The Account Application is pretty straightforward. You’ll need to provide information like your name, SIN, date of birth, and banking information.

The next couple pages are the Wealth Allocation Model and then the Investor Profile. Fill out the Wealth Allocation Model to provide your Total Point Score. This score will show you which asset mix would be right for you. TD will review this and want the asset allocation to match your score. Because of this, if you are quite sure of what allocation you want, you may want to adjust your score to match that.

The Portfolio Worksheet is where you enter the exact asset mix you want and the amount you are investing, both as a lump sum and pre-authorized purchase plan. To keep it really simple, many investors with a long enough investment time frame might benefit from a equal split into:

• Fixed Income 25% – TD Canadian Bond Index
• Canadian Equity 25% – TD Canadian Index
• U.S. Equity 25% – TD U.S. Index
• International Equity 25% – TD International Index

Next is a simple Understanding & Consent form to sign. In the Transaction Form you have to re-enter the information from the Portfolio Worksheet. These two asset mixes do need to match.

Then mail it in to TD e-Series Funds Administration. The full address is on the first page of the pdf. Once everything is setup, TD will mail you your login information.

Once a year, you should rebalance your portfolio back to your original asset mix. Using my example above, if you have a certain amount available to invest, put it into the under performing funds to bring them back up to 25%. If you do not have enough new money to re-balance, you can sell some of the better performing funds and put it back into the others. By rebalancing, it forces you to buy low and sell high.

These steps will provide a diversified portfolio, investing in the entire index that the funds track. You can rebalance it yourself and you will be paying a Management Expense Ratio (MER) of less than 0.5%.

Related Posts:

• TD e-Series Funds
• Dividend Funds That Don’t Pay Dividends
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TD Canadian Bond Index tracks the performance of the DEX Universe Bond Index. The Universe Index is comprised of Canadian investment-grade bonds which mature in more than one year. It has a MER of 0.48%.

TD Canadian Index tracks the performance of the S&P/TSX Composite Total Return Index. The S&P/TSX Composite Index is comprised of Canadian issuers traded on the Toronto Stock Exchange. It has a MER of 0.31%.

TD U.S. Index tracks the performance of The Standard & Poor’s 500 Total Return Index. The S&P 500 Index is comprised of 500 widely-held U.S. issuers. It has a MER of 0.33%.

TD International Index tracks the Morgan Stanley Capital International Europe, Australasia and Far East Index. The MSCI EAFE Index is a broadly diversified index consisting of equity securities of companies domiciled in developed markets outside the U.S. and Canada. It has a MER of 0.44%.

Not only do these four funds invest you in the entire index, their MERs are about 2% lower than the average mutual fund. This 2% advantage can go along way when investing over a long term.

Tomorrow’s post will detail some of the advantages that the TD e-Series Funds have over other mutual funds and show you how to open this type of account.

Related Posts:

• How To Setup and Rebalance TD e-Series Funds
• Canadian Index ETFs – XIU vs XIC
• Dividend Funds That Don’t Pay Dividends

When I first read about the Couch Potato I realized how simple investing can and should be. The basic premise is that by investing in ETFs or TD’s eFunds you can build a portfolio that equals the various indexes, 20% in Canadian equities, 20% in US equities, 20% in international equities and 40% in Canadian bonds. All with management expense ratios (MER) under 0.5%. While you won’t do any better than the market, you also won’t do any worse, just average. This is better than it sounds since, as a whole, the market is the average, but in regular mutual funds you’re getting the average minus expenses that equal more than 2%.

I highly recommend that you have a look at Money Sense magazine.

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