Canadian Couch Potato Investing with Questrade

Five years ago I started investing using the Canadian Couch Potato index fund strategy with TD using their e-Series funds. Last week I initiated the transfer of my funds from TD to Questrade and this post will revolve around the pros/cons of TD vs Questrade and the process on how to move to Questrade.

This page goes through what Canadian Couch Potato is and the difference between index mutual funds and ETFs, and here is an overall guide on the strategy.

The management expense ratio (MER) for TD e-Series is in the mid 0.4% range, and for ETFs it is in the mid 0.1% range. Here is a nice breakdown of the cost per year between the two.

TD e-Series:

Pros: ability to invest every single dollar and cent (simpler to rebalance), can buy outside of stock market hours, relatively simpler to use than Questrade, lower MER than Tangerine investment funds
Cons: higher MER than ETFs, limited fund selection, must wait at least a full business day for transactions to process, minimum $100 purchases

Questrade ETFs (CCP / CPM):

Pros: buy ETFs for free, lower MER than TD e-Series funds, reimburses you up to $150 for any account transfer fees (1 account only), if following the Canadian Couch Potato model portfolio you only need to manage 3 funds (compared to TD e-Series’ 4 funds), friend referral bonuses, flexibility to trade in a wide variety of funds, faster buy/sell processing times
Cons: account inactivity fee if your total balance is below $5,000 CAD and you have not placed a trade in the previous quarter, have to invest by buying units instead of a dollar amount, limited to buying when the stock market is open, fees when you sell your funds (min $4.95 to max $9.95)

The “S” in TFSA is rather misleading: it’s not a typical savings account, “the TFSA is really just an investment vehicle to hold money you don’t spend that the government won’t take“. “Like their older sibling the Registered Retirement Savings Plan (RRSP), TFSAs are a particular type of investment account in which you can hold a wide variety of investments. You can have a savings account, mutual fund, stock, bond, or many other types of investments in a TFSA.”

If you’d like to go with TD e-Series, I previously wrote a blog post on how to get started.

If you’d like to go with Questrade, continue reading! (I hesitated transferring my investments from TD to Questrade because it seemed daunting, but it was pretty straightforward)

Disclaimer: as always, be careful with your money. I’m not responsible for what you do with your money!

Deciding to Invest

If you have some cash you don’t need for the next 10 years, you can consider investing them.

If you do need cash in less than 10 years (e.g. plans to buy a house/apartment/car, travel), consider buying some GICs to get some guaranteed interested within a specific time period (e.g. a 1-year GIC) or depositing them in a High Interest Savings Account (HISA).

If this is your first time investing in the market, you may not want to invest all of your cash at once. If you go with Questrade I recommend you have at least $5,000 in your account to waive the account inactivity fee. You can choose to invest part of your cash first, such as $2,500 out of a $5,000 balance. Once you’ve done some trades and are more comfortable you can choose to invest more.

Note: if you go with TD e-Series funds, you must buy a minimum of $100 per fund.

Preparing Any Existing Funds

If you are transferring existing funds from another institution to Questrade, you have the option of transferring all in cash, all in kind, or partial:

All in Cash: your existing investments will be liquidated to cash and transferred over
All in Kind: your existing investments will be transferred as-is to Questrade IF there is an equivalent at Questrade (e-Series funds don’t have an equivalent at Questrade, TD i-Series do)

You would initiate the transfer via Questrade, not TD.

While transferring “All in Cash” is easier, “All in Kind” provides you the benefit of “staying in the market” throughout the entire transfer process. As I chose “all in cash”, so far I’ve been out of the market from Saturday, June 9th to Tuesday, June 19 (hello from the other side).

I would advise that if you are transferring TD e-Series funds, consider selling them all (to cash) and putting all the cash in a single i-Series fund such as TDB300 (compatible with transferring all in kind to Questrade). Very Important Note: to avoid the 2% redemption fee per TD fund, ensure you wait 30 days after the last time you purchased any fund (e-Series or i-Series) before you sell them. For any other institution, check if their funds mention an “early redemption fee”.

Setting Up a Questrade Account

If you are not transferring existing funds to Questrade, you can skip steps #6-7.

Go to http://www.questrade.com/account-selection and select what account(s) you’d like to set up (e.g. TFSA)
(optional) Before clicking on the “Open Now” button, click on “Add offer code” and add in either a promo code or referral code (see referral benefits)
1. Ask your friends/family if they’re already on Questrade, if not, my QPass Key is 756121473419127 🙂
You’ll be asked to enter a username and password
Once you’ve registered, you will be asked to create a profile (personal, employment, financial and citizenship information)
1. Note: when entering your home/work address, remove the street type from the address text box (e.g. Yonge Street) otherwise it will double up in the documents (e.g. Yonge Street ST), and also note “Street Direction” is optional
After creating a profile, you will need to either scan or take a photo of government-issued ID showing your photo, address, and signature (e.g. front and back of your driver’s license)
1. You will also be asked to digitally sign online documents (it will automatically generate a signature and initial for you which is pretty cool)
After you’ve created a profile, you can now start to set up your account! To transfer funds into it, you can add Questrade Brokerage as a payee and treat it as any other bill payment (ensure you enter your 8-digit Questrade account number correctly). Or if you had your investments at another institution (like I did at TD), you can request a transfer by going to Funding => Transfer account to Questrade:
1. Some things you will be asked to fill out:
  1. Institution (select one from a dropdown list) (e.g. TD Waterhouse Canada Inc.)
  2. Account Number (7-characters if TD)
  3. Institution address, phone number, contact name/number (I left contact name/number blank)
    1. If you don’t remember where you set up your investment account, you can use the default TD Waterhouse address:
      1. 3500 Steeles Ave E, Tower 2, 2nd Floor
      2. Markham, Ontario
      3. L3R0X1
      4. 1-800-465-5463
  4. Transfer type (either all in cash, all in kind, or partial)
  5. Approximate value (I used the total market value of my investments since I was transferring everything over)
Once you’ve initiated the transfer, it will take 10-20 business days.
1. There will be a transfer charge; Questrade will refund charges up to $150 if you upload a statement showing the charge and call them.
When the transfer is completed and you have cash in your Questrade account, it’s time to invest it (again)!

How to Use Questrade

Helpful video tutorial on how to invest via the Questrade interface
Before we do anything with our cash, you must have some sort of game plan on how you should invest your money. You can follow one of the Canadian Couch Potato model portfolios (Option 3) (mirror in case the site is down) or Canadian Portfolio Manager model portfolios. There are also simpler portfolios you can have:
1. 1-Fund: VRGO (0.22% MER)
2. 2-Fund: XIC/VCN (0.06% MER) and XAW (0.22% MER) (some people even go 100% XAW (world ex. Canada) and forego Canadian exposure from XIC/VCN)
The best time to do trades (particularly for international funds) is apparently between 10:00 am and 11:00 am (Eastern Time)
A summary:
1. Log into Questrade
2. In the top-right corner click on the green “Trade” button (you may be asked to re-confirm some details/agree to terms for the first time accessing the trading platform)
3. Go through the welcome walkthrough
4. In the top-right corner of the dashboard is “Order entry”, this is where you would type in the ticker code of the fund you’re interested in buying:
  1. Ensure “STK” is selected and type in the ticker code (e.g. XEF) and select the appropriate fund in the autosuggest dropdown that appears (note: double-check that you select the correct fund by paying close attention to the fund name)
  3. Click on the “> 15 min” label to switch it to real-time data
  4. Pay close attention to the “Ask” price and use this to populate your portfolio balancing spreadsheet or page (using your own spreadsheet or my Questrade Portfolio Rebalancer)
  5. Repeat steps 1-4 for each fund
  6. Knowing the ask price and your desired ratios, you can now purchase each fund. For each fund:
    1. With your preferred portfolio ratio type in the quantity you want to purchase
    2. For most people, “Order Type” can be left as “Limit”
    3. For “Limit Price” type in the ask price + 2 cents, so $31.78 ($31.76 + $0.02) for the above example (Why? “A good rule of thumb is to set your limit a couple of cents above the ask when buying, or below the bid when selling” – source)
      1. The core idea behind index funds investments is: time in the market is more important than timing the market
    4. Duration can be left as “Day”
    5. Confirm everything looks correct (especially “Quantity”) before clicking on “Buy”
    6. An overlay will appear with a summary of your order which you’ll need to confirm before the order is sent
    7. Wait a bit and your order should be filled relatively quickly

Rebalancing Your Portfolio

Over time, your portfolio will change in terms of ratio (e.g. equities vs bonds). Every now and then you’ll need to rebalance it using either available cash in your account, via a contribution, or both, which is why I made a handy-dandy page to do just this! Behold, my Questrade Portfolio Rebalancer!

As well, if you’re interested in setting up DRIP (Dividend Reinvestment Plan) for your investments visit http://help.questrade.com/how-to/frequently-asked-questions-(faqs)/self-directed-investing/diy-understanding-our-products-and-services/what-is-a-drip-and-how-do-i-set-that-up-

To transfer money into your Questrade account, as mentioned above: simply set up Questrade as a payee (use the respective 8-digit Questrade account number of the account you wish to transfer money into) and treat it as any other bill payment. The amount should be transferred within 1-3 business days.

Timeline

Wednesday June 6 – submitted request to Questrade for TFSA transfer from TD in cash
Saturday June 9 – received confirmation from TD that all my e-Series funds were converted to cash
Tuesday June 19 – TFSA transferred to Questrade, received confirmation at 9pm that I can start trading the next trading day!
Pending: receive TD transfer charge statement and contact Questrade for rebate up to $150