If you are just getting started with DIY investing, you may have a few questions about TD e Series Index Funds. Specifically, what are they? Where can you buy them? And what fees are associated with them? Let’s take a look at the basics.
What are TD e Series index funds?
TD e Series Index Funds are low cost, low maintenance index funds. They are available to purchase through a TD EasyWeb Mutual Fund account or a TD Direct Investment account. They provide a passive investment option with low MER’s (Management Expense Ratio) for Do-it-Yourself investors that can be bought and sold online.
What can you buy
There are numerous low fee funds you can buy as part of the TD index portfolio. This blog, as well as the Canadian Couch Potato model, focuses on these 4 main index funds:
But there are additional passive index funds that you could look into as well that are part of the TD e-Series:
- Dow Jones Industrial Average Index – e
- European Index – e
- International Index Currency Neutral
- Nasdaq®Index – e
- U.S. Index Currency Neutral – e
The 4 main index funds that cover the Canadian, International, and US equities index as well as the Canadian Bond index is what we will continue to focus on.
What are the MER’s and how are they calculated?
MER’s (Management Expense Ratio) are the fees associated with owning a fund. They are an annual rate that is calculated daily, but are incorporated into the price of the fund, and are never really noticed by the investor. Remember, you won’t see a charge for this fee, it is built into the fund price!
Here are the MER’s for the four major funds:
Rates as of May 2020
MER cost example
For a portfolio of my size, let’s take a look at what these MER fees will cost me each year:
However, these fees won’t be exact. They will change slightly depending on the price of the funds and how much more I add to these investments. Overall, I can expect to pay around $60 this year in management fees.
3 ways to invest in TD e-Series index funds
There are 2 ways in which someone can invest in these index funds:
- Through their TD Mutual Fund account
- Through a TD Direct Investment account
- *New as of 2020, through Questrade and other online brokerages.
Essentially through TD, both ways accomplish the same thing, but go about it in different ways.
Questrade is a new way, but not necessarily the best. See the TD e Series through Questrade guide to learn more.
TD Mutual Fund Account
You can purchase TD e Series funds through your regular online banking portal (TD EasyWeb). But first, you will need to setup a mutual fund account that has been converted to an e-Series account for this option to be available online. See my guide on “How to buy TD e-Series Index Funds” for a step-by-step instructions on how to buy these index funds through TD EasyWeb.
Using a TD Mutual Fund account is typically the cheapest and simplest way to invest in TD Index Funds.
Fees: There are no fees for buying and selling these funds through this account, nor are there any fees for the account itself. You can make as many mutual fund trades as you like for no commission, which makes this a good option for those who want to contribute monthly to their portfolio.
TD Direct Investing Account
You can also purchase e-Series funds through a TD Direct Investing account. It is TD’s online investment brokerage that you can use to trade in markets across North America, and buy stocks, options, ETF’s and mutual funds (including theses funds). TD Direct Investing is a more robust system that provides more information, and allows you to do more than purchase and sell mutual funds.
Fees: There are no trade commission fees when buying TD e-Series funds through TD Direct Investing. However, there is a quarterly maintenance fee of $25 ($100 per year). You can have these quarterly fees waived by investing more than $15,000 or by setting up an automatic monthly investment deposit of at least $100.
The newest addition to being able to buy TD e Series funds. There are pros to using Questrade (lower account minimums, lower trade amount minimums) but the big downside is the fact that it costs $9.95 to make a mutual fund trade. For the most part, I would recommend using a TD Mutual Fund account or TD Direct Investing, but Questrade may be a good fit for some. Read more about purchasing these index funds through Questrade here.
Are there any additional investment fees for TD e Series funds?
Aside from the MER’s, and the fees associated with a TD Direct Investing account (which can be waived), there are no other regular fees associated with investing in TD e-Series funds. Keep in mind, if you redeem an e-Series investment within 30 days of purchase, there can be a fee of up to 2.00% of the purchase cost.