I still have some TD e-series funds in my RRSP from when I first started DIY investing. I’ve been trying to clean up my portfolio so have been re-evaluating whether I should still keep TD e-series in my portfolio. The alternative is to liquidate them and convert them into ETFs. Here’s my review of the TD e-series vs ETF and which one is better for your portfolio.
Table of Contents
TD E-Series vs ETF
In this comparison of TD e-series and ETFs, we will go over:
- What the TD e-Series Funds are
- How the fees compare between the TD e-Series and certain One Ticket ETFs are
- How the returns of TD e-series vs ETFs are
- How to go about purchasing TD e-Series for your portfolio
TD E-Series Fund vs Exchange Traded Fund
Now let’s first go over the basic differences between a mutual fund (the TD e-Series is basically a mutual fund but the fees are lower than a typical mutual fund because it’s all online and there’s no middle person to pay) and an ETF.
Mutual funds are purchased by NAV (net asset value) per share (total value of all securities in fund / # outstanding shares). The purchase takes a few days to settle. Typically, mutual funds are actively managed.
Certain brokerages (like Questrade) charge you $9.99 to place a mutual fund order.
- Tangerine Investment Funds Review
- Step by Step Guide on How to Invest your TFSA with Questrade
- How to Transfer TD e-Series to Questrade
ETFs (or Exchange Traded Funds) are traded on the stock market.
You put an order in through your brokerage and pay a commission to buy the ETF. Some brokerages do not charge you commission to buy the ETF (like Questrade)
ETFs are are usually passively managed.
TD e-series Review
I would say that the TD e-series funds were the first pioneers in the DIY investing arena (for those who don’t want to be individually stock picking, anyway). They have been in the DIY investing game for over 20 years. The TD e-series funds provide an easy way for you to have a TD e-series Couch Potato portfolio and ‘index and chill’.
In recent years, the holdings of the TD e-series has changed and now the holdings are TD index-tracking ETFs. They also reduced the management fees and hence the MERs are lower for the TD e-series now.
For a hypothetical TD e-series Couch Potato Fund, you could have a 25% each asset allocation of say:
- TD Bond Fund -e
- TD Canadian Fund -e
- TD International Fund- e
- TD US Fund -e
For more potential TD e-series couch potato ideas, I would recommend checking out Dan Bortolotti’s blog.
Now let’s look at the fees of the TD e-series and some one ticket ETF fees.
TD e-series fees vs One Ticket ETF fees
Here are some of the fees of the TD e-series funds:
- TD e-Series Canadian Index Fund 0.28%
- TD e-Series US Index Fund 0.33%
- TD e-Series International Index Fund 0.45%
- TD e-Series Canadian Bond Index Fund 0.44%
As mentioned, these hold TD ETFs that track the index, and the TD e-Series have become a ‘mutual fund wrapper of TD ETFs’.
For example, the TD e-series Canadian Index Fund Top 10 Holdings are:
|TD Canadian Equity Index ETF||34.4%|
|Royal Bank of Canada||4%|
|Canadian National Railway||2.5%|
|The Bank of Nova Scotia||2.1%|
|Canadian Pacific Railway Ltd.||2.1%|
|Brookfield Asset Management||2.0%|
|Bank of Montreal||1.9%|
|Canadian Natural Resources Ltd.||1.8%|
Similarly, a lot of these Vanguard ETFs are ETFs that are a wrapper of other ETFs.
Here are some of the fees for certain popular similar Vanguard ETFs
- VXC FTSE Global All Cap ex Canada Index ETF 0.21% (holds about 60% US and 40% International)
- VAB Vanguard Aggregate Bond Fund 0.09%
- VCN Vanguard Canada All Cap Index ETF 0.06%
For Vanguard one-ticket ETFs:
- VGRO Vanguard Growth ETF 0.25%
- VEQT Vanguard All Equity ETF 0.25%
- VBAL Vanguard Balanced ETF 0.25%
As you can see, there is about a max 0.20% difference between the Vanguard one ticket ETFs and the TD e-series funds, with the Vanguard one ticket ETFs being more economical in terms of management fee.
I know I know, 0.20% doesn’t seem like very much. However, the larger your portfolio is, these numbers will catch up and add up.
On a $250,000 portfolio an additional 0.20% management fee comes up to $500 a year.
For a $50,000 portfolio a 0.20% difference is about $100.
That being said, if you are incurring fees to buy ETFs in your online brokerage, then these commissions will add up too!
For me, I use Questrade so buying ETFs is commission free. If I had to pay each time I dollar cost averaged I would probably stick to the TD e-Series funds.
TD E-Series Returns
Now that we know how the fees compare, let’s have a look at the returns for the TD e-series funds (these are the 1 year performance as of February 27, 2021 as noted on TD Asset M anagement’s website).
- TD e-Series Canadian Index Fund – 15.57%
- TD e- Series US Index Fund- 32.79%
- TD e-Series Canadian Bond Index Fund– 0.55%
- TD e-Series International Index Fund- 14.39%
If you put these as equal weight (e.g 25% each) in your portfolio, your average returns for the one year ending February 27, 2021 will be 15.8%
Here are the returns for the TD e-Series Canadian Index Fund:
Now, let’s look at some of the Vanguard all in one ETFs. I pulled these numbers for 12 month return with the end date of February 27, 2021.
- VEQT Vanguard All Equity ETF 15.27%
- VGRO Vanguard Growth ETF 12.81%
- VBAL Vanguard Balanced ETF 9.42%
Those were the one ticket ETFs, here are some of the returns of similar and comparable indices to the TD e-series.
- VXC Vanguard ex-Canada ETF 19.09%
- VAB Vanguard Aggregate Bond Fund 1.24%
- VCN Vanguard Canada All Cap Index ETF 7.94%
If I were to include a DIY portfolio of 50% VXC and 25% VAB and 25% VCN, the 12 month returns for this would be 11.84% as of February 27, 2021.
For VEQT it was 15.27%, for VGRO it was 12.81%, and for VBAL it was 9.42%.
As you can see, the TD E-Series Funds (depending on how you asset allocate) returns are very decent, but the fees are slightly higher.
How to Buy TD e-series
You can buy TD e-series a number of ways.
You can open up a TD Mutual Fund Account (either a TFSA, RRSP, or non-registered) and buy the TD e-series as a mutual fund. You can set up automatic pre-authorized purchases on a regular basis. Pre-authorized purchases allow you to invest with each paycheque you get and dollar cost average so that you don’t have to feel compelled to ‘time the market’. To access your TD e-Series, you would log in through Easy Web.
Alternatively, you can also purchase these mutual funds directly with something like the TD Direct Investing platform. Purchasing mutual funds is commission free with TD Direct Investing. Here’s is a review of TD Direct Investing if you are interested.
The TD e-series funds are also available from other online brokerages, too, like Scotia iTRADE or BMO Investorline.
When selecting which mutual 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 and it is not an e-series fund.
Here are a few things to consider when you are buying TD e-series funds.
- You will need $100 for each e-Series fund as a minimum investment.
- For pre-authorized purchase plans, the minimum amount is $25.00 for each e-Series.
- There is an early redemption fee of up to 2.00% of purchase cost if you redeem within 30 days of purchase.
If you are young and have a long time frame to invest ahead of you, you might want to start off with a more moderate approach such as equal allocation of the following (though some people may think 25% bond allocation is too much- it depends on your risk tolerance).
When buying from TD Direct Investing, enter the ticker symbol of TDB900 for TD Canadian Index Fund- e, and so forth.
- TD Canadian Index Fund- e TDB900
- TD US Index Fund- e TDB952
- TD Canadian Bond Fund- e TDB909
- TD International Index Fund- e TDB911
One thing to note is that you would have to rebalance your TD e-series. Here’s a primer on how to rebalance your TD e-series funds.
You could set up automatic re-investment of your distributions and dividends with the TD e-series as well.
How to BUy ETFs
- Click “Trade”
- Under “Order Entry” put in your Ticker Symbol (e.g. VGRO)
- Under quantity put in how many you want to buy
- This is dependent on how much you have to invest or how much you want to buy at that time
- How much each share of ETF costs
- For example, VGRO is $29.82 (as of March 21, 2021), and you have $500 you want to buy
- $500/29.82= 16.77 shares
- Under “Quantity” put in 17
- You can choose to do a limit order if you want to make sure you don’t spend more than $24.64 per share. Put this (or whatever amount you want) in the limit order box
- GTD (Good To Date) and put in the date (or stick it to Day if you have time to put in an order when the market is open)
- Make sure the Account says the account you want it in (e.g. TFSA, RRSP, or non-Registered)
- Then press “Buy”
- That’s it, you are done!
You could set up a Questrade drip for your index ETFs if you want to increase the speed of your compounding.
Genymoney.ca Verdict: TD E-SERIES VS ETF
In summary, the TD e-series funds are great. They revolutionized the DIY investing sphere and paved a path for people to start feeling confident about their investments without having to rely on the high fees of shady high MER mutual fund sales people.
They also have decent and impressive returns.
So which one is better, the TD e-Series vs ETF? I think it depends on how large you think your portfolio will get, and what brokerage you use (for example, Questrade is NOT good to buy mutual funds but good for ETFs).
However, when (note I say WHEN not IF) your portfolio gets bigger, you may want to go for a product that has even lower fees AND doesn’t require you to rebalance regularly. Even though the TD e-series funds management fees are quite low, you can go even lower as we see above.
Sure, the difference between the TD e-series funds and an all in one Vanguard ETF is like 0.25%, but that 0.25% annually on a $200,000 portfolio is $500. Wouldn’t you rather have that $500 in your investment portfolio instead of disappearing as a management fee?
For a smaller portfolio, using the TD e-series funds makes more sense. A smaller portfolio would be something like the RESP, where the maximum contribution is $50,000 per child. For example, we hold TD e-series in our children’s RESP account.
That being said, if you have a Family RESP account (with more than two children for example), that account might become sizeable.
Finally, if you are not comfortable rebalancing your TD e-series, you might also want to think about starting with an all in one ETF from the get go.
You may also be interested in:
Do you have the TD e-series funds?
Would you rather have TD e-series or ETFs in your portfolio?
GYM is a 30 something millennial interested in achieving financial freedom through disciplined saving, dividend and ETF investing, and living a minimalist lifestyle. Before you go, check out my recommendations page of financial tools I use to save and invest money. Don’t forget to subscribe for blog updates, a free dividend yield spreadsheet, and the free Young Money Bootcamp eCourse.