I received a query from a reader about how to open a no-fee (or low-cost) RRSP account that provides a good selection of mutual funds. I thought I would expand my answer into a blog post.
If you want the flexibility to trade stocks and bonds, a RRSP account can be opened with any of the discount brokerages (Check out an earlier post on Best Canadian Online Brokerages for some options). They typically charge an annual fee for smaller portfolios (for example: RBC Action Direct charges a $50 fee for accounts less than $25,000). Opening an online RRSP account is as simple as visiting the brokerage webpage and clicking on the Open an account link.
If you want to buy mutual funds from various fund companies, you might want to consider ING Direct Funds. Please note that actively managed funds charge high fees that would make administration fees seem very small by comparison. (Example: on a $10,000 account, a $50 administration fee translates into an annual expense of 0.5%. On the other hand, the average mutual fund in Canada charges a fee of 2.1% and the vast majority of them have also underperformed their benchmark indices).
You can also open a RRSP account at your local bank branch or with an independent mutual fund company like Investors Group. But, your options will usually be limited to the in-house mutual funds. Note, that these mutual funds also have a high MER and you might have to pay a fee to move the RRSP account to another institution.
In my opinion, the best choice for small portfolios is TD eFunds. The index funds offered have a MER ranging from just 0.31% to just 0.48%. You would be able to quickly create a fairly diversified portfolio like I described in an earlier post. Opening an account is a fairly easy process and can be done online.
Disclaimer: I am not a financial advisor. No post (including this one) should be construed as financial advice.
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7 responses so far ↓
1 Alex Givant // Nov 22, 2005 at 3:29 pm
For those of you who interested in EFT, here is info about iUnits DRIP program.
http://www.iunits.com/english/individual_investor/dividend.cfm
2 Investing Intelligently // Nov 23, 2005 at 12:47 am
DRIPs for iUnits ETFs
As a follow-up to my previous post where I quoted a site that said ETF distributions could only be paid out in cash, I just found out from a comment on the canadiancapitalist.com that it is possible to have distributions from iUnits ETFs re-invested t…
3 Frugal Canadian // Dec 5, 2005 at 5:30 pm
Thanks for the info on the TD e-series funds. I hold a few TD index funds, but the e-funds MERs are half of my existing funds, for an almost identical holding and performance over the past 5 years.
4 Canadian Capitalist // Dec 6, 2005 at 10:19 am
FC: TD eFunds are a great choice for indexing. In indexing the lowest MER almost always wins.
5 Curious // Apr 7, 2006 at 3:06 pm
Does anyone know which ETFs can be DRIPed in an RBC Action Direct account?
The iUnits site says that 9 of their ETFs are aligible but doesn’t mention which.
Also, I couldn’t find any info about other Norht-American ETFs
6 Romanes Despeines // Dec 13, 2006 at 11:34 am
I want to buy some Canadian Bonds.
Thx, Romanes
7 Investing Intelligently » Blog Archive » DRIPs for iUnits ETFs // Jan 30, 2007 at 6:47 pm
[...] As a follow-up to my previous post where I quoted a site that said ETF distributions could only be paid out in cash, I just found out from a comment on the canadiancapitalist.com that it is possible to have distributions from iUnits ETFs re-invested through a DRIP: Dividend reinvestment plans let you take advantage of the power of compounding. Instead of receiving cash dividends from the company, you may purchase more of a company’s stock by having the dividends reinvested. Your brokerage firm may offer a dividend reinvestment plan that allows for the reinvestment of cash distributions on iUnits. Cash distributions, in the form of income, return of capital or dividends could then be reinvested in additional units of the same fund. You should check with your brokerage firm to see whether you will be charged for this service. [...]
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