How to Open, Invest, and Rebalance a TD e-series Portfolio

The TD e-series Funds are one of the easiest ways to get into the market. It is one of the first ways I got into the market and it is so easy that I taught my sister how to set it up. So if we can do it, you surely can!

Other than the easiness factor, the MERs are very low and can be as low as 0.33% for some funds.

The MER is low because you get set up online and the TD financial advisors at the bank don’t know very much about it (because they are not compensated to know about it, that’s why the fees are low).

Therefore, to open to the TD e-series Funds and to start investing in the stock market, you need a bit of patience, a bit of gusto, and a pinch of knowledge on how to open a TD e-series account up.

Unlike Exchange Traded Funds, every time you PURCHASE a fund (e.g. setting up automatic monthly contributions) you do it for free– you won’t have to pay any commissions for frequent purchasing. Unless you end up with ETFs through Questrade where the ETF is commission-free to purchase.  The only fee is a max 2.00% of purchase cost if you redeem your fund within 30 days of purchasing it (it’s called a short-term trading fee).

Related: TD e-series vs ETF: Which one is Better?

How to Open up a TD e-series Fund

If you already have a TD MUTUAL Fund account (you know, where your MER is 2.5% or higher) and you were sold these mutual funds by a financial advisor, converting to a TD e-series is easy.

Alternately if you already have a TD Webroker account, you can just by the TD-eseries funds directly. This is what we did when we funded Baby GYM’s RESP.

All you have to do is review the Understanding and Consent and complete the Conversion Application Form, sign it, and mail it to them.

If you have never opened up a TD Mutual Fund Account, you can complete and sign the Application Form, which requires you to complete an investor profile (e.g. your risk assessment and recommended asset allocation) and a signed Understanding and Consent form and mail it.

For further questions, TD has kindly created a web page for the TD e-series funds so you can access the information here and you can always speak to a Mutual Fund Representative on the phone as well.

After you get EasyWeb Access via email, your TD e-series Fund account is set up and you are officially ready to Fund!

Purchasing TD e-series Funds

When selecting which funds to purchase, always look for the ‘e’ beside the fund name. That means it is part of the e-series Funds. If it doesn’t have the ‘e’, then the MER is likely much higher.

You will need $100 for each fund as a minimum investment.

If you are young and have a long time frame to invest ahead of you, you might want to start off with a more moderately aggressive approach such as:

• 25% TD Canadian Bond Index- e MER 0.50%
• 25% US Index Fund- e MER 0.36% (this is in Canadian funds)
• 25% Canadian Index Fund- e MER 0.33%
• 25% International Index Fund- e MER 0.51%

With it being 25% each of the total “Pie”, it will be easy to rebalance and set it back to your 25% each asset allocation.

The total “cost” or MER of this investment is 0.425% compared to 2.5% of your average regular run of the mill mutual fund. Now how’s that for keeping your costs low?

For further information about each of the funds, you can click on “Fund Facts”.

For example, let’s look at the US Index Fund-e. Here are the top 10 holdings, so if you’ve been dying to hold Apple in your portfolio, here’s your chance. At the fraction of the cost, and without having to put all your eggs in one basket.

Here is also a screenshot of the sector mix and diversification of this fund:

The investments included in the US Index Fund-e are those mainly in the S&P500, you know the index that Warren Buffett says people should just invest in, and forget about speculating. Of course, this is considered a “medium risk” investment and you have to be comfortable with a 37.4% reduction (see below) but also the following year, it bounced back 25.7%. That’s why diversifying (asset allocation with International Exposure, Canadian Exposure, and Bonds) is a good idea. And also dollar cost averaging.

Here’s also a snapshot of the fund performance, up to 2015.

How to Set up Dollar Cost Averaging

Speaking of dollar cost averaging, you can set up Pre-Authorized Purchase Plans with the TD e-series so it takes money out of your account and invests automatically for you.

First, you’ll need to have a bank set up from where to have the money withdrawn. I recommend your main ‘cash savings’ bank so there isn’t any chance of overdraft if you are using a chequing account instead (this happened to my sister even though I warned her not to use that).

Then you’ll need to think about how much you want to contribute on a monthly (or weekly, quarterly, or yearly- there are that many options!) basis. I recommend monthly. Let’s say you have $400 a month to invest.

1. Click on “Pre-Authorized Purchase Plans”
2. Then put $100.
3. Then put Monthly.
4. Then Drop down to the Fund Category
5. Then Click on the Fund (remember the ‘e’ stands for e-series! Don’t get the names of the funds confused, make sure the name is exact, otherwise you’re buying another fund)
6. Then choose your start date and click ‘Next’
7. Then you confirm and click “I Accept”

How to Rebalance your TD e-series Funds

When your portfolio goes markedly outside of the 25%/25%/25%/25% asset allocation pie you will need to rebalance. Over time, it won’t stay at the perfect 25% each allocation unless you correct it yourself.  There are different ways to go about it, some people choose to rebalance once the asset allocation is off by an absolute 5%.

Of course, if your goals change e.g. you are closer to retirement and you don’t want to have a risky 25% allocation and you want to invest more in bonds, then you can also change the allocation as well.

You can do it via a lump sum way or by varying your pre-authorized purchase plans/ dollar cost averaging, or by selling some funds and buying others if you don’t have extra cash on hand to invest.

To do this, you basically add up all your allocations and total it, and divide each index (e.g. bond index) by the total amount invested in the portfolio.  You’ll get a percentage.  Then you can calculate how much more you need to buy of the lowest % (e.g. bonds since they performed poorly compared to US stocks) in order to get back to original asset allocation.  If you do the selling approach, you can calculate how much you need to sell (of the one that is taking “too much of the asset allocation pie”) in order to get back to the original asset allocation.  It really is basiarithmeticic.

If you are interested to see exactly how to do this, you can learn how to do this in Step 11 of the Young Money Bootcamp eCourse.

You can rebalance on a quarterly on annual basis. Set a reminder for yourself or write it on your calendar. You can always pick your birthday if you’re resetting your asset allocation annually.

Summary of why TD e-series Funds are a Good Investing Start:

• Low MER’s (some are around 0.33%)
• Automatic deductions are available (so you can set it and forget it)
• It is easy to rebalance regularly
• You also have the option of lump sum contributions
• They have accounts for TFSA, non-registered, RRSPs etc.
• Buying and selling the funds are free of charge
• You get a quick snapshot of the market value versus book value of your TD e-series investments
• Everything is done online, and you don’t have to bank during bank hours
• You can also set up a DRIP, meaning re-investing all the dividend distributions you receive from the fund

My recommendation is setting up a TD e-series Fund if you are new to investing and just want it to be straightforward and easy, without the temptation to buy other stocks directly.

A great alternative (cheaper) is to do the DIY investing and buy a one fund ETF in a Questrade TFSA portfolio.  If you didn’t get the automatic rebalancing Vanguard fund, you could sign up for Passiv for free for a year with Questrade.  Here’s my Passiv review.

Be care that you don’t over contribute to your TFSA though.

Readers, what do you think of the TD e-series funds?  How often do you rebalance?