Could really use some advice before I waste all my money away..
I had $10,000 in my TFSA until I went to BMO and asked them how I could make more money with my TFSA.. they said to invest in this:
I find the MER is quite high and I don't know if I'll make any money off of it.
I'm looking to save for retirement, I want to max out my TFSA then invest the rest in a RRSP, I have $1,500/month.
Should I open a Questrade account and just make a portfolio from some recommendations on this site?
I can't get a TD Bank E-series so please don't suggest that or ask why.
Any recommendations please?
Last edited by Jeremyhalifax88; 2012-09-11 at 06:52 PM.
I currently bank with BMO as well and I have my RRSP and TFSA through BMO Investorline. Very easy platform to use, the trades are expensive ($29.95) unless you have $50k in assets (then it's $9.95) and the customer service is great from my experiences. Not sure if you read any personal finance blogs, but Young & Thrifty has a write-up about Investorline on her blog...check it out.
Now, you don't say your age or your time horizon. It's also difficult to say whether depositing to your TFSA or RRSP would be more beneficial without knowing your current income, projected future earnings or what room you have in those accounts. I'm assuming $10k left for room in the TFSA.
Personally, if I had $10k in my TFSA and looking to invest, I'd start a couch potato portfolio using index funds, modifying the allocations to MY risk tolerance. The trading costs for ETF's at most brokerages would eat away your profits with a small portfolio. I have found that TD and RBC had the lowest MER's for the index funds I was looking to purchase.
Last edited by PF_Enthusiast; 2012-09-11 at 08:16 PM.
Reason: Change of wording
The 4 biggest holdings make up almost 65% of the fund: These 4 holdings should track the fund performance fairly closely.
BMO Dow Jones Canada Titans 60 ETF 24.5% MER 0.15%
BMO International Equity Index ETF 14.8% MER 0.46%
BMO US Equity Hedged CAD ETF 14.8% MER 0.23%
BMO Aggregate Bond Index ETF 10.0% MER 0.28%
The MER on the fund recommended is 1.77% or $177 per year. The commissions to buy these 4 funds would cost anywhere between $40 and $120, depending on your setup with the brokerage arm of the bank. So, even the ETF commissions + ETF MERs would be less than the mutual fund MER and after the 1st year your average annual costs (MER) will be somewhere around 0.3% (30 bucks) instead of $177.
Long story short - It would be more beneficial to buy the holdings rather than the fund.
Thanks pf! Well okay, how about I open a quest rate tfsa.. Wouldn't that make more sense?
Thanks PF for those links!
Originally Posted by PF_Enthusiast
So I should open up a questrade account and buy some index funds and go that route with a lot lower overall cost due to a lesser MER correct?
I don't have a Questrade account, so I can't answer your questions in that respect. Lots of folks here do though, and I haven't heard any terrible reviews. $4.95 trades I believe...that's much better than most brokerages. I currently pay $29.95 with Investorline, so the fees really add up. I always try to keep trading costs at less than .5%, but I've read other who have the 1% rule.
For example: I want to buy 50 shares of ABC which is $10 per share = $500 cost. I want to keep my trading cost at .5% or less, so $2.50 or less. Therefore, I wouldn't make that purchase unless I was buying $1000 worth, to keep costs low. You can really see how those $29 trades can really add up and take your hard earned cash.
Keep in mind this is for stocks and ETFs, not mutual funds/index funds. Funds have MERs and loads. If you're buying index funds, it's a no-load mutual fund, meaning there are no upfront or back-end fees when you're buying or selling. TD e-series have the lowest MERs of index funds, but you've mentioned you're unable to open a TDW account.
ETFs are better suited for somebody with a bit higher of a portfolio, at least $25k. Index funds are great if you're purchasing small amount monthly or rebalancing often.
Here's a few links I think should help clarify things: