Ask MoneySense: Monthly contributions

Trading commissions can really eat into a portfolio if you buy small amounts of ETFs with monthly contributions.



From the September/October 2012 issue of the magazine.


I want to set up a Couch Potato portfolio but we make monthly contributions to the account. How can we do this without getting hit by trading commissions?

—Scott Misener, Newmarket, Ont.

Trading commissions can really eat into a portfolio if you buy small amounts of ETFs with monthly contributions. But there are ways around this. Low-fee mutual funds like the TD e-Series funds are an option, says CFP Fred Kirby. Or you could save up the contributions and buy the ETFs on a quarterly or annual basis, he adds.

Another option is to go with a discount brokerage that will allow you to buy a selection of ETFs without incurring commissions: Scotia iTrade, Qtrade and Virtual Brokers currently offer this service. The main drawback is that the list of eligible ETFs is not as large as some would like, but for the beginner Couch Potato it’s a good way to start.

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3 comments on “Ask MoneySense: Monthly contributions

  1. I think read somewhere that it only makes sense to buy ETFs if you have over $60,000 or so to invest. Less than that and the lower MER are insufficient to make up for the costs of buying and selling (may have to sell if you re-balance the portfolio). Less than that and cheap no-load index mutual funds like TD's e-series were the way to go as while they have a higher MER, there is no commission to buy/sell. Gotta do the math and workout the annual costs of purchasing (buying quarterly might be the way to go) and the MER for the ETFs, vs the MER for an index fund with no cost of purchasing.


    • What is MER? Also, I have $50, 000 to invest and have a Royal Bank Action Direct discount brokerage account. Should I wait until I have $60, 000 saved to purchase ETF stocks? I want to follow the couch potato model or what Andrew Hallam has discussed re. ETF stocks.

      I want to invest every month, but if the fees to purchase ETF stocks are high, then I should purchase new shares once a year. Is that correct?


  2. Try ING Street Smart funds they're setup to be just like a couch potato portfolio


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