A friend just opened her first self-directed investment account. Now, she is wondering, "Now what?" When I learned that at this moment she has only a small amount to invest, not even $2000, advice was easy: round up some more cash. Right now, she cannot afford the cost of trading fees. The answer: mutual funds, if available, free of trading charges.
I checked and her account does allow the buying and selling of mutual funds with no commission (She should double check.), although there is fee for selling a mutual fund when held for less than 30 days. With TD WebBroker there are two series of mutual funds that may interest her: the D-Series and e-Series mutual funds. The D-Series trims a little from the MER and the e-Series attempts to compete with ETFs.
I know today mutual funds are out of favour with many. ETFs are the investment vehicles of choice. It may surprise you to know that sometimes mutual funds can best ETFs. I've run demo portfolios created using low MER mutual funds and done amazingly well.
TD claims the key reasons to own D-Series and e-Series Funds are:
- Access to professional fund management
- Lower management fees
- No commissions to buy or sell
Here is a partial list of some of the TD mutual funds that may be of interest to an investor with a TD WebBroker self-directed account.
TD Canadian Blue Chip Dividend D TDB3105
TD Dividend Growth - D TDB3088
TD Ultra Short-Term Bond - D TDB3078
TD Monthly Income - D TDB3085
TD U.S. Blue Chip Equity D TDB3091
TD US Index e TDB902
TD International Idx Currency Neutral-e TDB905
TD Ultra Short-Term Bond - D TDB3078
If I were forced, for whatever reason, to invest in mutual funds, my person choice would be to mix two funds: TDB3085 (for exposure to Canadian equities and bonds) and TDB3091 (for U.S. equities exposure).
I have a demo portfolio running the above mix. It has performed very well. I might change the U.S. mutual fund component to TDB902. I believe it delivers similar performance but a better dividend. I like putting more TDB3085 into the mix than U.S. equities but there are arguments for weighting the mix towards the States. It is the investor's call.
If you are not fond of bonds, I'm not, I'd consider switching TDB3085 for the pure Canadian equity play TDB3105. This is not an easy decision. At times the Monthly Income fund bests the Canadian dividend funds and it usually pays a better dividend. Again, it's the individual investor's call.
The above approach gets one into the market but unfortunately locks one into the market for a month if one is to avoid all charges. When one has more funds available, the next move is to invest in a portfolio in an ETF like XEQT.
XEQT is a pure equity play that gives an investor exposure to global markets with the accent on the States. If one prefers a portfolio with a bonds component, the XGRO is the way to go.
Whether one moves on to building a personal portfolio of individual stocks is an open question. Using TD WebBroker Portfolio Manager, I'd build a demo portfolio mirroring my wish list portfolio. Then I would note how my dream portfolio performed in comparison to the portfolios-in-an-ETF such as XEQT, XGRO, VEQT and others if they are of interest to you.
XEQT is the green line; TSX is the purple line.
Later today, January 9, 2022, I'm going to create five $30,000 portfolio. One will be a mix of two mutual funds: a Canadian Blue Chip Dividend fund and a U.S. Index fund. The second and third demo portfolios will simply be either the TD Monthly Income fund or the BMO ZMI Monthly Income fund. The fourth and fifth portfolios will both be ETFs marketed as complete portfolios in an ETF. (XEQT is the pure equity play and XGRO is the a more traditional approach with 20% in bonds).
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Note: Mutual Funds Update after markets close -- Updated as of 6:30 PM, Feb. 4, 2022.
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