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moneysense.ca, 1/03/06
What Price Convenience?
Current issue:
I am a big fan of TD eFunds, which are perfect for constructing a diversified portfolio even with relatively modest sums of money. I have set up a RESP account with TD Bank for our two boys and I had decided on the following asset allocation:
Bonds – 20%
Canadian Equities – 20%
US Equities – 35%
International Equities – 25%
Each of these asset classes has a corresponding eFund and the MER of the funds range from a piddling 0.31% to a mere 0.48%. TD also offers investors a series of Managed Index Portfolios, one of which – the Aggressive Growth fund – is close to my targeted asset allocation. I would have picked it in an instant as it eliminates the need to periodically rebalance the portfolio and I would need to track the performance of just one fund in Microsoft Money.
The catch is the MER of the Aggressive Growth fund (which is actually made up of other index funds) is a relatively steep 1.34%. Is the convenience of a one-decision fund worth the extra 1% in fees? I think not! I can slice my portfolio myself, thank you!
moneysense.ca, 1/03/06
Hi,
I live near Ottawa and am about to start investing in index funds using the TD e-funds, so this post is timely. It is indeed hard to go back to high MER funds once you have discovered those, especially once you know that actively managed funds rarely are better in the long run.
No kidding! Yikes! Too much to pay to have them do it for you.
Did you compare investing in eFunds vs. ETF. It diffently not good for dollar-cost averaging, but if you put money once a year and considering DRIP for ETFs (such as iUnits), can it make sense to buy ETFs considering they have lower MER from eFunds?
Thanks.
Alex: The RESP accounts for our sons have fairly modest amounts of money. It is very expensive to build a diversified ETF portfolio (and there are administration fees charged at discount brokerages). In 5 years or so, when there is a decent chunk of money accumulated, I will consider buying ETFs.
Michael: I think TD eFunds is one of the best investing deals out there.
“Michael: I think TD eFunds is one of the best investing deals out there.”
My appointment with TD to open an account is this afternoon, so that’s reassuring. Thanks
I’m thinking of opening an eFund account for my daughter’s RESP. Are there any other fees than the listed MERs associated with eFunds? I can’t find any info about commission fees and the like on their website.
Aneta: There are no fees for opening a RESP account. eFunds are purchased directly from TD Bank and there are no commissions or sales charges. There are also no RESP administration fees.
[...] fees for these portfolio ETFs are slightly less than portfolio mutual funds available through TD e-Series Funds or ING Streetwise Funds but the same criticism directed towards the mutual funds applies here: [...]
Hi, totally agree with your comments on TD e-series. Just one question about your June 29 2006 posting. “There are also no RESP administration fees.” Has this changed? I have an RESP account with Waterhouse and there is a fee in the RESP has less than $25K in it. Have you managed to get this waved?