# Best Brokerage for buy/hold ETF trading?



## dumbfoundead6666 (Jun 9, 2016)

I will soon be investing a sizeable sum of money ($500k+) in various ETFs, similar to the Couch Potato style.

I would rebalance my portfolio once a year and hold maybe 5-6 different ETFs at most.

My current top three picks are IB, Questtrade, TD Direct Investing.
I'm leaning towards IB for the low fees but I question if it really even matters for me if I'm going to be simply holding ETFs for a long term and rebalancing once a year...

What do you think is the best brokerage for a novice (but willing to learn!) trader like myself?


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## AltaRed (Jun 8, 2009)

If you are dealing with a mid 6 figure portfolio and you are maybe talking about 10-20 trades a year, $100-200 in trading fees is a 5th decimal point. Pure noise. Even if you did 50 trades a year.... $500 is still noise. 

Look for a discount brokerage which offers you the other things you really want (check both Rob Carricks G&M brokerage review and the recent Moneysense review of discount brokerages). IMNSHO, too many people look for least cost rather than best value..... to you!


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## fretwire (Apr 13, 2016)

Agreed with AltaRed. With the model you're talking about commissions will basically amount to a rounding error.

I'd go with convenience and try to avoid dealing with another financial institution. See what the institutions you're currently dealing with have available.

P.S. Terminology nitpick: if you're planning to buy 5-6 ETFs, hold for the long term and rebalance periodically you're an investor, not a trader. Good on ya.


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## gibor365 (Apr 1, 2011)

CIBC IE is the best.

see http://canadianmoneyforum.com/showthread.php/94570-CIBC-trade-ETFs-w-o-fees-June-8-July-13


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## LBCfan (Jan 13, 2011)

Amy of them shpuld work for ypur purposes


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## larry81 (Nov 22, 2010)

I would pick TD Direct Investing, its rock solid and will still be around when pass away


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## mordko (Jan 23, 2016)

6 ETFs, quarterly/monthly dividends, rebalancing, RRSP account, spousal RRSP account, TFSAs, marginal accounts... It all adds up. For buying and holding ETFs it makes sense to use brokerage which does not charge for buying ETFs.


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## humble_pie (Jun 7, 2009)

IB is not a low-cost broker in this context. This is a fairly large non-registered account that will be buying securities in significant multiples, probably multiples of 1000 shares.

at a penny a share, IB commissions easily add up to the $10 charged by the big bank-owned brokers. In addition IB has ECN fees. I'm not sure about their fees for data packs, they used to charge for those.

a drawback at questrade is that all non-registered accounts must be margin accounts. Questrade has no cash accounts other than registered accounts. 

in addition to the TD, there's also BMO. Both offer excellent service. Both have useful research & reference libraries, the big green's is probably more copious than the big blue though.

BMO this morning announced that it's driving down the MERs on some of its house family of ETFs to .10. Since the TD is rapidly ramping up its own suite of ETFs, one can imagine that the TD will soon follow the flow & will soon offer ultra low cost ETFs as well.

one advantage BMO has is shared only by royal bank. Both broker platforms permit easy, instant, online currency gambit trading. No other brokerage in canada can offer this. The TD comes close when some of its representatives agree to place the sell side of a gambit pair at web commission. But not all representatives will do this.


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## scorpion_ca (Nov 3, 2014)

As per MoneySense-2016, best overall brokerage is following -

Top bank-owned - Scotia iTrade and BMO Investorline

Top independent - Qtrade and Questrade.

Your best bet might be BMO or TD as they offer exclusive service for large accounts. But be firm when you go to a bank. They will try to convince you to buy their mutual funds from their advisor. Whoever you choose, make sure to negotiate and try to get lot of free trades at least 50-100. 

For 500k, I would not spend $10k per trade.


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## gibor365 (Apr 1, 2011)

btw, CIBC IE has now another promo, if you moved there 50K+ , they gonna give you something like $250 and 50 free trades.

Don't go to TD, they gonna kill you with FX rate


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## james4beach (Nov 15, 2012)

Maybe humble_pie can post here about the goodies you can get if you go to TD with a high net worth.

I encourage you to shop around and make sure the brokerage offers you something sweet for such a large amount of assets. When you have money like this, you can negotiate and get goodies.

For example, maybe you dangle the $1 million in front of Scotia iTrade and say, "I want life-long employee foreign exchange pricing... otherwise I'm going to your competitor".

It might be worth visiting one of the TD DI / Waterhouse offices in the big cities and negotiate this in person.

I would personally go to each of TD, etc and say the same thing. Can they give you employee FX rates? Meaning the much lower foreign exchange rates on USD/CAD. Normally with TD for example the foreign exchange fee is around 1.5%. For example the open-market USDCAD rate today is 1.2959 but TD quotes 1.2798 ... that's an implied fee of 1.2%

See which of these brokerages can do better than 1.2% FX fee.

And I strongly suggest a big bank brokerage. They're safer, honestly. Less chance of fraud, mismanagement, poor IT security practices, etc. This is because the big banks have well established management practices and security practices.


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## humble_pie (Jun 7, 2009)

gibor said:


> Don't go to TD, they gonna kill you with FX rate




this is gravely misleading. The cibc has a beneficial spot rate for CAD/USD conversions *only* in registered accounts. Nearly all brokers by now have made similar beneficial FX arrangements in registered accounts because the IIROC has been forcing these changes in recent years. But in registered accounts only.

in non-registered accounts - the type that this OP will have - the cibc charges FX fees that are among the highest in canada. When Canadian Capitalist called for a comparison a few years ago, only questrade FX charges were higher.

the way to escape FX fees forever is to learn how to gambit currencies. The OP might wish to learn this skill later on. I would imagine that, for now, he has his hands full.


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## humble_pie (Jun 7, 2009)

james4beach said:


> I encourage you to shop around and make sure the brokerage offers you something sweet for such a large amount of assets. When you have money like this, you can negotiate and get goodies.
> 
> I would personally go to each of TD, etc and say the same thing. Can they give you employee FX rates? ... that's an implied fee of 1.2%
> 
> See which of these brokerages can do better than 1.2% FX fee.




james4 not sure what you are talking about. In his first message the OP stated that this is a $500,000 account that will have something like 10 trades a year.

as accounts go these days, 500k is a mid-sized account. It will have conspicuously few trades. As you know, what brokers are looking for is trade activity, not account size.

brokers won't likely stand on their heads to attract an inactive mid-sized account. For 500k, brokers might offer a few hundred dollars in cash, wlll certainly offer a few hundred free trades, which typically must be used up in the first 60 or 90 days.

since the OP is establishing the account with 5 or 6 ETF purchases, a broker offer of 200 free trades that must be used within 60 days is meaningless.

i'm sure the brokers are fully aware that their hundreds of 60-day free trade offers are meaningless. Are, in fact, nothing more than hype from their marketing departments.

incidentally, why should an investor bother negotiating for an employee FX rate of 1.20? that rate is already punitive. All an investor has to do is learn how to gambit trade. From that day forward, he will miraculously escape all FX fees, for the rest of his life.

.


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## Beaver101 (Nov 14, 2011)

gibor said:


> *btw, CIBC IE has now another promo, if you moved there 50K+ , they gonna give you something like $250 and 50 free trades*.
> 
> Don't go to TD, they gonna kill you with FX rate


 ... where do you see that? Or are you just a preferred client getting this promotion also?


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## gibor365 (Apr 1, 2011)

Beaver101 said:


> ... where do you see that? Or are you just a preferred client getting this promotion also?


I got this ad when I logged to my account couple of days ago, so not sure if it's only for pref clients... however, if you call them , very likely they will make you same offer...


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## gibor365 (Apr 1, 2011)

> in non-registered accounts - the type that this OP will have -


 how do you know that OP will have Cash account?! Crystal ball?!


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## Beaver101 (Nov 14, 2011)

gibor said:


> I got this ad when I logged to my account couple of days ago, so not sure if it's only for pref clients... however, if you call them , very likely they will make you same offer...


 ... looks like it's targeted clients, thanks for confirming.


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## james4beach (Nov 15, 2012)

humble_pie said:


> james4 not sure what you are talking about. In his first message the OP stated that this is a $500,000 account that will have something like 10 trades a year.
> 
> as accounts go these days, 500k is a mid-sized account. It will have conspicuously few trades.


OK, that's a good point. I missed the 500 part and thought he was taking the 1 mln to TD.


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## humble_pie (Jun 7, 2009)

gibor said:


> how do you know that OP will have Cash account?! Crystal ball?!


i didn't say cash account, i said non-registered account.

read the OP's original posts, gibor. Pay attention to all of his circumstances. His age. His working history. How he received the money. These facts should tell you everything.


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## gibor365 (Apr 1, 2011)

humble_pie said:


> i didn't say cash account, i said non-registered account.
> 
> read the OP's original posts, gibor. Pay attention to all of his circumstances. His age. His working history. How he received the money. These facts should tell you everything.


shy to ask .... what other non-registered account types, except "cash" account?!

OP's original post


> I will soon be investing a sizeable sum of money ($500k+) in various ETFs, similar to the Couch Potato style.
> 
> I would rebalance my portfolio once a year and hold maybe 5-6 different ETFs at most.
> 
> ...


 doesn't say anything about his age, working history and account types


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## humble_pie (Jun 7, 2009)

gibor said:


> OP's original post doesn't say anything about his age, working history and account types



read his original post in his original thread. You'll see his entire circumstances in a glance. If you are able.

ps in non-registered, there are both cash & margin accounts


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## gibor365 (Apr 1, 2011)

> read his original post in his original thread


 oic  , before you said ONLY about original post.... maybe u r doing search on all posts of all threads  .... to bored ?!

In any case OP should have TFSA and RRSP room ...



> ps in non-registered, there are both cash & margin accounts


 Margin?! he-he, this is exactly what OP need :biggrin:


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## mordko (Jan 23, 2016)

Having a "margin" account does not mean you have to borrow. It's neither here no there if you don't want to use the facility.


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## Nerd Investor (Nov 3, 2015)

For this style of investing (a few positions with relatively little turnover) as others have pointed out it's going to be almost irrelevant cost-wise who you choose. Likewise, if you're doing couch potato style ETF investing, any research bells and whistles probably won't matter much to you either. If you plan to hold US ETFs, make sure your brokerage has $US RRSPs and TFSAs available. Other than that, it shouldn't matter much. For simplicity, you may just want to choose the broker associated with where you bank (assuming your with one of the big banks).


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## humble_pie (Jun 7, 2009)

mordko said:


> Having a "margin" account does not mean you have to borrow. It's neither here no there if you don't want to use the facility.



but all questrade non-registered accounts are margin accounts

as a questrade client you should know that


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## mordko (Jan 23, 2016)

humble_pie said:


> but all questrade non-registered accounts are margin accounts
> 
> as a questrade client you should know that


Yes, and I don't use the borrowing facility. So I just don't see it as a disadvantage.


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## Eclectic12 (Oct 20, 2010)

gibor said:


> oic  , before you said ONLY about original post.... maybe u r doing search on all posts of all threads  .... to bored ?!


The OP posted a thread a week ago that ... 


> ... I am 24 years old.
> I have recently been blessed with a roughly CAD$1 million windfall.
> My income is $0 right now, so my tax bracket is the very lowest.


http://canadianmoneyforum.com/showthread.php/94234-1m-blessing-Now-what

The details aren't included in this thread but did stick in my mind ... no searches required.




gibor said:


> In any case OP should have TFSA and RRSP room ...


The OP knows for sure but when the details from the other thread are added and the types of questions being asked are factored in ... it sounds like what may be available is a drop in the bucket.


The age part means a possible starting point for the TFSA is $41K of contribution room. The questions about investing, brokers & planners over a couple of threads such as "Financial Advisor or Financial Planner suggest that it is not likely growth within the TFSA has added much contribution room (another example, http://canadianmoneyforum.com/showthread.php/94314-Financial-Advisor-vs-Financial-Planner).

The "windfall" part if it is a gift, may mean that no RRSP room was granted. The "no income right now" (and age) suggests that there may not be much RRSP contribution room available from other income sources.



Cheers


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## Eclectic12 (Oct 20, 2010)

mordko said:


> Yes, and I don't use the borrowing facility. So I just don't see it as a disadvantage.


In the OP's case, there is likely no need.

I seem to recall that less fortunate types complaining in another thread that due to a timing mix up, the combined cash/margin Questrade account resulted in unexpected interest charges. It was only one post so most seem to stay on top of it.


Cheers


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## dumbfoundead6666 (Jun 9, 2016)

Eclectic12 said:


> The OP posted a thread a week ago that ...
> 
> http://canadianmoneyforum.com/showthread.php/94234-1m-blessing-Now-what
> 
> ...


I have put almost no money (<$1000) in my TFSA/RRSP, so yes, I have ample contribution room! haha


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## dumbfoundead6666 (Jun 9, 2016)

Nerd Investor said:


> For this style of investing (a few positions with relatively little turnover) as others have pointed out it's going to be almost irrelevant cost-wise who you choose. Likewise, if you're doing couch potato style ETF investing, any research bells and whistles probably won't matter much to you either. If you plan to hold US ETFs, make sure your brokerage has $US RRSPs and TFSAs available. Other than that, it shouldn't matter much. For simplicity, you may just want to choose the broker associated with where you bank (assuming your with one of the big banks).


Thanks to everyone in this thread! 
I am now considering using one of the banks that I use for my personal banking. 
Do any of the big 5 offer free ETF trades?


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## dumbfoundead6666 (Jun 9, 2016)

humble_pie said:


> this is gravely misleading. The cibc has a beneficial spot rate for CAD/USD conversions *only* in registered accounts. Nearly all brokers by now have made similar beneficial FX arrangements in registered accounts because the IIROC has been forcing these changes in recent years. But in registered accounts only.
> 
> in non-registered accounts - the type that this OP will have - the cibc charges FX fees that are among the highest in canada. When Canadian Capitalist called for a comparison a few years ago, only questrade FX charges were higher.
> 
> the way to escape FX fees forever is to learn how to gambit currencies. The OP might wish to learn this skill later on. I would imagine that, for now, he has his hands full.


Hmmmm you're right, I will look into this 'norberts gambit' stuff...


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## Eclectic12 (Oct 20, 2010)

dumbfoundead6666 said:


> I have put almost no money (<$1000) in my TFSA/RRSP, so yes, I have ample contribution room! haha


I suspect you mean you've got a fair amount of contribution room available to you. In particular, the TFSA contribution room is probably in the 90% range of what has been granted so far (a guess on my part).

The "drop in the bucket" comment was to indicate that while this room is available, when compared to $500K or $1 million ... the percentages are likely to swing the other way. Using the $500K with the TFSA $41K to illustrate, that's something over 8% that can be Canadian tax free. A good number where it is in your best interest to use it but overall, not a high one.

In comparison, for some of my co-workers - the annual $5.5K TFSA contribution allotment represents more like 60% of what they are saving total.


The effectiveness of RRSP contributions is murky. With no income, the benefit would be tax deferred growth but with no/low income at withdrawal, it may be better to focus on taxable eligible dividends. If these are one's only source of income, one can collect something like $50K before income taxes start being applied. The RRSP contribution room may end up being of better use when one has a higher income.


Cheers


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## gibor365 (Apr 1, 2011)

dumbfoundead6666 said:


> Thanks to everyone in this thread!
> I am now considering using one of the banks that I use for my personal banking.
> Do any of the big 5 offer free ETF trades?


CIBC IE now until beginning of July offers free ETFs trades. Also , if you move your money there, you will get a lot of free trades (call them and negotiate)


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## gibor365 (Apr 1, 2011)

> I have ample contribution room! haha


 so as I assumed, OP has contribution room and cheap FX rates would be important for him .... and in future those rooms will be growing up ...


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## AltaRed (Jun 8, 2009)

gibor said:


> CIBC IE now until beginning of July offers free ETFs trades. Also , if you move your money there, you will get a lot of free trades (call them and negotiate)


Scotia iTrade has offered "some" commission free ETFs for quite some time (years). It's a select group though and never should influence a purchase. I asseert those offers of 50/100/150 free trades (in a quarter) are really not worth much. Unless someone is truly a trader, an investor might (at most) use about 20 of those free trades in the space of 90 days. Worth $200. Much better in my opinion to get a cash bonus deal which some brokerages offer from time to time, BMO IL in particular.


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## gibor365 (Apr 1, 2011)

AltaRed said:


> Scotia iTrade has offered "some" commission free ETFs for quite some time (years). It's a select group though and never should influence a purchase. I asseert those offers of 50/100/150 free trades (in a quarter) are really not worth much. Unless someone is truly a trader, an investor might (at most) use about 20 of those free trades in the space of 90 days. Worth $200. Much better in my opinion to get a cash bonus deal which some brokerages offer from time to time, BMO IL in particular.


Just to clarify  CIBC IE doesn't have any permanent free ETFs trading.... but last year and now, they have 1.5-2 months free ETFs trading, on practically any CAD or USD ETF on the market.
I agree that 50 free trades in quarter doesn't worth much (I personally used maybe 30 of them), even though you may average down or up, every week 

CIBC IE together with free trades gives also $250-300 bonus + covers TRO fees


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## dumbfoundead6666 (Jun 9, 2016)

Eclectic12 said:


> I suspect you mean you've got a fair amount of contribution room available to you. In particular, the TFSA contribution room is probably in the 90% range of what has been granted so far (a guess on my part).
> 
> The "drop in the bucket" comment was to indicate that while this room is available, when compared to $500K or $1 million ... the percentages are likely to swing the other way. Using the $500K with the TFSA $41K to illustrate, that's something over 8% that can be Canadian tax free. A good number where it is in your best interest to use it but overall, not a high one.
> 
> ...


Are you suggesting that I leave my RRSP/TFSA accounts empty for now and instead, use the eligible dividend tax benefits as my income will most likely only be around $30k in dividends? And then in the future, when I have a job, I can start saving chunks of my salary in the large TFSA/RRSP contribution room I would have amassed by then (roughly 5 years from now)? 
And if I understand correctly, this would be to drop my taxable income for the years when I am working, so that i fall in a lower tax bracket, and thus a lower tax rate?


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## dumbfoundead6666 (Jun 9, 2016)

gibor said:


> so as I assumed, OP has contribution room and cheap FX rates would be important for him .... and in future those rooms will be growing up ...


Which of the big 5 do you recommend for favourable FX rates? Or will it depend on whoever gives me the best deal after I negotiate with them?


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## gibor365 (Apr 1, 2011)

dumbfoundead6666 said:


> Which of the big 5 do you recommend for favourable FX rates? Or will it depend on whoever gives me the best deal after I negotiate with them?


CIBC Investor Edge ... and yes, you should negotiate with them for amount of "gift" cash and free trades


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## mrPPincer (Nov 21, 2011)

gibor said:


> CIBC Investor Edge ... and yes, you should negotiate with them for amount of "gift" cash and free trades


When I moved from TDDI to CIBC IE, I phoned in first, and they said the free trades and free cash for moving over were always available if asked for, whether advertised or not; I'd guess that it's safe to assume the same for the other major players too.

But it is important that you do the negotiation or you might not get anything .

eg of an added negotiated perk (on top of the cash/free trades that shoud be asked for), when I moved from TD I had at the time a small amount in the td tfsa.

I knew the trades I wanted to do and asked for only a bonus of only 10 free trades in the TFSA, which was not a standard perk for the small transfer.
There was no problem with it, they agreed immediately.

I got (if I remember correctly) $200 and a bunch of free trades in my cash acct., $100 and a bunch of free trades in my RRIF, and the negotiated 10 free trades in my TFSA.

That said, if I hadn't phoned in prior, I would have got nothing.

(Same goes for any of the competitors I would assume).
___

PS. It could be a completely different negotiation for a brand new account that is not a transfer from a competing brokerage, let us know how it works out for you if you would, thanks, and good luck


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## Eclectic12 (Oct 20, 2010)

gibor said:


> dumbfoundead6666 said:
> 
> 
> > I have put almost no money (<$1000) in my TFSA/RRSP, so yes, I have ample contribution room! haha
> ...


Agree that there will be room ... it is not clear how significant it is.

I expect the RRSP contribution room will be the smallest as it requires a filed tax return with earned income (gifts, dividends, among other types of income will not earn one RRSP contribution room).


TFSA contribution room is granted mainly by being 18+ as a Canadian tax resident (already estimated at $41k).


Hopefully the OP is aware that these two contributions rooms are granted differently and are two different things.


For 2015, to earn the maximum RRSP contribution room of $24,930, an earned income of $135K (assuming no reduction factors) is needed. 

For fun, let's assume the OP started filing tax returns with earned income at age of fourteen to make the maximum RRSP contribution room. Over ten years, the earned income total of $1.3 million is needed to earn RRSP contribution room of $234,940.

So yes ... the TFSA at $41K plus RRSP contribution room is going to be significant at a total of $275K. It is however, even in the best case - not going to absorb the $500K. 


Real life is likely to have a lower total between the two types of registered accounts.


Cheers


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## mrPPincer (Nov 21, 2011)

> Real life is likely to have a lower total between the two types of registered accounts.


^totally agree, yet I'm in a similar scenario, with the bulk of my savings in non-reg, and the lesser amount in reg. accounts, and I'm very happy with CIBC IE as my primary discount brokerage.
____

forgot to mention, the free cash in my previous post was on top of the the transfer fees from TDDI; CIBC covered those as well, as do the other brokerages, if it is negotiated, (important to not forget that).


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## Eclectic12 (Oct 20, 2010)

dumbfoundead6666 said:


> Are you suggesting that I leave my RRSP/TFSA accounts empty for now and instead, use the eligible dividend tax benefits as my income will most likely only be around $30k in dividends?


No ... use the TFSA now. The only downside to using it is that the US does not exempt it so that US dividends will be charged the 15% US taxes. From a Canadian tax perspective, everything earned will be tax free. Any withdrawals will also be tax free. 

The only downside to using the TFSA is that if you lose money on your investments, that's the end of the story. If you lose money in a taxable account, you can store the capital losses up to offset future capital gains.


The RRSP, on the other hand is tax deferred. You get to deduct the contributions against income but from your post, you don't have a lot of income. This means little or no refund. Then when you withdraw in the future ... not only is the withdrawal going to added to your income, there is likely to be investment income. If you withdraw when employed after getting the degree, there's that employment income as well. If you withdraw in retirement, without planning ahead, there may be a retirement plan income plus CPP etc.

I am thinking that you might do better to let the income (investment or employment) build up before contributing to the RRSP. 

As I say, the RRSP deduction won't be needed until something like $50K in dividend income where your income/expenses are low now. Saving the RRSP contribution room for when you are employed likely gives you more chance of making sure the rates work in your favour (plus possibly better cash flow when employed).

The flip side is that skipping the RRSP contributions means the assets in the RRSP will be in growing tax deferred for less time but I'm not sure that's critical to you.


Or you could choose to go middle of the road, put a bit into the RRSP but save most of the contribution room for future employment. Or you could plan to retire early, not start any retirement income so that you can withdraw at rates controlled by your plan.


Bottom line is that in your situation with a low income ... it is likely a good idea to think through the RRSP plan before diving in.


Cheers


*PS*

Another reason to use the TFSA is that you will have more room granted just for being alive, over 18 and a Canadian tax resident. Over time, more and more of the windfall can be made tax free.


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## humble_pie (Jun 7, 2009)

.

lol why would dumbfoundead listen to the 2 hard-core cibc advertisers on here? they have no one's interests at heart except their own extravagant claims. Are they possibly being paid for the recruits they manage to drag in to cibc? if so, the codes of conduct embodied in the various provincial securities acts require this pair of naughty bandits to disclose their compensation . :biggrin:

most of dumbfoundead's million dollar windfall is going to end up in non-registered accounts, for the simple reason that he has so little available room in registered. As previously established, the cibc has some of the harshes FX rates in all of canada for non-registered accounts.

james4beach is right when he suggests visiting the broker candidates on a short list to see what cash & what free trades each might offer as incentives. Cash will be better than free trades, though, since in a classic couch potato only a few trades are really necessary to set it up.

however james4 is not quite right when he says one can negotiate lower FX rates on a permanent basis. FX fees are one of the last remaining unregulated wide-open-skies profitable frontiers for all canadian brokers & they are not likely to surrender one iota.

better that dumbfounded should patronize an excellent low-rate exchange house such as Knightsbridge, if he wishes to commence with a largish amount of US dollars, for example $50,000 to $100,000 or more. Several cmf forum members have obtained FX rates from Knightsbridge that were only slightly above spot. These were for larger amounts of money, as mentioned.

if less than $50k will be bound for US securities at first, dumbfounded could busy himself initially with setting up the canadian dollar portions of the account while learning how to carry out gambit trades. When ready, he could arbitrage (gambit) a smaller amount of CAD into USD & begin using this to purchase USD securities.

lastly, Eclectic has an excellent suggestion when he says set up a TFSA on a priority basis. Even if it's only a HISA account, the idea would be to contribute the maximum in canadian dollars right now. Also to keep topping up that account each year, as each new annual contribution window opens on january 1st. Tax-free accounts are one of life's few win/win/win situations, so they should be attended to as soon as possible.


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## mrPPincer (Nov 21, 2011)

Eclectic12 said:


> No ... use the TFSA now. The only downside to using it is that the US does not exempt it so that US dividends will be charged the 15% US taxes. From a Canadian tax perspective, everything earned will be tax free. Any withdrawals will also be tax free.
> 
> The only downside to using the TFSA is that if you lose money on your investments, that's the end of the story. If you lose money in a taxable account, you can store the capital losses up to offset future capital gains.
> 
> ...


^+1, very solid advice imho


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## Spudd (Oct 11, 2011)

Nowadays I don't see a lot of point in even worrying about buying funds on the US side. A fund like VUN has quite a low MER and it saves all the trouble of converting currency, tracking ACB's in foreign currency, US estate tax issues. I used to buy VTI but a year or 2 ago I switched to VUN and have been quite happy with it. 

Only if you're holding a US equity fund in an RRSP does it really make sense to buy in USD, IMO.


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## james4beach (Nov 15, 2012)

humble_pie said:


> however james4 is not quite right when he says one can negotiate lower FX rates on a permanent basis. FX fees are one of the last remaining unregulated wide-open-skies profitable frontiers for all canadian brokers & they are not likely to surrender one iota.


Fair enough. That was wishful thinking on my part... so they may give you some kind of cash incentive, but perhaps no FX wiggle room.



Spudd said:


> Nowadays I don't see a lot of point in even worrying about buying funds on the US side.


I agree. Unless you have some very specific US-listed things you want to buy, just buy the Canadian-traded ones and don't even worry about currency conversion. ZSP for example is an S&P 500 ETF that already has over $2 billion in assets. Trades on the TSX in Canadian dollars, MER is 0.11% which is phenomenal.

Trades in CAD$ means, by the way, that it still has all the US exposure inside, but the price that's reflected is always the CAD equivalent. You don't lose anything by holding ZSP priced in CAD.

Keeping your ETFs domiciled in Canada and trading on the TSX is probably an advantage. For one, there is this horrible thing in the US called estate taxes. If you hold a lot in US-based investments, even as a foreigner, you may be subjected to some very rough taxation if you were to die & pass on your assets. And in general, holding a US domiciled security exposes you to any crazy tax laws they come up with.

Holding a Canadian domiciled one (like ZSP, XUS, or VUN) somewhat insulates you from changes to US laws, and keeps the issues domestic. For the same reason, I prefer Canadian domiciled gold bullion ETFs.

For "US stock" exposure, my favourite is ZSP.


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## dumbfoundead6666 (Jun 9, 2016)

Eclectic12 said:


> Agree that there will be room ... it is not clear how significant it is.
> 
> I expect the RRSP contribution room will be the smallest as it requires a filed tax return with earned income (gifts, dividends, among other types of income will not earn one RRSP contribution room).
> 
> ...


Wow! Thank you for that explanation. I did not know that the RRSP contribution room accumulates according to your income level. For my RRSP, I probably have very low contribution room available... 
For my TFSA, I have the entire thing available (never had a TFSA account)


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## dumbfoundead6666 (Jun 9, 2016)

james4beach said:


> Fair enough. That was wishful thinking on my part... so they may give you some kind of cash incentive, but perhaps no FX wiggle room.
> 
> 
> 
> ...


Hmmm... I am having a hard time understanding how this works:
Suppose I owned CAD$100,000 of ZSP and now the Canadian dollar fell to CAD$1.40/USD$1.. How would this impact my portfolio?


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## Spudd (Oct 11, 2011)

dumbfoundead6666 said:


> Hmmm... I am having a hard time understanding how this works:
> Suppose I owned CAD$100,000 of ZSP and now the Canadian dollar fell to CAD$1.40/USD$1.. How would this impact my portfolio?


Let's say you bought the 100k of ZSP while 1 CAD = 1 USD. Then the Canadian dollar fell so $1.40 CAD = $1 USD. But magically the US stock market did not change at all. Your portfolio would now be worth 140k CAD. 

Of course in real life, the stock market fluctuates and so does the currency, so the end result is a combination of both factors.


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## humble_pie (Jun 7, 2009)

.
investment accounts that are built to drive all USD transactions back into CAD the instant they occur - for example cibc registered accounts - are perpetrating a disservice to most canadian investors imho.

the sole reason most investors possess USD securities in the first place is to benefit from continuous exposure to foreign currencies & foreign economies. In other words, they want & need at least one permanent focus outside canada, in order to balance their investment allocations.

index investors require USD dividends & US capital gains to remain in USD, so that their USD holdings can grow effortlessly, efficiently & seamlessly, alongside their canadian holdings & in proper proportion in their global allocation plans.

to abort all USD transactions by forcing them into canadian dollars as of the moment they occur is a regression. 99.9% of investors do not have the time or will not take the trouble to convert each & every piddling little transaction back into USD. Unfortunately they will lose the very diversification & safety that they were seeking in the first place.

over the past 6 years, investors who signed up for the kind of regressive investment accounts that force instant conversion of USD back into CAD have lost significant amounts of money. The US dollar has mega-appreciated during these recent years. Alas, such investors have forfeited some or much of this mega-appreciation.

imho it's a distraction aimed at naiive investors, to pretend that converting all transactions into CAD at spot rates is always beneficial. It's an advertising prank that cheats index investors out of some of the currency & sovereign nation diversification they had planned to gain.

.


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## dumbfoundead6666 (Jun 9, 2016)

humble_pie said:


> .
> investment accounts that are built to drive all USD transactions back into CAD the instant they occur - for example cibc registered accounts - are perpetrating a disservice to most canadian investors imho.
> 
> the sole reason most investors possess USD securities in the first place is to benefit from continuous exposure to foreign currencies & foreign economies. In other words, they want & need at least one permanent focus outside canada, in order to balance their investment allocations.
> ...



Wow, is this the same with BMO and TD investment accounts, or only CIBC?


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## mrPPincer (Nov 21, 2011)

dumbfoundead6666 said:


> Wow, is this the same with BMO and TD investment accounts, or only CIBC?


it's gobbledeegook BS

the only reason I saw this trash BS post of pie's is because you quoted her.

(I have her on ignore right now)

CIBC currently (and as long as I've been with them) lets you trade cross-currency USD-CAD in registered accounts *free* of FX fees.

Also the dividends in US currency don't get dinged.

The quote of humble_pie above seems to suggest that this is somehow a bad thing, which is absolutely absurd.

It's the very best deal you can get in that regard, amongst all the Canadian brokerages, in fact some of the recent cross-currency trades I've done in registered accounts have been in my favour as opposed to bank of canada closing rate, in other words, CIBC is giving me free money sometimes when I trade cross-currency in registered accounts.

Compare this to the calculations I've done (which can be found in the CMF archives as well as in Canadian Capitalist's blog where he used my real numbers) where the greedy green thieving machine (TD) was taking more than 3% by double-converting USD dividends.

That's why I left TDDI and went to CIBC IE, and I have absolutely no regrets.

(plus, they ony charge 6.95 per trade, not 9.99 as the greedy green thieving machine does).


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## christinad (Apr 30, 2013)

humble_pie said:


> .
> investment accounts that are built to drive all USD transactions back into CAD the instant they occur - for example cibc registered accounts - are perpetrating a disservice to most canadian investors imho.
> 
> the sole reason most investors possess USD securities in the first place is to benefit from continuous exposure to foreign currencies & foreign economies. In other words, they want & need at least one permanent focus outside canada, in order to balance their investment allocations.
> ...


So am i some sort of inferior investor because i choose to hold canadian us etfs like vun and vfv? Frankly i like that it removes a level of decision making - deciding when to convert us to canadian. It seems to me that introduces more risk. Please note i am not defending cibc - i find their interface clunky.

. I would open tfsas at different brokerages to get an idea what they are like. I don't believe they do a hard credit check and the big banks don't have a minimum for tfsas.


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## DavidW (May 27, 2016)

humble_pie said:


> .
> investment accounts that are built to drive all USD transactions back into CAD the instant they occur - for example cibc registered accounts - are perpetrating a disservice to most canadian investors imho.
> 
> the sole reason most investors possess USD securities in the first place is to benefit from continuous exposure to foreign currencies & foreign economies. In other words, they want & need at least one permanent focus outside canada, in order to balance their investment allocations.
> ...


I'm not sure how the ETFs fared during the period of strengthening of the USD versus the CAD you refer to, I have noticed that there is some correlation of Canadian equities price direction and the trend of FX rates. It is not always simultaneous or linear though. 'All prices are artifacts of prevailing system intent' still applies.

Having the CAD spot values for USD securities in a registered account may not be necessary. I do like seeing the US values for US exchange traded securities, and even in a registered account, also seeing the CAD values would help investors make 'value' comparisons of US exchange listed securities. A person doesn't need a 'price' to obtain benefits provided by holding foreign securities. In a RRSP what currency is used to measure value doesn't matter as much - if the setup is detrimental to investor trust I consider it a disservice. If I saw only CAD values for USD securities I could work with it but wouldn't be as happy as if I also saw the underlying exchange value, maybe a toggle for displayed currencies.

What isn't helpful to an investor is having a non-registered margin account with an average cost in USD that becomes less meaningful over time as the currency fluctuates - and I still think tying to the average cost to margin to create bigger selloffs is stealing. 

For non registered accounts Canadian investors need to manage the USD account in CAD for CRA, and they likely want to manage it also for USD value. Seeing the CAD spot values can be useful as an aide in deciding what to sell with consideration to the superficial loss rule. Besides that rule, it is "necessary" to have the CAD spot value to even know if you are in a capital gain or loss position due to the currency fluctuation over time as the CRA requires reporting acquisitions and dispositions in CAD dollars, of course this also requires you know your ACB in CAD. Having the acquisition and disposition confirmations remain in USD is probably ok as I record my trades on the days I make them, the Bank of Canada has made looking up old FX rates more difficult though so including the FX rate on the confirmation could still be helpful. It is still a USD account where securities use US dollars on the exchange, so I like the cash balance in US dollars, and where Canadian investors are required to map to CAD by CRA. When using the user interface I would like to see the CAD value with the USD value - a toggle for the displayed currency would make me happy. 

A setup which stored the average cost, accounting for currency fluctuations over time, without it tied to margin, allowing me to easily manage in either USD or CAD would be very nice.

And your right the trading algorithms comprising 82.6754% of volume front running each other and everyone else and not holding anything until the following day's open probably don't consider currency fluctuation although I'm not sure they use a broker user interface - they do provide liquidity though which I find useful.


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## humble_pie (Jun 7, 2009)

dumbfoundead6666 said:


> Wow, is this the same with BMO and TD investment accounts, or only CIBC?




dumbfounddead, you say you wish to find a suitable broker. Some cmffers have offered very helpful suggestions.

1) altaRed wisely says don't fret over a couple of dollars per commission, since the indexed account(s) you are planning will have few commissions. In addition your future account itself will be large, you say. I believe altaRed mentioned that your concern should be overall quality of service as well as adequacy of research resources. Me i think these are good suggestions.

2) james4 suggests drawing up a short list of suitable brokers & seeing what kind of benefits & perks each one will offer you. The same interview(s) will also serve to explore other aspects of each brokerage. These are good suggestions ...

3) you have mentioned yourself that convenience of banking connection would be a significant criterion for you. Also a good suggestion ...

4) there is no need to dwell on RRSP policies at the present moment since - by virtue of young age plus no plans to earn RRSP eligible income in the near future - you will not have a significant RRSP investment account for several more years.

in general, though, you might take note of the fact that many investors maintain US-heavy RRSP accounts, since the most favourable US taxation consequences belong to these accounts. And you might take note of the fact that, to benefit fully from foreign investment diversification, an RRSP investment account should remain in USD at all times, should not be converting any of its parts back into CAD at any time.

right now canadian brokers are in a state of flux with respect to USD RRSPs. Many brokers have already developed dual currency RRSP accounts. More & more brokers are joining this flow. Monocurrency RRSP brokers are now in the minority. The IIROC has required them to mitigate their terms of currency conversion since, in the past, brokers used to charge harsh & punitive FX fees on RRSP & RRIF currency conversions. Those bad old days are now largely over, thanks to the IIROC.

all of the above has been fully & calmly discussed in recent threads. There is no need for any cmf forum member to post hysterics over this issue. Parties who post out-of-control temper tantrums should be ignored, imho.

5) a registered account exception for you right now would be a TFSA. CMF members such as Eclectic & others have urged you to set up a TFSA as soon as possible, contributing the maximum amount you can according to your age & province of residence.

this is a first-rate suggestion. You don't even need to plan anything. You can open a simple HISA type TFSA at one of the online financial institutions. There are many threads in cmf forum which continuously monitor & evaluate these online establishments.

just make sure that a) your new TFSA account is insured by the CDIC; & b) the institution does *not* impose a transfer-out fee. This means that, if & when you do get around to changing your TFSA plan, you will easily be able to transfer the actual TFSA account to another institution without having to withdraw or collapse it.

best wishes for success with everything, including the ambitious plans for further studies!

.


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## christinad (Apr 30, 2013)

Dumbfoundead

The only way you are going to get a good exchange rate is to do norbert's gambit and i'm not sure as a newbie that is something you want to do. I would do what is right for you and if that means starting off with canadian listed us etfs don't feel bad about it. I know i have received great returns with my canadian listed us etfs and i appreciate the convenience they provide. I personally like the new td interface too. You can always move to us liisted etfs once you are comfortable.


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## christinad (Apr 30, 2013)

Here are 2 resources for you:

http://www.moneysense.ca/etfs/ask-the-spud-when-should-i-use-us-listed-etfs/

http://canadiancouchpotato.com

Don Bortolotti is an well respected etf expert


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## mrPPincer (Nov 21, 2011)

christinad said:


> Dumbfoundead
> *
> The only way you are going to get a good exchange rate is to do norbert's gambit* and i'm not sure as a newbie that is something you want to do. I would do what is right for you and if that means starting off with canadian listed us etfs don't feel bad about it. I know i have received great returns with my canadian listed us etfs and i appreciate the convenience they provide. I personally like the new td interface too. You can always move to us liisted etfs once you are comfortable.


christinad, this is true only if you're *only* talking about the non-registered portion.

For the registered portion, as I mentioned up-thread, there is at least one brokerage that I know of that is converting USD/CAD & CAD/USD at spot without FX fees.


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## humble_pie (Jun 7, 2009)

this OP is indeed talking *only* about a non-registered account.

his youth & life experience settings do not yet allow him to have a significant RRSP account.

in non-registered accounts, CIBC broker charges some of the highest FX fees in the whole of canada.

there appear to be no advantages to a non-registered CIBC account. This will be a million-dollar non-registered indexed account launching only 10 or 12 rebalancing trades per annum. Saving $3 on a trade commission is not worth talking about.

CIBC research resources are said to be meagre.

evidently the OP does not bank at the CIBC. For a non-registered account, there do not appear to be any reasons to include CIBC broker on his short list of broker candidates.

even scotia iTrade would make more sense as a broker candidate for this OP, now that james4beach has gone to some trouble to explain scotia's new & attractive bond trading interface.

.


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## Eclectic12 (Oct 20, 2010)

dumbfoundead6666 said:


> Wow! Thank you for that explanation. I did not know that the RRSP contribution room accumulates according to your income level. For my RRSP, I probably have very low contribution room available...


The way the two were combined ... I wondered if needing specific types of income to be granted RRSP contribution room might have been missed.




dumbfoundead6666 said:


> ... For my TFSA, I have the entire thing available (never had a TFSA account)


Knowing that the TFSA contribution room will be granted, regardless of how one is making money to live on ... using it is the easy decision to make.


Cheers


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