-15-16

How to Build an ETF Portfolio at Scotia iTRADE

In the fifth installment of my beginner DIY investing series, we’ll learn how to implement an ETF portfolio at Scotia iTRADE. Scotia iTRADE is a relatively high-cost brokerage for a newbie investor with modest assets, so please carefully review the fees below before making your choice.

 

$9.99 trading commissions

In order to qualify for $9.99 trading commissions, you’ll need to have at least $50,000 of combined assets with Scotia iTRADE, or a minimum of $50,000 in other Scotia products (such as mortgages or lines of credit with Bank of Nova Scotia). If you’re starting out with a smaller amount, you’ll pay a whopping $24.99 per trade. If you’re in this situation, check out The Globe and Mail’s 17th annual online broker ratings for additional discount brokerage options.

Commission-free ETFs

Scotia iTRADE offers about 50 commission-free ETFs. Although this seems like an amazing deal, their current list largely excludes the cheapest plain-vanilla ETFs. There were two ETFs that made the grade though: 

Upon receiving my recent confirmation notices from Scotia iTRADE, I was pleasantly surprised to find that no trading commission had been charged on my purchase of XEC. Investors may want to also consider swapping out the Vanguard Canadian Aggregate Bond Index ETF (VAB) in my model portfolios for the commission-free XQB.  

Source:  Scotia iTRADE

 

Watch those cash balances

Similar to BMO InvestorLine, trading commissions are not accounted for on the day you place your trades (so your quoted cash balance details are slightly inflated). One possible solution to this issue is to subtract the total trading commissions that will be payable for the day prior to placing your final trade. 

Avoid the annual RRSP fee

If you have $25,000 or more of aggregate assets with Scotia iTRADE, they’ll waive their annual $100 RRSP fee. Other Scotia products that you hold are not included when meeting this threshold though (only Scotia iTRADE assets count).  Once again, if you have below this amount, you may want to look around for a brokerage with a lower account minimum.

U.S.-Friendly RRSP quarterly fees

Regardless of the size of your portfolio with Scotia iTRADE, they will still charge you $30 per quarter for a “U.S.-Friendly RRSP” account. Nearly all of the big bank brokerages have actual U.S. dollar RRSP accounts (and they don’t charge additional fees for the privilege of investing within them), so I would recommend looking around for another brokerage if you plan to hold US-listed ETFs at some point in the future.

For smaller accounts, use less ETFs

Although I’ve shown how to build a 5-ETF portfolio in my tutorial, you can get away with using just three ETFs to cut down on trading commissions. Instead of holding separate ETFs for US, international and emerging markets stocks, simply hold the iShares Core MSCI All Country World ex Canada Index ETF (XAW).  

Stay tuned next week when we’ll learn How to Build an ETF Portfolio at National Bank Direct Brokerage.

By: Justin Bender | 0 comments
November-08-16

How to Build an ETF Portfolio at RBC Investing

In the fourth installment of my beginner DIY investing series, we’ll learn how to implement an ETF portfolio at RBC Direct Investing.

 

$9.95 trading commissions

In 2014, RBC was the first of the big six banks to lower its standard trading commission to $9.95 per trade (others quickly followed suit).  Although $9.95 may not seem cheap in 2016, it’s still reasonable if you keep your trades to a minimum.

Avoid the quarterly maintenance fee

If you have combined assets across all accounts of $15,000 or more, RBC Direct Investing will waive their $25 quarterly maintenance fee.  Similar to TD Direct Investing, they will also waive their quarterly maintenance fee if you set-up a pre-authorized contribution of at least $100 per month ($300 per quarter).  

For smaller accounts, use less ETFs

Although I’ve shown how to build a 5-ETF portfolio in my tutorial, you can get away with using just three ETFs to cut down on trading commissions. Instead of holding separate ETFs for US, international and emerging markets stocks, simply hold the iShares Core MSCI All Country World ex Canada Index ETF (XAW)

Stay tuned next week when we’ll learn How to Build an ETF Portfolio at Scotia iTRADE.

By: Justin Bender | 0 comments
November-01-16

How to Build an ETF Portfolio at CIBC Investor’s Edge

In the third installment of my DIY investing series, I show newbie investors how to implement an ETF portfolio at CIBC Investor’s Edge. I’ve also included some additional comments below, which may be helpful if you’re still trying to decide which discount brokerage to go with.

 

Avoiding the annual RRSP administration fee

In order to avoid the $100 RRSP administration fee, you’ll need to maintain a balance of at least $25,000 (those with multiple household RRSPs with a combined total above $25,000 should speak with a CIBC representative to see if they would also be exempt from the fee).

No-fee RESP and TFSA accounts

CIBC Investor’s Edge is one of the few brokerages that offer no-fee Registered Education Savings Plan (RESPs) and no-fee Tax-Free Savings Accounts (TFSAs).  This is a nice feature, especially for new parents who are trying to save for their child’s education.  

$6.95 trading commissions

CIBC has the lowest trading commissions amongst the big five banks.  For those Canadians who already bank with CIBC, this may be a good enough reason to open an Investor’s Edge account with them. 

US-dollar RRSP accounts…coming soon

When I logged in to my account today, I received a notification that CIBC will begin offering US-dollar RRSP accounts in early 2017. This is great news for investors who use US-listed ETFs in their RRSP accounts in order to mitigate the tax drag from foreign withholding taxes. When these new accounts are released, you can be certain that I’ll be showing investors how to convert their Canadian dollars to US dollars in the most cost effective way possible.

For smaller accounts, use less ETFs

Although I’ve shown how to build a 5-ETF portfolio in my tutorial, you can get away with using just three ETFs to cut down on trading commissions. For additional model ETF portfolio ideas, please refer to a recent Globe and Mail article: The ABCs of building an RESP using ETFs.  

Stay tuned next week when we’ll learn How to Build an ETF Portfolio at RBC Direct Investing.

By: Justin Bender | 4 comments