I've heard a lot about a couple brokerages in Canada offering no-commission ETF trades on specific ETFs lately, so I thought I'd ask Questrade if they had any plans to release such a feature. I don't want to switch away from Questrade's low commission fees, since I buy stocks as well as ETFs, but I don't mind waiting.
Here was my question:
"Hi,
I noticed that two brokerages in Canada have now begun offering commission-free ETF trades for specific ETFs. Does Questrade have any plans to offer a similar service? If so, I would switch my RRSP account to Questrade in a heartbeat, provided the variety of ETFs is good.
Thanks,
-Mike"
Here was their reply:
"Unfortunately, we currently still charge commissions on ETFs. We may look into the no commission ETFs; however, no discussions have occurred yet. Please feel free to contact us if you have any additional questions."
Showing posts with label ETFs. Show all posts
Showing posts with label ETFs. Show all posts
Sunday, October 23, 2011
Thursday, June 2, 2011
Diversification
In the past few months, I've been reading and learning about how to do fundamental analysis of a stock to determine its growth or value potential. I did some analysis of a few stocks listed on the TSX, and I came up with 15 potential growth candidates. I haven't done any deeper analysis yet, just some initial weeding out of stocks that didn't fit my basic criteria.
I decided to create a new portfolio in Google Finance and add my 15 hopefuls to it, just to see which ones outperformed the others. I added hypothetical transaction data to each stock so that the cost basis was around $500 for each one. This is my personal minimum amount to invest in a stock, since it makes brokerage fees around 1% of the total amount being invested. All in all, my hypothetical cost basis was around $7,700. In the two weeks since I started the portfolio, it has gone up to +3% and is now around +1.6%. While it's true that two weeks is a very short time frame for growth investing, I realized something as I checked on the portfolio every day.
I have read many times before how diversification in a portfolio is essential for mitigating concentration risk. I didn't actually realize the true value of diversification until I saw it in action. The worst of my 15 picks is currently down $62. However, my overall portfolio is up by $63. Just under half of my picks are in the red by small amounts, but from diversifying across multiple stocks I have managed to keep the overall portfolio value positive.
Since this is all hypothetical, it's purely for the sake of learning on my part. However, it made me re-examine my current strategy for my real stock portfolio. Up until now, I've been working on building a dividend growth portfolio. The dividend growth strategy is a valid strategy, however it takes a fair amount of capital before the dividends start to really pay off. The dividend growth strategy also takes patience, which I don't seem to have when I say that I'm considering switching strategies.
I have two excuses for moving away from the dividend growth strategy for the time being. Firstly, my whole investing experience so far has been all about learning as much as I can, both by reading about the vast amount of things there are to know about investing, and also to learn by doing. Learning investing through hands-on experience was my inspiration for starting this blog in the first place. Secondly, as I mentioned above, it takes a significant amount of capital to earn meaningful dividend amounts through a brokerage account every so often. It's a little different if you buy shares direct and can hold fractional shares, but that's not the case for me.
So after taking a good look at my diversified pretend portfolio, I saw the true power of diversification and the role it plays in growing your money. Since I have a very limited amount of money to invest with, I decided to try and grow my account more efficiently and effectively. Perhaps a few years down the road when I have more income available and a larger balance in my TFSA, I can consider re-implementing the dividend growth strategy.
If I want instant diversification and my TFSA is a discount brokerage account, what's the first thing that comes to mind? ETFs! I did a little research on what types of ETFs are available on the TSX, and what sectors and market caps they cover. I came up with a few choices and put them into a new hypothetical portfolio in Google Finance. Then I scrolled down to the portfolio performance window, and checked off the box for comparing portfolio performance with that of the S&P/TSX index. As it turns out, my ETF choices outperform the S&P/TSX by almost 10% over the past 12 months! I have yet to examine the risks associated with each ETF, and I also need to decide what percentage of my portfolio each ETF should occupy. I'm excited to try out a new strategy, and I've now given you fair warning for the types of posts you might see on this blog in the near future.
I decided to create a new portfolio in Google Finance and add my 15 hopefuls to it, just to see which ones outperformed the others. I added hypothetical transaction data to each stock so that the cost basis was around $500 for each one. This is my personal minimum amount to invest in a stock, since it makes brokerage fees around 1% of the total amount being invested. All in all, my hypothetical cost basis was around $7,700. In the two weeks since I started the portfolio, it has gone up to +3% and is now around +1.6%. While it's true that two weeks is a very short time frame for growth investing, I realized something as I checked on the portfolio every day.
I have read many times before how diversification in a portfolio is essential for mitigating concentration risk. I didn't actually realize the true value of diversification until I saw it in action. The worst of my 15 picks is currently down $62. However, my overall portfolio is up by $63. Just under half of my picks are in the red by small amounts, but from diversifying across multiple stocks I have managed to keep the overall portfolio value positive.
Since this is all hypothetical, it's purely for the sake of learning on my part. However, it made me re-examine my current strategy for my real stock portfolio. Up until now, I've been working on building a dividend growth portfolio. The dividend growth strategy is a valid strategy, however it takes a fair amount of capital before the dividends start to really pay off. The dividend growth strategy also takes patience, which I don't seem to have when I say that I'm considering switching strategies.
I have two excuses for moving away from the dividend growth strategy for the time being. Firstly, my whole investing experience so far has been all about learning as much as I can, both by reading about the vast amount of things there are to know about investing, and also to learn by doing. Learning investing through hands-on experience was my inspiration for starting this blog in the first place. Secondly, as I mentioned above, it takes a significant amount of capital to earn meaningful dividend amounts through a brokerage account every so often. It's a little different if you buy shares direct and can hold fractional shares, but that's not the case for me.
So after taking a good look at my diversified pretend portfolio, I saw the true power of diversification and the role it plays in growing your money. Since I have a very limited amount of money to invest with, I decided to try and grow my account more efficiently and effectively. Perhaps a few years down the road when I have more income available and a larger balance in my TFSA, I can consider re-implementing the dividend growth strategy.
If I want instant diversification and my TFSA is a discount brokerage account, what's the first thing that comes to mind? ETFs! I did a little research on what types of ETFs are available on the TSX, and what sectors and market caps they cover. I came up with a few choices and put them into a new hypothetical portfolio in Google Finance. Then I scrolled down to the portfolio performance window, and checked off the box for comparing portfolio performance with that of the S&P/TSX index. As it turns out, my ETF choices outperform the S&P/TSX by almost 10% over the past 12 months! I have yet to examine the risks associated with each ETF, and I also need to decide what percentage of my portfolio each ETF should occupy. I'm excited to try out a new strategy, and I've now given you fair warning for the types of posts you might see on this blog in the near future.
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