Everyone who reads this blog knows that I’m a big fan of comparing and contrasting and analyzing things to death (must be the Virgo in me)…therefore, I thought it might be apt to analyze the Vanguard Exchange Traded Funds and the TD e-series mutual funds.  In this post, I’ll talk about how to invest in either of these modalities and also talk about which one might be better for you, depending on your style of investing and the amount of money you have to invest. If you need a crash course in ETF Investing take a look at our eBook.

What are TD E-Series Mutual Funds?

As you all know, I am a huge fan of the TD e-series mutual funds. They are great because I am able to dollar cost average and contribute to these in my RRSP on a monthly basis. Even though it is a b*tch to get the TD e-series mutual funds, it is well worth the effort and hassle and discussion with customer service representatives from TD bank who don’t know what you’re talking about.  The average MER is about 0.32% on the TD e-series mutual funds which makes for a very low cost way to invest, according to Rob Carrick over at Globe and Mail.

What are Vanguard ETFs?

Vanguard ETFs versus TD e-Series Mutual FundsVanguard ETFs are exchange traded funds composed of primarily the same basket of stocks as the TD e-series funds except that they have an even lower MER ranging from 0.09% to 0.35% annually.  They are traded through a brokerage (e.g. Questrade).  Questrade allows for free ETF purchases (meaning you won’t have to pay the $4.95 that you normally would to trade an equity) but charges commission for the sale of ETFs.  Many of these Vanguard ETFs are new and are less than a year old, they recently created Vanguard ETFs that can be traded on the Toronto Stock Exchange, which means you can get exposure to U.S. and International markets without having to have a USD account etc.

Related: Updated Questrade Review

How to Open Up a TD E-series Account

Here’s a step-by-step guide courtesy of moi a la 2010 on how to get your hands on the TD e-series mutual funds if you’re seriously thinking about a hassle free way to invest your money.  It is difficult to set up, but once you set it up, it is a breeze to maintain.  I’m a huge fan (in addition to 99% of the other Canadian personal finance bloggers out there).

How to Invest in Vanguard Exchange Traded Funds

To get your hands on some Vanguard exchange traded funds, you will need to have access to a brokerage account in order to buy and sell exchange traded funds.  Exchange traded funds are bought and sold much like individual stocks, except that they are far from individual stocks.  If you don’t have an account yet, Questrade is a discount brokerage that offers rock bottom commission prices for buying and selling on the stock market, and as mentioned, offers free purchasing of exchange traded funds.

Should I Invest in the Vanguard ETFs or the TD E-series Mutual Funds?

According to the Canadian Couch Potato (who, if you’re not aware, is Dan Bortolotti, the guru of exchange traded funds who writes for MoneySense magazine), if you have a large portfolio (meaning lots of cashola to invest), using ETFs rather than e-series mutual funds is the way to go.  However, you can also opt to combine the two as well.

However, despite the lower cost of the Vanguard ETFs, if you are a complete newbie to investing, you might want to still opt for the TD e-series funds just because of their ease of use.  It is also easier to set up pre-authorized contributions with the TD e-series funds.  With the Exchange Traded Funds you will have to re-balance regularly to ensure that your asset allocation is still sitting in the right percentages.  Another reason why the TD e-series is good for the beginner is that you can get customer support from TD bank (a big bank) which is better than the customer support that you would get from lets say, Questrade, which is notorious for having you wait forever to even chat with a CSR on the computer.(*Note from Justin* – They have gotten much better in the last year)

Readers, which one are you a bigger fan of, Vanguard ETFs or the TD e-series mutual funds?