I switched jobs recently and one of the benefits of the new job is a matching program for contributions to retirement accounts. The Group RRSP program is administered by one of the large mutual fund companies and offers more than 50 different funds to choose from. As a rule, I stay away from mutual funds, but I decided to participate anyway because of the generous company match.
Researching more than 50 different funds is a time-consuming affair, so I had parked the money temporarily in a money market fund. Recently, I discovered that the program offers a few index funds from TD Asset Management that can be used to construct a fairly diversified portfolio even with relatively small sums of money. The funds offered are:
TD Canadian Bond Index Fund (tracks the Scotia Capital Universe Bond Index)
TD Canadian Index Fund (tracks the TSX Composite Index)
TD US Index Fund (tracks the S&P 500 Index)
TD International Index Fund (tracks the MSCI EAFE Index)
I split the portfolio between the above funds in the ratio of my target asset allocation (Bonds: 20%, Canadian Equities 19%, US Equities 35%, International Equities 26%) and future contributions will also be split in the same ratio. Once a year, I will rebalance the portfolio to meet the target asset allocation. Easy peasy, no?
I realize that the portfolio lacks exposure to small-cap equities, REITs, emerging markets, high-yield bonds, real return bonds etc., but for a small portfolio it is well diversified. Surprisingly, retail investors can construct a portfolio with even lower expenses using TD eFunds. The MER for the equivalent e-series funds range from 0.31 to 0.48%. That’s cheap!
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10 responses so far ↓
1 David Grant // Nov 16, 2005 at 10:36 pm
Do they also offer the TD Canadian Bond Fund? It has a good track record, beating the Index in 5 out of the last 6 1-year periods. The mix is quite different, being 56% corporate vs. 29% in the index. You could even consider adding the TD Real Return Bond Fund to increase government exposure. I wish I knew more about bonds in general, especially these real return bonds. I know roughly how they work, but not the details.
Can anyone invest in the TD eFunds? I am in the process of switching my investments from TD to a different company (just waiting for the 90-day no-sell periods to expire). The US and Canadian indexes I own at TD are both eFunds. I was under the impression that I had to be a TD “on-line” customer to buy them? They certainly are appealing…
2 David Grant // Nov 16, 2005 at 11:28 pm
Sorry I just realized I might have misunderstood your original post. Is the “large mutual fund company” TD? and are the 50 funds all TD funds? That’s what I thought originally, but then after re-reading your post I realized that perhaps those 4 index funds were the only TD funds available to you through this group plan… That would explain why you said you didn’t include any real return or high-yield bonds, etc… Sorry for my confusion!
3 Canadian Capitalist // Nov 17, 2005 at 9:37 am
David: Unfortunately, we don’t have access to junk bond funds or real return bond funds. The mutual funds are offered by many fund companies like Fidelity, Bissett etc. These 4 are the only index funds offered.
You are right about TD eFunds. They are available only online. The MER on the eFunds is just super.
4 D. Grant // Nov 17, 2005 at 1:14 pm
That’s really too bad that TD eFunds are not available to everyone. It is tempting to keep my TD RRSP open with the eFunds inside, but I really want to leave TD and I think having a good advisor now that I can talk to one-on-one will outweigh the benefits of the low MER. Besides I will be indexing using ETFs whenever possible from now on anyways (on the suggestion of my new advisor) so my MER will actually be even lower.
I wish my company had a group RRSP plan. Lucky guy…
5 pfadvice // Nov 21, 2005 at 6:51 am
It’s kind of hard to turn away money when the company matches or % matches it. That’s free money into your investment account and it’s beyond me why so many people fail to take advantage of such offers.
6 Dave // Nov 21, 2005 at 2:55 pm
A co-worker of a friend of mine apparently turned down his company’s RRSP plan recently. His answer was “I don’t do RRSPs.” Wacko.
7 Canadian Capitalist » Financial Advice For Parents // Nov 6, 2006 at 11:12 pm
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10 Ryan // Jan 17, 2008 at 1:45 am
Hi, this is amazing! Your TD Index fund is identical to ING Direct’s new Streetwise Fund! You should sue for copyright. : )
I’m a newbie investor. Just started VERY late and am thinking of building a TD e-series Fund just like yours. Are there any fees besides the MER? Is this a good portfolio to start or do you have a better one? I’d like to go aggressive to catch up and as this is for retirement only - I’m in for 15-20 years at least.
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