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Thanks to TD’s new stance on using TD E-series Index Funds in TD Mutual Funds account, it is goodbye. I still have two accounts open, and they are both going to move somewhere else.

Estimated reading time: 2 minutes

A while ago, I received a cryptic letter about “changes to my TD Mutual Fund Account.” I could only find out by going into the bank and talking to a TD investing person. Through some “internet research,” I suspected it had to do with TD E-series Index funds. This research included:

My suspicions were confirmed. I spoke to a rep with whom I had to reschedule my appointment. She confirmed with me the E-series Index Funds would no longer be “tradeable” in these accounts. This means:

  1. I could not buy any more of the TD E-series Index Funds in those accounts
  2. I cannot re-balance those accounts, by moving between these funds
  3. It would not be possible to do this at the Bank or Online either. Why online it is removed is bewildering.

So now I am moving my two accounts to TD Directline. I have had TD Mutual Fund accounts (and CT Mutual Fund accounts) for more than 27 years. Maybe I should have done this sooner.

TD E-series Done?

No, I can continue to buy them in my TD Directline accounts. There have always been issues dealing with E-series funds in my TD Mutual Fund Accounts. The Bank investment advisors make little or nothing from them, so there was little motivation to help.

I have also read about other, even lower MER ETFs (e.g. HXT, VCN, ZCN, XIC). I can also use them in a TD Directline account.

Other TD E-series Funds Stories

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I Like My Money Like I Like My Coffee

Safely invested, with low fee drag and growing every year.

Big Cajun Man 2020 (with respect to Letterkenny)
I Like My Money This Way

Frankly this makes as much sense as a lot of financial advice that I hear these days. At least the punch line is on point.

The Debt doesn’t matter crowd seems to think that due to low interest rates, debt is an afterthought. Unless the entire economy changes, Debt is going to comeback big time.

These days it is reminiscent of the hay days of the Internet Bubble. Back then the statement was:

Profits don’t matter. It’s eyeballs!

90’s Internet Bubble Investing Credo

That drove the 90’s Internet bubble. When you read that I am sure you smirked or laughed how insane that reads, but it was the gospel of investing in the 90’s. We saw the explosion of that bubble, and the associated side effects (i.e. loss in wealth for day to day investors).

One More

I like my women, like I like my coffee. Respected in the workplace and compensated at an equitable and fair level.

Big Cajun Man 2020

Same Topic

best advice

I wrote an article in 2005 about Experts? It’s your decision where Harry S. Dent Jr., back in 2000 advised how great the Internet was as an investment. This was written as the Bubble Exploded.

Index Investors, who purchase Canadian Indexes need to remember they are Highly Exposed on Banks. Banks hold a high portion of most major Canadian Indexes.

Key investment strategy

You need Two Key Investment Strategies, if you plan on investing for the long term. The first is easy, when to buy, but what might be the second?

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MER : A Worm in the RESP Money Tree

The RESP can be like a Money Tree for parents (and children) wanting to save for  post-secondary education.   If you invest your money you can get:

All of this free money is there for the asking. Truly it is like having a Magic Money Tree, however, as with all orchards, you can lose some of your fruit due to  worms.

In this case the worms can be:

  • High MER (Management Fee) Mutual Funds, many of the time they are hidden under the guise of Balanced Funds.
  • Badly performing Mutual Funds, usually pushed by an “Investment Person” who is making money on the purchase.
  • Very low interest paying saving devices (e.g. Bond Funds, Money Market Funds, GICs and HISA).

These financial worms chew into the potential growth of your RESP. Remember that most RESPs can have about a 23 year lifespan. The government stops adding money after the child turns 18, but  the  money  can continue to  grow for  a while after that, unless the  worms get in there.

When I opened my kids’ RESPs (more than 23 years ago), I didn’t know much about investing, so I spoke to my Canada Trust “Investment Person”. This person warned me that this was a short-term investment, where I didn’t want to risk losing money, so I should put the funds in safe Mutual Funds. I didn’t know so that is what I ended up getting was a small amount in a Balanced Mutual Fund (MER 2.8%) a larger amount in a Bond Fund (paying 1.2%) and a Money Market Fund (which paid 0.9%).

As time passed, I learned more about investing. I started looking at my , now, TD Mutual Funds, and saw the High MER I was paying. I read about the E-series Funds from TD, saw they had low MERs, so I went to TD to ask how to  transfer to  these Mutual Funds. You would have thought I was about to fall into an abyss, the way the investment person reacted. I got all the needed forms and changed the RESPs so that I could purchase the E-series funds.

I changed my investment mix, to be more like my other Index Fund portfolios, while still holding all grant money in safe(r) funds (i.e. Money Market funds). I didn’t want to lose the grant money, so I figured they were safe in a Money Market fund. We were wrong, Money Market funds can lose value too.

I lost a great deal of possible growth during that time. We lost it to High MER funds and badly chosen Mutual funds as well.

Don’t let the worms eat away at the growth of your RESPs.

BCM 2020

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Not Asking is Rejection by Default

I have written many times about if you don’t ask the answer is always no, but the title of this post is also a good turn of phrase. Too many times folks feel they have no one to ask for help, so they just give up. Most of the time that is exactly what service companies want you to do.

Many times return procedures are convoluted, complex or just downright silly, but it is to stop you from returning things. If you keep it, but don’t want it, they have won.

A good example is, if you want to use TD E-series mutual funds, inside your TD Mutual Fund account, it is not an easy procedure. You must apply via a written form, and wait for the “OK” from them to be able to buy them. Once you are granted permission, you then must figure out which funds are the E-series funds. If you wish to cash the E-series Funds out of the account, you must first go on-line, transfer them to a Money Market account, and then go into a TD Branch, to do the cash out?

The best way to deal with this, is simply don’t use the TD Mutual Fund vehicle. Other reasons to be wary, will be the Risk Profile trade cancellation issues.

This example shows that the system seems to be set up to discourage you from doing what you want. Worse, to do nothing, when you should be rebalancing or other important investment tasks.

Why Not Ask?

This is the question. If you do not ask for what you want, you will rarely get what you want. You may sound like a pest, you may upset whoever you are dealing with, so be polite, but ask for what you want. The worst they can say is, No.

Not Asking is Rejection by Default

Unknown, but words to live by

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Index Investing Downsides

Even though I do Index Investing (mostly) I do realize that with all investing plans there are downsides. I read an interesting article in the Kiplinger magazine (by Elizabeth Leary) that talked about the obvious Index Investing downside, you are investing in the Index. In these raucous days of market corrections, this is a concern to Index Investors

The best quote from the article is:

“By definition, index funds guarantee that you will suffer 100% of the next bear market’s decline,” — Jim Stack, president of InvesTech Research.

Given  you are an Index Investor, you already knew that, but for others the subtleties of the statement is lost. When the Indexes are in a Bull Market, you enjoy the low MER and growth, but when the Bear Market comes (and it has?) you will feel the brunt of the market drop. The argument that actively traded funds make are that they can react quicker to market corrections.

Index Investing

Both of those statements are true, but the losses you incur from Actively Traded funds MERs are usually not mentioned (especially during Bull Markets, so you lose some of your profits). Do all actively traded funds manage to stop-loss during market corrections? No (some do), and some might argue they are some of the market forces that cause the market corrections.

The other point folks forget is that the “Yard Stick” that most Index Funds use correct themselves as well. The S&P (and others) regularly update (add and drop) stocks from their Indexes, depending on what the Index is tracking. They don’t typically do this during a market correction, but the “bad apples” do eventually go away.

Ms. Leary points out that if you buy into the argument about Indexes and how active traders can be more nimble, you are assuming that your Mutual Fund manager are smart enough to deal with rapid market changes. This is a very big assumption to make, you must choose the wisely managed Active Trading Mutual Funds or risk being worse off than if you simply use well-defined indexes. The hard part is figuring out which funds are the wisely managed nimble ones.

My Opinion

I will stick with index investing for now. I tried to be an active investor myself and lost enough money to realize that Market Timing is not possible for an individual investor. Are there Actively Traded Mutual Funds that beat the market (i.e. out strip the Indexes)? Yes, however, it is interesting that it is rare to find any that can make that claim over 10 years.

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