2017 Update – Comparing Questrade and Robo Advisors to TD E-Series Funds
The big benefit to TD’s e-series funds are that they allow investors to efficiently invest their money for a very low management fee (MER). When they first came out, these quick turn-key portfolios were an excellent way for investors that were starting with just a little bit of money to invest every month because there were no transaction costs for small amounts of units that were bought or sold – just the relatively low MER. If you want to start index investing with a couch potato portfolio, this was the best way to do it until you got big enough to switch over to a discount brokerage (and the amounts got big enough to justify the transaction costs.
While still a good option, TD’s offerings have largely been replaced when it comes to getting my overall recommendation. These days, robo advisors such as Wealthsimple will allow you to try their services for free, and provide the same instant solution for hands-off investors. You can pre-authorize contributions just like you used to with your TD e-series funds, and instead of having to purchase three different funds to create a diversified portfolio, these robo advisors will split up your investment dollars for you – and even re-balance them when the time comes. They do this for an MER fee very similar to what TD offers, and hae no transaction fees. If that were the whole comparison, it might be a pretty even head-to-head match up, but the reality is that robo advisors also offer an advice component that puts them away ahead in terms of value for your money. Finally, when it comes to getting started, we’ve found that the most important thing is actually getting started. This might sound odd, but so many people get lost in the paperwork when it comes to starting with investing, and robo advisors offer the quickest and easiest way to invest your money in a way that makes sense.
Of course if you want to cut the costs on your couch potato index portfolio to the absolute bone, the cheapest option is Questrade discount brokerage, see our Questrade Review here. Much like the e-series, you have to log in and setup and account so that you can buy and sell your own investments (not quite as easy as a with a robo advisor). Creating a low-cost broadly-diversified portfolio through purchasing ETFs at a discount brokerage was always by far the lowest MER way to grow your money. The problem used to be that when you had to pay $10.00 in transaction costs every time that you purchased your ETFs, it just didn’t make sense for a lot of portfolios. However, that advantage is completely gone now that Questrade allows you to purchase ETFs for free. Given that there are virtually no transaction costs for small portfolios, and the MER for a diversified portfolio of ETFs (which are identical to the e-series funds) is somewhere in the .15 MER range, it is unquestionably a better deal for those that don’t mind learning a bit about buying and selling their own investments.
Again, it’s worth pointing out that there is nothing terrible wrong with TD e-series, it’s simply that while there used to be no one else playing in their ball park, they have recently fallen slightly behind the times in the evolution of Canadian low-cost investing.
Original TD E-Series Guide for Beginners
The TD e-series funds are a way in which you can get a mutual fund without having to pay an arm and a leg for the MER’s. I have had a TD e-series fund for my RRSP since last year and regularly contribute a set amount to it per month. It’s a great way to employ dollar cost averaging without having to pay for trading commission fees each time you do a transaction. It’s wonderful for us young people who don’t have time to go to the bank (really, how do people do their banking regularly when they work the same hours you’re working?) and are internet savvy.
However, TD e-series are notoriously difficult to acquire, it takes a bit of time and a bit of patience to be able to set an account up, mainly because when you walk into any TD branch, no one knows what the heck you’re talking about. The reason, I believe, that TD bank branch employees do not know what you’re talking about is because it is an e-series fund. That means that TD bank doesn’t waste their money teaching branch employees the details of the fund because it is all done online.
This my friend, is where they save you the $. You don’t have to pay for the services of a Mutual Fund Specialist because there are none! The MER’s for TD e-series are low- 0.31-0.48% is the average compared to a whopping 2.5% for full service mutual funds. It took me about 6 weeks to get my TD e-series fund in working order (long story- I think I tried to mail it in, and they told me I needed a card after I had no response for a 3 weeks, then I went into the branch and had to go back twice because no one new what I was talking about, then finally got my beloved e-series), so I’m going to try and save you the time and headache by learning from my mishaps.
So without further adieu, here’s the most hassle-free way on how you can get in on the action:
1) If you already have a mutual fund account with TD bank, you’re already one step ahead of the game.
2) If not, you need to go to your local TD bank branch and open up a mutual fund account (and don’t forget the number) and get yourself a card with an easy web login number. Remember, don’t buy any mutual funds, just open up an account. =)
3) You can then convert an existing mutual fund account (the one you just opened up) to the TD e-series account. I found it much easier and faster this way because your information (driver’s license, ID) has already been approved by someone at the branch. You get the help of a real-live person and then can convert it to the e-series later on. This method is much faster. You send some paperwork in, and a week later, you’re good to go.
4) Alternately, if you’re starting from scratch and applying online, the website will guide you through your Wealth Allocation Model (a questionnaire to determine what your asset allocation should be and determine your investor profile). The questionnaire will help you pick the funds you want to include in your portfolio. You’ll need to mail your signature so the information can be verified.
5) You’ll need to send in your application, consent form, mutual fund account number, and transaction form (if you’re planning to set up a pre-authorized purchase plan)
6) Once the account is set up and funded, you can set up your pre-authorized purchase plan (I do mine monthly) according to the percentage of asset allocation you want. I’m in love with pre-authorized purchases because it’s automatic! If you have any questions at all about getting your e-series account, I found that the toll free number given was quite helpful (1-800-281-8029). Also because of the fund’s popularity, they recently have an online page dedicated to troubleshooting.
Do you have a TD E-Series Fund? What do you think of it?