My struggles with TD/Waterhouse and their RDSP continues on, with a little progress thanks to a commenter to my previous post RDSP and TD Aggravations who suggested I was mistaken that I could in fact deposit money into the account via the TD/Waterhouse Phone interface.
I phone on Monday and sure enough I can transfer money into the account, but as usual not in a straight forward way. First I had to transfer money into my main trading account, which I haven’t used in years, and then from that account I could transfer cash into the RDSP account. I was quite happy that I could do that, and it did seem to happen quite quickly, so I was ready to invest the funds, using the on line interface.
However, that evidently, is a bit to straight forward for things, as I am blocked from doing anything on line with the account, other than look at the account balance. I may not have filled in the correct forms on this, not sure, but I must now call the TD/Waterhouse phone folks (again) to ask this very question, and if it is simply not allowed to trade on line, I will then find out whether this is something I can do on the phone. My guess would be, yes I can trade over the phone (or go into the bank), because (in my opinion) this means someone can put their Trading ID next to my purchases and get the commission from those trades (yes a very cynical view, and I will gladly retract it, if I can be proven wrong).
This means I will end up spending more time doing something that should have taken less than 5 minutes (so far I have spent over an hour fiddling with this thing, and my guess there is another 1/2 hour to be spent (at least) attempting to complete things by buying the securities I wish to add to this account).
Given this account is a very long term savings vehicle I am using a passive investment scheme (fashioned after one of the Canadian Capitalist’s original sleepy mini portfolios):
- TDB909 â€“ TD Canadian Bond Index (e-Series) Â 33%
- TDB900 â€“ TD Canadian Index (e-Series) 33%
- TDB902 â€“ TD US Index (e-Series) 33%
A Small Difference
Now the original Sleepy Mini-portfolio included TDB911 â€“ International Equities and I may add some of this to the mix with this addition of funds, depending on how I feel.
Disclaimer:This is not a sales pitch or endorsement for this method or these funds, it is simply supplied as an example where I think it is a good place for a passive investment strategy using Index Funds.
And the benefit of the bond fund is if the stock market dives the bond fund bounces up. So long as you don’t panic and sell if the bond fund drops 20%, over time it should bounce back up anyway. A short term bond fund (maturities mostly 1-3 years) also has much less room to fall and likely won’t lose much value. But even a long term bond fund will be fighting valiantly not to fall and may do pretty well.
I just wanted to emphasize that bonds are only one fixed income security. GICs, money markets and cash are other ones. In the past, Bond funds could generate much better returns than GICs, money markets or cash, so they were preferred. Right now, though, bonds might be heading for a fall, so they might actually make less money than GICs. But no one can really predict that.
As you say, if you’re investing for the long term, and if you can avoid panic selling, bonds are fine. It’s still far preferrable to putting 100% into equities.
Good luck with the hassles. It sounds like it’s been a very trying time.
Come back Tuesday there will be yet another follow on post!!!
I tend to complain on twitter for maximum exposure! Works most of the time!!! Have got all sorts of freebies!
You definitely can’t do online trades nor do they show any interest in allowing this to happen. I have discovered, though, that I can fund my rdsp by just doing a bill pay from my credit union account. Prior to that, my only option had been to go into the bank any time I wanted to do a deposit. Annoying but TD is still the only institution that allows the rdsp investor to purchase basically any type of security.
That is an ingenious solution, good on you, I may try this in a different way! Thanks!
Normally I’d support a portfolio like you describe, but given the incredibly low interest rates, I’d be nervous about putting 30% into a bond fund (any bond fund) right now while we’re at rock bottom. As soon as rates start to climb, many bonds are going to tank.
Have you considered putting that 30% temporarily into a money market fund or into GICs until interest rates are more “normal”? Or at least take a very very close look at that bond fund and make sure it’s all in very short term bonds, under 3 years to maturity. Have you compared to the CBO etf? It may have a lower MER and lower risk, but I’m not sure because I haven’t looked at the TD product in any detail.
Good luck with the seemingly endless battle against “technical difficulties.”
I keep hearing that Bond funds are dangerous, and I keep meaning to do something about it, but if you think the RDSP is confusing, the GIC path is not intuitive either.
I’m hoping that once your RDSP is fully set up that perhaps you can purchase third party GICs from within the plan as a simple no-commission buy. For a regular self directed investment account at BMO InvestorLine or CIBC Investor’s Edge this is a very easy option. You can just browse a list of GICs for any length of term and click on one to buy it. (The minimum though is 5000 which may be too high for you at this stage, I’m not sure.)
At BMO/CIBC the GICs are offered by CDIC insured companies like Home Trust and People’s Trust and offer a much better rate than the bank. (E.g. today rates are about 1.7% for 1 year terms.) On maturity, they automatically pay out in cash back into your investment account.
Personally, I would not touch GIC “Products” with a bargepole. (e.g. the ones that are market linked etc.) Keep your “safe” money safe, and use your equity money to buy stocks. Don’t try to mix the two. (For one thing the bank always ends up the winner on the earnings.)
Right now, 1 year terms are the longest you should consider. There is a strong chance of rates climbing .25-.5% by year end. So you don’t need to ladder them or anything because there’s no reason to lock in long terms at the abysmal rates offered today.
If you have less than the minimum (probably $5000) I would put the money into a money market fund before putting it into a bond fund. But if you can’t get a GIC or a money market fund, then the bond fund is probably ok. It’s just not a great time to start putting money in bonds, since the outlook is that they might suffer a down tilt soon. But then the rise in interest rates has been predicted for the last 3 years and still hasn’t happened yet, so who really knows!
The most important thing is you’re getting the account set up and running. That alone is a huge step forward and puts you miles ahead of many others. It’s very hard to find the time to deal with these kind of hassles and you’re to be congratulated for not giving up or giving in.
I keep hearing that Bonds are going to take a hit, and I think I understand why, but if you are investing long term and don’t have a lot of money in the Bond Fund (for now), it may hurt but not as much as for BIG investors?