I’ve been a little quiet recommending discount brokerages lately since my old tried and true choice over at Questrade has been at a slight disadvantage for a couple months. They were still a great company that I have only had good experiences with (and I had no real reason to leave) but when a couple of their competitors introduced the idea of commission-free ETF trades, I was a little jealous to say the least. I mean, the free eBook I wrote about passive investing and how to make sure you keep investment returns in your pocket by keeping things simple – is a perfect fit for commission-free ETF trades. Now granted, when other discount brokerages released their lists of ETFs, the options were limited, and there were definitely some caveats, but I was really hoping Questrade would jump on board.
Related: Questrade Review
The good people behind the Green Q have not disappointed! Questrade announced this week that they would allow people to purchase ETFs without any commission at all! This is even better than their normal $5-per trade line. In my mind, the ability to purchase ETFs without paying a commission takes away the main advantage that mutual funds had over ETFs. A lot of smart people would recommend keeping your money in mutual funds if you wanted to invest monthly since most people aren’t investing enough on a monthly basis to justify the bite commissions would take out of their investing capital. This advantage is gone when you can buy ETFs for free! I love the free market, and when I get to benefit from competition as a consumer.
Questrade was quick to point out that this wasn’t exactly “no strings attached” though. Here are the caveats they put in place:
- You’ll pay the ETF commission at the time of purchase, but we’ll rebate you in two business days
- There are no minimum number of shares you have to buy. Hold them for as long as you’d like
- Buying ETFs for free is only available if you’re trading on one of the Questrade IQ platforms
- ECN fees or any other incidentals charged by the markets are your responsibility
- Your standard commissions will apply when you sell an ETF
Fight For My Low-Cost Business!
Basically this means that ECN fees will still charge you a few pennies, and that you will still pay to sell an ETF, but if you’re a young index-devotee like me, that’s almost irrelevant. Why would I want to sell my ETFs that have me invested in 6,000 or so companies around the world? I’ll just keep the faith that businessman will continue to figure out ways to make money, the world’s economic system won’t collapse (if it does, my RRSP will be the least of my problems), and consequently, the value of companies will go up. Now, it is no secret that brokerages make their money on people that trade back and forth in the stock market, and if you do that you will paying some money to sell ETFs. To me though, I have no intention on cashing in any of my investments for at least 25 years, and probably more like 30. In that situation, the small commission that I will pay in order to sell will almost 0% and close enough to not worry about!
Any and All ETFs!
While Questrade wasn’t the first discount brokerage to initiate free ETF trading, is in the only one I’m aware of right now that places no restrictions on which ETFs you can buy. This means that unlike their competitors every ETF listed on the NYSE and TSX can be bought with $0 commission! Those ETFs that index guys like Andrew Hallam and Dan Bortolotti (The Couch Potato Investor) are now free to purchase. Kudos to the entire investment industry for realizing that there are more and more cost-conscious investors out there that will reward a company for recognizing their needs.
Also, big props to Questrade for their timing on this one. Instead of Canadians stuffing their RRSPs full of high MER mutual funds in the coming weeks, they can fill it with ultra-low-cost, efficient investments instead. No need to panic and call your financial advisor in a cold sweat. Simply set up a plan that allows you to invest money into your tax-advantaged accounts (RESP, TFSA, RRSP) throughout the year, and then just watch your ETF pile grow and grow!