Success #2: Rebalancing RRSP TD e-Series Mutual Funds for More Exposure

Last year, I recognized that my mutual fund fees were too high, and I switched my units over to the TD Canadian Index and TD Canadian Bond e-Series mutual funds. Since then, my investments have been doing well. However, I decided that since the S&P/TSX Index focuses a lot on financials, energy and mining, it might be a good idea to broaden my investment exposure. After all, true couch potato index investing states that one should invest in everything and diversify as much as possible. The S&P 500 (which the TD US Index e-Series fund tracks) has a pretty good balance across sectors that I wasn't exposed to with just the Canadian Index fund. I also decided to allocate a little bit of my portfolio to the TD International Index e-Series fund to get some exposure there as well.

Overall, I decided on the following balance between e-Series funds: 40% TD Canadian Bond, 30% TD Canadian Index, 20% TD US Index and 10% TD International Index. I did some reading on the experiences others had had with rebalancing their TD e-Series funds, and I came across a very useful spreadsheet: http://www.canadiancapitalist.com/sleepy-portfolio-rebalancing-spreadsheet/

If you Google search for switching fees regarding the TD e-Series funds, you will find many forum posts discussing the issue. I seem to have found an approximately equal amount of people that say the mutual fund units are First In, First Out (FIFO) and some say Last In, First Out (LIFO). With e-Series units, one cannot sell them before 90 days have passed since purchase without incurring a penalty fee for frequent trading. This includes units purchased through a Pre-authorized Purchase Plan (PPP). If the units are sold FIFO, that would mean that the most recently-bought units would be sold first. If the units are sold LIFO, the least recently-bought units would be sold first.

In my case, the units seem to have been sold LIFO, where the oldest units were sold first. I have made PPP purchases in the last 90 days, but the full dollar amounts that I transferred to the two new funds correspond exactly with their book values. I didn't see any kind of fee of 2% of the transfer balance.

Since I now have four different e-Series funds, I tried to figure out how I could contribute to them evenly, while keeping my RRSP contributions fairly low. I don't want to contribute too much to my RRSP since I'll have to start paying off my university student loans next year, and I still have one year of school left to do (tuition to pay, books to buy, etc.). Before, I contributed the minimum PPP amount ($25) to each of my two e-Series funds every month. Now however, I have 4 funds to contribute to. Even with the minimum PPP amount, I would be paying $100/month into my RRSP to contribute to each fund equally. This is more than I can handle, so I tried to see if there was an "every two months" option on the PPP form on TD EasyWeb's website. There wasn't, so I decided to call them and see if they could set something up for me. Unfortunately, whatever options are on the web form are the only PPP options. So I guess for now, I'll leave my two PPP transactions as is, and re-balance some of the units of those funds to the other two every 90 days or more.

Something strange I noticed about the e-Series funds is that I both sent an email and then an eService message to TD with regard to my PPP inquiry, and in both cases the reply was that "we are not trained in mutual funds, please call TD". I thought the point of e-Series funds was that they were to be managed online and online only. I really hope they don't try and revoke my e-Series agreement, but if they do, I'll point out how I tried twice to contact them through online means.

Back to Investing

After a period of 4 months of unemployment, I once again have an income. I decided not to work during my school term at university, in favour of studying and improving my grades to attempt to renew my scholarship. I have set up Pre-authorized Purchase Plans (PPP) for my two RRSP mutual funds, alternating contributions to each every two weeks (every pay day). This way, I'll keep my allocation at about 50-50 equity and bonds. If I want to fine-tune the allocations, I'll have to save up $100 to contribute since that's the minimum contribution outside of a PPP. I've also started contributing small amounts to my stock-trading TFSA account. Once I get enough for a round of dividend stock purchase, I'll post another dividend stock analysis on what I decide to buy. Stay tuned!

Success #1: Recogizing When Fees Are Too High

When I decided to open an RRSP mutual fund account, I had done some research on the different funds available from my bank. I had some in mind when I went in to open the account. I have a feeling that the representative I spoke with thought I had no idea what I was talking about when I told her I wanted to start investing. This was most likely because I still get asked if I'm over the age of 18, when really I'm 22. I don't do anything major like start an RRSP without knowing what I'm doing.

So when I went in to open the account, they didn't even ask me which fund I wanted to invest in, or give me choices. I filled out their quiz, and they said "Ok, here's what we're going to set you up with." I didn't really have a choice in the matter. Luckily, I realized that the bank would get 1.9% of the balance in my RRSP account every year. Later on when the balance is getting big, that's a lot of money to lose out of my retirement savings every year.

I discovered that my bank offers low-fee index funds, around 0.3% per year. This is a much more agreeable fee, so I applied for the funds by mail. Everything is switched over now, and my annual fees are much more under control now. I've decided that if I need to deal with the bank again, I'll do it in a more direct manner, or circumvent the representative altogether by doing things through mail or email. I'm glad I was able to recognize an unfavourable financial decision, and remedy it on my own.