# Tips for new investors?



## cici (Feb 16, 2013)

Hi Everyone,

I'm new to here. Just wanted to know if anyone can give me some advice for DRIP or other investment for a new investor? 

I'm interested in DRIP, and had read about the comparison of different discount brokers to start a traditional DRIP. I thought if I spent $30 for transaction and $50 for certificate, I will be able to buy a share of stock to start DRIP, plus whatever the price of the stock is of course. The cost of $80 is fine since I don't have to spend on fees after. But when I looked into more about the brokers, it seems that every broker charges a fee if the account was inactive. I'm not sure that after I open an account with one broker, buy a share and got the certificate to computershare, whether the share will be with Computershare or is it still with the broker? If it is with Computershare, does that mean I also need to pay a transfer fee (e.g. over $100, not sure how much) to the broker? Since no one mentioned there would be a transfer fee, I suppose the share is still with the broker? If so, will I have to pay inactive account fee to the broker, e.g. $25 a quarter if I don't have any more transactions?

I asked this because I'm just starting... plan to invest $100 a month to let it DRIP. If I can't close the account with the broker, the account inactive fee is 8.3% of what I invest. It seems silly to do this because I don't even get a 8.3% return. 

It is embarrassing my investment is tiny... $100 a month to start and might invest more at the end of the year depending on how much cash I have. But it is better to save this money than to buy junk food, and hopefully I can save some money for my children to go to college in the future. Many people here have great experience, I hope someone can share some experience of small investment with me. It seemed to me DRIP and TD E-Series was good for a small start, but now that the inactive fee holds me off. Or is RESP a good choice? My girl are 12 and 8 years old. I never save any money before. 

Because my investment is low, it is really important for me to find something with low maintenance cost.

Thank you everyone!
Cici


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## cici (Feb 16, 2013)

Bump

The above was my first post and need to be approved before it went to the forum. When it eventually show in the forum, it was already 3 pages behind. There are over 200 people viewing right now. You must have some insights.


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## Spudd (Oct 11, 2011)

I think TD e-series are the best way to start out. You can set up a TD mutual funds account which is free to have, and it's free to buy/sell the funds within there. The fees on the e-series are very low and they give you good diversification (lots of different stocks). 

If your kids are 8 & 12, do you think they will go to college or university? If yes, and you want to help them out, then an RESP would be a good idea. You can have an RESP account at TD that would invest in e-series, I believe. If you do an RESP, then the government gives you a 20% match on every dollar you put in, up to a certain cap. I don't have kids so I don't know all the details. 

If you don't think they will pursue higher education then a TFSA is probably the best place to invest, because any money you make will not be taxed. You can ask TD to set you up with an investment TFSA that will hold the e-series funds.


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## humble_pie (Jun 7, 2009)

hello cici & welcome to the forum. I think you are doing a great job with the start of your financial planning & action.

what you have in the message above from Spudd are just about perfect suggestions. Yes, there are daunting fees for dormant or tiny accounts, so you would want to avoid these entirely by opening a TD e-funds account, in which you would regularly purchase e-fund index funds until you reach a higher savings level some time in the future.

there is a link at the bottom of this screen to a blog published by Canadian Capitalist. There you will find quarterly updates to a mini-sleepy-portfolio which he has been running for a few years. This holds, as best i can recall, exactly 4 TD e-funds. Nothing more, nothing less. Reading the posts about this e-fund mini-portfolio will give you a excellent handle on one way of managing an e-fund account.

i wonder if i could make another suggestion. How about opening just a TFSA or else both a TFSA & a RESP if the latter would be your decision? It sounds as if you are prepared to commit to long-term investments, so the 100% tax-free aspect of the TFSA might be appealing. Keep in mind that, although you can withdraw from a TFSA at any time, the moment when you might wish to withdraw (ie some date in the future) might not be an auspicious time for any of the e-funds in that account. It is possible to compensate for this by keeping some emergency funds within a TFSA in what is called a HISA deposit, although these are paying very low rates of interest at present.

as for dripping stocks & other exchange-traded securities, i do believe that these should come later, after your savings have had time to grow. In the meantime, wishing you every good fortune.


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## Cal (Jun 17, 2009)

If you really want to drip, and save on fees, check out www.dripinvesting.org. You will be able to pick up shares for a reasonable fee, on the share exchange board.

There are no fees when you register the share in your name w computershare. 

The site has alot of articles that will answer your questions.


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## Young&Ambitious (Aug 11, 2010)

Also check out the Eight with Weight recommended reading list. That and reading some of the threads on here, will give you a great abundance of information.


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## Toronto.gal (Jan 8, 2010)

cici said:


> 1. I'm not sure that after I open an account with one broker, buy a share and got the certificate to computershare, whether the share will be with Computershare or is it still with the broker?
> 2. does that mean I also need to pay a transfer fee
> 3. It is embarrassing my investment is tiny


*1.* There is a reason for the cost of the certificate! 

- A traditional DRIP requires the shares to be registered in your name, hence the certificate is required to remove them from your broker's account, and then transfer to the applicable transfer agent. 

- When you have a synthetic DRIP, the shares are not held in you name, but that of your broker [aka 'street name']. Same goes with shares that you buy/sell with them.

The information detailed on said certificate, as you can see below, includes: co.'s name/your name/# of shares.










*2.* No additional fees than those under #1.

*3.* Not at all! You would be amazed how even small amounts saved can make a huge difference with proper time horizon.

As Cal mentioned, if you still wish to drip, there is a less expensive way to do so, but I agree with the other advice given.


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## cici (Feb 16, 2013)

Spudd said:


> I think TD e-series are the best way to start out. You can set up a TD mutual funds account which is free to have, and it's free to buy/sell the funds within there. The fees on the e-series are very low and they give you good diversification (lots of different stocks).
> 
> If your kids are 8 & 12, do you think they will go to college or university? If yes, and you want to help them out, then an RESP would be a good idea. You can have an RESP account at TD that would invest in e-series, I believe. If you do an RESP, then the government gives you a 20% match on every dollar you put in, up to a certain cap. I don't have kids so I don't know all the details.
> 
> If you don't think they will pursue higher education then a TFSA is probably the best place to invest, because any money you make will not be taxed. You can ask TD to set you up with an investment TFSA that will hold the e-series funds.


Thanks for giving some directions, Spudd! That's what I think... TD e-series to start since it is at a very low cost for small investment. 

I do hope my kids will go to college. Will find out some more about RESP with TD.


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## cici (Feb 16, 2013)

Hello humble_pie, I didn't see the link for the blog on the screen. 
I didn't know about HISA before, can I withdraw it any time?



humble_pie said:


> hello cici & welcome to the forum. I think you are doing a great job with the start of your financial planning & action.
> 
> what you have in the message above from Spudd are just about perfect suggestions. Yes, there are daunting fees for dormant or tiny accounts, so you would want to avoid these entirely by opening a TD e-funds account, in which you would regularly purchase e-fund index funds until you reach a higher savings level some time in the future.
> 
> ...


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## cici (Feb 16, 2013)

Cal said:


> If you really want to drip, and save on fees, check out www.dripinvesting.org. You will be able to pick up shares for a reasonable fee, on the share exchange board.
> 
> There are no fees when you register the share in your name w computershare.
> 
> The site has alot of articles that will answer your questions.


Thanks for this, Cal. I was looking at all the 2009 posts and wondering What? Finally I figured out the newest at the back.


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## cici (Feb 16, 2013)

I started with Four Pillars of Investing... couldn't read half of it 


Young&Ambitious said:


> Also check out the Eight with Weight recommended reading list. That and reading some of the threads on here, will give you a great abundance of information.


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## cici (Feb 16, 2013)

- A traditional DRIP requires the shares to be registered in your name, hence the certificate is required to remove them from your broker's account, and then transfer to the applicable transfer agent. 

So it means I will have to pay $$$ to transfer out from the broker's account?


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## cici (Feb 16, 2013)

Thanks for Spudd and humble_pie. The posts I replied to you were under reviewing, but my later posts already show up.


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## Compounding1 (May 13, 2012)

I recommend reading the book Millionaire Teacher. It goes over index investing and is very easy to read. I think you will get more mileage for your monthly contributions with the index investing rather than picking one stock to DRIP. Much better diversification this way for you. Good luck


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## Eclectic12 (Oct 20, 2010)

cici said:


> - A traditional DRIP requires the shares to be registered in your name, hence the certificate is required to remove them from your broker's account, and then transfer to the applicable transfer agent.
> 
> So it means I will have to pay $$$ to transfer out from the broker's account?


Yes ... TDW calls is "Delivery of registered certificates and/or Direct Registration Services (DRS) statement - Canadian Companies (certificate and DRS statement) $50".
http://www.tdwaterhouse.ca/apply/forms/521778.pdf

For the amount you are talking about, you'll probably want to go the route Cal suggested using the share boards.

Another option is http://www.investments.shareowner.com/home/v1/index.html but the fees are likely too high for your purposes.


Cheers


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## humble_pie (Jun 7, 2009)

Q to cal & eclectic: i will be happy to stand corrected on this issue, but it has always been my understanding that shares accumulated under non-broker dripping plans are expensive or difficult or cumbersome or all 3 to wind up. Wind up as in eventually sell the shares or transfer them to a real brokerage account after one has accumulated enough.

op has mentioned he or she is starting out with zero, will contribute $100 per month. At the end of one year, when all is said & done, that will be $1,200. It's for this reason that i thought an e-funds account might be a good beginner's choice. It would usher in a year or 2 of opportunities to read & learn at a leisurely pace, while still gently providing investment opportunities at rock-bottom minimal cost.

there would be nothing to prevent dripping individual stock dividends later, once an investor had reached say a 10k or 20k level.


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## Toronto.gal (Jan 8, 2010)

cici said:


> -
> 
> So it means I will have to pay $$$ to transfer out from the broker's account?


You would pay your broker for the certificate, which simply represents the change in share name registration from broker's to yours, and that is the only fee involved as previously mentioned. The actual transfer is handled by the transfer agents at no cost [for now]. 

What you also need to do in the above scenario, is complete transfer forms, which are mailed to you after you request the certificate.

*HP:* as per your 'wind up' question, I really don't know as I have never sold via a TA. For now I participate in the DRIP program, which I plan to do for several years, as well as participate in the OCP [optional cash purchase] plan at no commission [for now]. The latter is worth it if contributing on a regular basis. For example, if I were to buy additional shares just once per quarter/per company = $27.80/yr. [that I would have paid with broker, but free with TA]; mutiply that by say 7 companies x 10 years, that would be almost $2K in saved commission fees.

What I like about traditional DRIPS, is also the ability to purchase fractional shares. But traditional drips also have cons that have been already explained several times on this forum.


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## Toronto.gal (Jan 8, 2010)

cici said:


> I started with Four Pillars of Investing... couldn't read half of it


That is why new investors should start with the basics first, ie: the *Dummies Series*, which are quite good btw, and then books like the above mentioned, would be much easier to understand.


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## humble_pie (Jun 7, 2009)

Toronto.gal said:


> You would pay your broker for the certificate


this neonate account is far too small for a broker, won't even hit questrade's minimum for nearly a year, or longer if the chosen drip stock goes down in the meantime.

keep in mind that dripping one company with startup of $100/month is not really sensible imho. Too much risk. imho.


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## Toronto.gal (Jan 8, 2010)

I don't disagree at all HP. 

I merely answered OP's questions, as she did not seem to understand the purpose of the certificate, ie: that shares would be held with transfer agent & not broker.

I also posted for general info. for others.


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## cici (Feb 16, 2013)

When I said "transfer fee" to broker, it is something I see in the brokers website. Such as TD waterhouse:
Account Closure/Transfer Fee: A fee, as outlined in this document, will be charged for all trading and registered accounts that are withdrawn in full or transferred to another financial institution

This is a $135 fee for TD. since I will buy only one share for drip and I will transfer it to the computershare. So what I need to pay is $50 certificate and $135 transfer? 

I don't think I will start a traditional DRIP from a discount broker.


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## My Own Advisor (Sep 24, 2012)

Hi cici,

Here is some more information about DRIPs.
http://www.myownadvisor.ca/drips/

Happy investing.


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## Toronto.gal (Jan 8, 2010)

cici said:


> 1. So what I need to pay is $50 certificate and $135 transfer?
> 2. I don't think I will start a traditional DRIP from a discount broker.


*1.* You're mixing 2 separate issues here, the cost of a security registration in your name [certificate], and regular administration/transfer fees. 

If you are determined to have a traditional DRIP, you should follow Cal's advise. If you'll open a TD account to just buy that single share, yes, I suppose that you'll be charged an admin. fee for closing the account. 

Why not look into opening an RESP/TFSA account as others have suggested to start with? If you're not familiar with either, maybe take a bit of time to learn about these before you make your final decision.

*2.* Discount brokers only offer synthetic, not traditional drips as noted upthread. 

*My Own Advisor:* nice blog!


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## Toronto.gal (Jan 8, 2010)

humble_pie said:


> it has always been my understanding that shares accumulated under non-broker dripping plans are expensive or difficult or cumbersome or all 3 to wind up. Wind up as in eventually sell the shares or transfer them to a real brokerage account after one has accumulated enough.


Neither difficult nor expensive, just a few steps are required.

Since I did not remember the information given to me when I first set the accounts a few years ago, I called one of my Transfer Agents to find out.

*1. Electronic Shares* - are the shares purchased by the TA, via dividends/OCP & on their DRS [direct registration system]:

*a.* You can sell via the TA @ a current cost of $.3 cents per share [takes approx. 2 weeks].

*b.* You can also transfer/sell via your broker. For that, you'll be given a certificate by the TA for the full shares/a cheque for the fractional shares [forgot to ask, but I believe at no cost for the former].

*c.* You then visit your branch to deposit the certificate, and to complete & sign transfer documents, which they in turn will submit to the broker & will coordinate the transfers with the TA [assuming you have your account set up with them].

2. Certificated Shares -  are the shares that had initially been transferred from your broker to the TA:

*These shares can only be sold via your broker*. If you had them registered in the TA's DRS [meaning that you gave the certificate to them], then you would need a certificate to transfer, but if you had opted to keep the certificate that the broker had initially given you [meaning that your shares were not registered in their DRS], then all you would need, would be to deposit that with the broker via the branch, who would then coordinate the transfers.

Voilà, once the shares have been transferred to the broker, you're ready to DRIP synthetically if you wish/sell, etc. Not a big deal as this isn't something you would do regularly; in my case, not planning on worrying about this for several more years, and then, it shall be done all at once.


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## Eclectic12 (Oct 20, 2010)

humble_pie said:


> Q to cal & eclectic: i will be happy to stand corrected on this issue, but it has always been my understanding that shares accumulated under non-broker dripping plans are expensive or difficult or cumbersome or all 3 to wind up. Wind up as in eventually sell the shares or transfer them to a real brokerage account after one has accumulated enough.


I'm not sure why - most of the fees I've read about are on the broker side of the equation so I'm not sure why there would excessive fees/issues to sell all shares or transfer them to a broker. 

Losing control of when the sale is made seems to me to be the bigger issue but like so many things, YMMV depending on the specifics of each plan.

I don't recall any fees when my mom liquidated her BCE DRIP but that's a while ago where some plans have been changed.




humble_pie said:


> op has mentioned he or she is starting out with zero, will contribute $100 per month. At the end of one year, when all is said & done, that will be $1,200. It's for this reason that i thought an e-funds account might be a good beginner's choice .... there would be nothing to prevent dripping individual stock dividends later, once an investor had reached say a 10k or 20k level.


Either choice is good, IMO - as long as the specifics of the DRIP/SPP have been investigated. 

With the various posts/responses - I have the impression the op is keenly interested in a traditional DRIP route versus lukewarm for the eSeries route.


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## Toronto.gal (Jan 8, 2010)

Eclectic12 said:


> 1. most of the fees I've read about are on the broker side
> 2. so I'm not sure why there would excessive fees/issues to sell all shares or transfer them to a broker.
> 3. Losing control of when the sale is made seems to me to be the bigger issue


1. Yes, the cost of the certificate, which seems most brokers charge $50, with the exception of Questrade - they charge a whopping $300/$450 on a rush basis. 
2. There are none, other than maybe the certificate [if required], but I don't think the TA charges for this, just the brokers.
3. Yes, a key disadvantage, is that there is no real-time buying/selling. But the one that HP hates the most, is the record keeping.


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## praire_guy (Sep 8, 2011)

If you go to drip.org you will find people who will sell you share certificates for market price plus ten bucks as a courtesy fee.


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