There is a bit of effort you need to put in to invest in TD e-Series Funds, but it is worth it. First of all, you need to apply using the pdf available on the TD Canada Trust website.
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%.
How To Setup and Rebalance TD e-Series Funds,Related Posts:
Tom Drake is the owner and head writer of Canadian Finance Blog.
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How would you compare these index funds to the similiar ishares ones?
shawn,
iShares have lower MERs, but you have commission fees to pay to a broker since they are bought like stocks. The e-Series funds have slightly higher MER, but no cost to purchase.
If your making small, automatic, bi-weekly or monthly purchases then you’ll likely be better off with the e-Series. If you’re looking to invest more money at once, then look into buying iShares.
Tom,
What are your thoughts on the tax advantages of ETF versus say these e-funds. I think the e-series funds are based on derivitives, which I really do not understand.
Shawn
shawn,
I’m not positive, but I don’t think there is a difference tax-wise. They both hold the underlying stocks with minimal selling that would trigger capital gains. However, I’ve never seen a tax consequence personally as I have my e-Series funds in my RRSP.
Hi Tom,
I have E-series myself and I set it up to automatically deduct a certain amount (e.g. $200) per month from my savings account. I then split the $200 into the allocation according to my risk profile (e.g. $50 goes into Canadian Index and $25 to Bonds). That way, I don’t have to worry about rebalancing.
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Does anyone know if converting a TFSA from an Investor Series Account into an e-Series account, would trigger a withdrawal/purchase?