# TD Mutual Funds Wait Times



## realist (Apr 8, 2011)

With TD there is a message that selling or transferring a MF within 60/90 days may incur a penalty. Does this apply to dividend reinvestments? I have the TD Dividend Income Fund and I want to transfer it to e-series funds. I have not purchased anything new in the last year, except for the reinvested dividends. Will I pay a fee? 
Thanks!


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## AltaRed (Jun 8, 2009)

There are generally no fees for 'early selling or transfers' within the same family of funds, e.g. TD to TD. So that is the short answer to your question. But just to complete that thought, the reason for 60/90 day selling/transfer fees is potentially 2 fold: 1) a fee imposed by the brokerage as compensation for the lack of a trailer fee being paid for the short time the funds are held, 2) a fee imposed by the asset manager, e.g. TD asset management to discourage short term trading of mutual funds. 

But to further answer your question, I think you mean distribution re-investments (they are not dividends as in stocks) but still not sure what you mean.... Do you want to transfer just the montly/quarterly/annual distributions into TD e-series or transfer the TD Dividend Income fund in total? If the former, just stop distribution re-investment taking cash instead and investing that cash into TD e-series. A distribution re-investment results in more units of the underlying TD Dividend Income fund and you would have to sell those units first to fund the e-series fund.


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## stardancer (Apr 26, 2009)

The wait time is from initial purchase, or from lump sum purchases, not from distributions. I have never been penalized when I have sold after a distribution.


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## realist (Apr 8, 2011)

Thanks!


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## OptsyEagle (Nov 29, 2009)

The actual answer is maybe. 

The actual reason for the fee was in response to the "market timing" scandals that rocked the industry in the early 2000s. You may recall that some hedge funds figured out that when the US stock market rallied a large amount(more then 1.5% in the day) the European markets and Asian markets, tended to rally the next day, since the Asian market was totally closed and the European market closed early, and may not have participated in the US rally. So these hedge funds would invest some $100 million or so in a money market fund with a fund family. Every time they saw the US stock market rally, they would switch the money into that fund family's European fund or Asian fund and almost all the time make a quick 1% to 2% and then switch it back to money market the next day. During the bear market of 2000 to 2003 when the US stock market declined by almost 50%, these guys earned positive returns in the 30% to 40% range.

The OSC looked into it and since the money manager of the equity funds would not have sufficient enough time to invest the money, from the hedge funds, into the stock market, before it got switched out of the equity fund. Therefore, they realized that all the gains these hedge funds were getting were coming from the dilution of returns to the longer term investors in the fund. Since they figured this out, they felt the fund company should have known this as well (and so do I) and therefore they breached their fudiciary responsibility to protect the other investors. Investors Group, CI, AGF and AIC all paid fines in the area of $50 million or so for this mis-conduct.

Since then a short term trading fee has been imposed by all fund companies and it definitely pertains to switches as well as sales. You should look into it. That being said, 2% on a few small dividends may not be all that material.


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## Westerncanada (Nov 11, 2013)

realist said:


> With TD there is a message that selling or transferring a MF within 60/90 days may incur a penalty. Does this apply to dividend reinvestments? I have the TD Dividend Income Fund and I want to transfer it to e-series funds. I have not purchased anything new in the last year, except for the reinvested dividends. Will I pay a fee?
> Thanks!


Great Move.. TD E-series are great fund with an instant 2% Gain just in MER's from traditional Mutual funds. 

Good Luck !


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## AltaRed (Jun 8, 2009)

Westerncanada said:


> Great Move.. TD E-series are great fund with an instant 2% Gain just in MER's from traditional Mutual funds.
> 
> Good Luck !


Not necessarily true on an individual fund basis. The difference in MERs does not necessarily translate into instant gains of the MER difference . Actively managed funds can add alpha sometimes albeit in the LONG run, the average of ALL funds statistically would result in a performance difference equal to the difference in MERs.


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## Westerncanada (Nov 11, 2013)

AltaRed said:


> Not necessarily true on an individual fund basis. The difference in MERs does not necessarily translate into instant gains of the MER difference . Actively managed funds can add alpha sometimes albeit in the LONG run, the average of ALL funds statistically would result in a performance difference equal to the difference in MERs.


I would say there is the potential and opportunity to.. i researched several TD Mutual Funds performance vs TD E - Series last ten years and dont believe anything beat the TD E Series S&P Index... again, you can argue the market had a banner year in 2013 that really did swing this number for the index overall.. 

a 2.5% MER is just too high for me to pay personally.


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## AltaRed (Jun 8, 2009)

Westerncanada said:


> a 2.5% MER is just too high for me to pay personally.


Yes, as it would be for me (and should be for most others) too. But it does not automatically translate to a 2% gain to go to the TD e-series as you originally stated. All of us should have an obligation to be factual for the novice/new reader/investor who comes to CMF to learn.


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## Westerncanada (Nov 11, 2013)

AltaRed said:


> Yes, as it would be for me (and should be for most others) too. But it does not automatically translate to a 2% gain to go to the TD e-series as you originally stated. All of us should have an obligation to be factual for the novice/new reader/investor who comes to CMF to learn.


That is a fair and valid point.. and i should have clarified that assuming both the Mutual Fund and E-series performed the same with respect to their return that the E - Series would have an advantage based on the lower MER.


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## lb71 (Apr 3, 2009)

FYI - I was on the phone today with TD regarding my mutual funds. I asked if the 60/90 day wait time applied to pre authorized purchase plans, and it did not. I thought he had it wrong, but based on the above I understand why it wouldn't. Good background OptsyEagle.


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## OptsyEagle (Nov 29, 2009)

The annoying result is all the OSC said to the mutual fund companies is that they needed to put in a deterrent to reduce the short term market timing behaviour of some investors so that it didn't hurt other investors. 

The problem we have is that all the different mutual fund companies responded in slightly different ways. Some have an automatic computer controlled 2% penalty, end of story. Others have a human that looks at the past behaviour and determines if a penalty should be rendered. I think Fidelity charges 2% in 30 days and 1% for 30-90 days. So it is impossible to know without talking to them.

I personally think 30 days is long enough to give the money manager time to invest the money and protect the existing investors and I doubt any fund company would charge the fee on a reinvested dividend since that is really just an accounting action not a physical trade. Also, it should be noted, that the money from these fees all go into the mutual fund itself and not to the fund company.


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## OptsyEagle (Nov 29, 2009)

To continue the history lesson for those interested, this scandal in Canada was recognized after the same scandal broke out in the United States. In the US the behaviour of the fund companies was significantly worse. They would actually allow these hedge funds to put in their orders after 4:00pm, for that trading day. They could put in orders as late as 6:30pm in some cases. 

Anyone that understands the stock market can see the huge advantage one would have by being able to respond and reposition your portfolio to information and news releases that come out after 4:00pm and have those actions happen as if they were executed before 4:00pm. This behaviour did not deserve fines, this behaviour deserved jail time, in my opinion.

Anyway, in Canada, our companies were just guilty of allowing the basic market timing strategies and did not allow trading after 4:00pm


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## OptsyEagle (Nov 29, 2009)

Lastly, I have always wondered about dollar cost averaging (DCA). Most of us know that when we buy a mutual fund monthly, that fluctuates in value up and down, the return we get on those invested dollars is higher then the return provided by the underlying fund.

Since the DCA money is in that same fund, the question arises "where did this extra return or money come from". When you look at it very, very closely, you will see that those DCA investors are provided a return higher then the fund is providing, by diluting the return of the investors that are staying fully invested.

Why does the industry allow one investor to gain on the back of another, in this DCA case? The first reason is I doubt anyone took the time to look into it, like I did, and that may be because of the second reason, it is not overly material to the fund or current investors or even the DCA investors for that matter. Investing $50 a month has a much smaller effect on a fund then moving $100 million dollars in and out of it, does.

In any event, the extra money gained from DCA is not magic. The extra money comes from the fund itself, but probably makes a difference on the 7th or 8th decimal place of most people's return. Just thought it was interesting, all the same.


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