Archive for May, 2010

BMO InvestorLine Trading Glitches

May 31, 2010


Imagine the following scenario: You have a short list of stocks you are interested in and would like to own the stocks when they hit some predetermined levels. You’ve been patient and keep plenty of cash around for what Buffett would call “the perfect pitch”. A few months pass and sure enough, the markets are in turmoil and your stocks are hitting your strike price. You want to buy and try logging into your account but you are unable to access your account and perform any trades. You try and reach a broker on the phone but since other clients can’t access their accounts either and are trying to reach customer service, phone lines are clogged. You face wait times of close to an hour and you may be out of luck if you wanted to make a trade at the end of the day.

That’s what clients of BMO InvestorLine faced on May 25th and 26th. BMO said it was experiencing “technical glitches” and was sorry for the “inconvenience” but it took two days for normal operations to resume. As a goodwill gesture, BMO InvestorLine says it is charging $9.95 per trade for all clients for trades executed while the glitches persisted and also offering two free equity trades in June but some clients may feel the gesture to be very small compared to the opportunity cost of the outage.

BMO InvestorLine may have been the latest but it is certainly not the only discount broker to experience temporary problems. Clients at TD Waterhouse and RBC Direct Investing have experienced website outages in the recent past. Investors may not be able to do much about these intermittent website problems at discount brokers but it is something to be aware of.

More ETFs from BMO

May 30, 2010


The Bank of Montreal is launching ETFs at a fast and furious pace. Eight new ETFs from BMO started trading on the TSX recently. In just over a year since it launched its first ETFs, BMO has 30 ETFs in its lineup. The new ETFs that started trading last week are:

  • BMO Equal Weight REITs (ZRE)
  • BMO Equal Weight US Banks Hedged to CAD (ZUB)
  • BMO Equal Weight US Health Care Hedged to CAD (ZUH)
  • BMO Junior Oil (ZJO)
  • BMO Junior Gas (ZJN)
  • BMO Long Federal Bond (ZFL)
  • BMO Real Return Bond (ZRR)
  • BMO Emerging Markets Bond Hedged to CAD (ZEF)

Two of these ETFs are interesting. The BMO Real Return Bond ETF (ZRR) has a MER of 0.25% compared to a MER of 0.35% for the iShares DEX Real Return Bond ETF (XRB). ZRR holds 5 Government of Canada real return bonds but XRB is slightly more diversified as it has about 15% of its holdings in provincial real return bonds. A 10 basis points savings in MER may not be tempting enough for existing investors to switch because investors with large holdings will want to invest in real return bonds directly, not through an ETF. The Sleepy Portfolio, for example, has $7,300 in XRB. Switching to ZRR will save $7.30 per year but will cost $20 in trading commissions plus another 0.5% or so in bid-ask spreads. In other words, it will take 8 years for the Sleepy Portfolio to just recoup the costs of switching.

The BMO Equal Weight REITs (ZRE) has a MER of 0.55%, the same as the iShares S&P/TSX Capped REIT ETF (XRE). But unlike XRE, which is capitalization weighted and just three REITs account for more than half the weighting, ZRE weights 18 REITs equally. Therefore, ZRE may be a more diversified holding than XRE for the REIT portion of a portfolio. It would have been very tempting to switch if BMO had set the MER at a much lower level than 0.55%.

The rest of the new ETFs focus on such narrow market segments that Jon Chevreau says they are “the antithesis of the “buy-and-hold-for-the-long-run” first generation of broadly diversified equity ETFs epitomized by the Vanguards of the world”. I couldn’t have said it better.

This and That: Emotional investors, forecasting folly and more…

May 27, 2010

  1. Emotions are driving stock prices. That’s not something to fear. It’s something to exploit, wrote Derek DeCloet in The Globe and Mail.
  2. It was only four weeks back that investors were sure that (a) interest rates will go up (b) bonds will face big declines and (c) the loonie will keep soaring. Rob Carrick takes another look at these fearless forecasts.
  3. Have you overdosed on new ETFs yet? Jon Chevreau reported that BMO introduced eight new ETFs this week. It’s enough to make you nostalgic for the time when you could count all the ETFs listed in Toronto with the fingers in your hand.
  4. Congratulations to Where Does All My Money Go? and Squawk Fox, winners of the Globe and Mail Best of the Money Blogs vote.
  5. Kevin Press of Today’s Economy Blog says that global diversification ain’t what it used to be.
  6. Thicken My Wallet notes that investors who are not high net-worth clients have no choice but to become DIY investors.
  7. Dan Bortolotti of the Canadian Couch Potato blog kicked off the new Index Investor column for MoneySense by showing how investors of all account sizes can become couch potatoes.
  8. The Financial Blogger wrote a humorous post on how money relationships are as varied as human relationships.
  9. With hot and dry weather, our lawn is in a sad state these days. Million Dollar Journey pointed out the steep cost of maintaining a perfect lawn.
  10. Larry MacDonald has eight tips for reducing the cost of rebalancing your portfolio.
  11. On July 1st, the Harmonized Sales Tax will kick in in Ontario. Canadian Financial Stuff notes that the HST is setting off a mini construction boom.
  12. Politicians are still debating whether to get rid of the penny. Michael James says that they ought to be debating getting rid of nickels and dimes as well.

I’m unable to highlight all the articles worth checking out in my weekly round up but you can check them out through my Twitter feed. Have a great weekend everyone!