For years, TD e Series funds (also known as e series mutual funds or e series index funds) have been a popular low-cost option for DIY index investing. Even with the increased popularity of robo-advisors and ETF investing, TD e-Series funds are still a great option for building your passive investment portfolio.
In this guide we’ll take a look at what TD e Series funds are. Then, we’ll see how they compare to ETF investing. Third, we’ll go over popular e-series funds and their fees. Finally, we’ll cover how to invest in them.
This post was updated October 2020. The original was posted Jan 31, 2017.
What are TD e Series funds?
TD e-series funds are low cost and low maintenance index mutual funds. Since they are index funds, they track the performance of the market. The market they track depends on the e Series fund you purchase. For example, the Canadian Bond Index e-Series fund tracks the performance of the Canadian investment-grade bond market.
Its possible to create a well diversified investment portfolio just using TD e-Series funds. In this post we’ll focus on the four e-Series funds recommended in the Canadian Couch Potato model portfolios.
ETFs vs. TD e Series funds
As a Canadian, when you begin your DIY investing research, you find two main options for creating a diversified index portfolio. One is low fee ETFs and the other is a diversified portfolio of e-Series mutual funds. Both are great options for index investing because of their low fees, broad market exposure and strong historical performance.
Let’s take a look at a comparison chart between Vanguard ETFs and e-Series funds.
|Vanguard ETFs||TD e-Series|
|Management expense ratios (MERs)||0.12% to 0.25%||0.36% to 0.41%|
|Transaction costs||$0 depending on the brokerage||$0 depending on the brokerage|
|Automated contributions||Generally not possible||Easy to setup with a minimum investment of $25/month|
|Rebalancing||Manually or not at all with one-ETF portfolios||Manually|
|Ease of trading||Orders placed based on number of shares and purchased only during market hours||Orders placed based on dollar amount and can be purchased at any time|
|Recommended platform||Questrade||TD Mutual Fund (EasyWeb) or TD Direct Investing|
|Dividends||DRIP must be setup||Automatically reinvested|
|3-year annualized return (60% equity, 40% bonds)*||5.72%||5.66%|
|10-year annualized return (60% equity, 40% bonds)*||7.80%||7.84%|
|25-year annualized return (60% equity, 40% bonds)*||6.68%||6.62%|
*Return data from Canadian Couch Potato Model Portfolios
What you’ll see in the table is that performance for both are very similar over time. This makes sense because with both strategies you are getting exposure to the entire market.
The TD e series index funds are more hands off because purchases can be automated. Rebalancing has to be done manually which isn’t the case if you have a one-ETF portfolio. MERs are higher with e-Series index funds but are still relatively low compared to traditional mutual funds.
Overall, whether you use ETFs or e-Series funds, the index investing strategy remains the same. Deciding what tool to use really just comes down to personal preference; the platform you prefer to use, how hands off you want your investments to be, how you want money to be reinvested, etc.
Popular TD e Series Funds and Their Fees
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 4 main index funds:
- Canadian Bond Index – e: A low risk fund that tracks the performance of the Canadian investment-grade bond market
- TD Canadian Index Fund – e: A medium risk fund that tracks the performance of the Canadian stock market
- TD International Index Fund – e: a medium risk fund that tracks the performance of the equity market in Europe, Asia and Far East regions.
- U.S. Index – e: a medium risk fund that tracks the performance of the U.S. stock market
Management Expense Ratios (MERs) are used to calculate fees associated with owning a fund. It’s an annual rate that is calculated daily and is incorporated into the price of the fund. You won’t see a charge for this fee; it’s built into the fund price.
Here are the MERs for the four funds we are focusing on:
|TD Canadian Index Fund – e||0.28%|
|TD International Index Fund – e||0.44%|
|TD Canadian Bond Index Fund – e||0.44%|
|TD U.S. Index Fund – e||0.33%|
Let’s take a look at the fees in portfolio of around $20000 based on their MERs.
|Fund||Fund Value||MER||Estimated fee this year|
|TD Canadian Index Fund - e||$5304.80||0.28%||$14.85|
|TD International Index Fund - e||$5024.68||0.44%||$22.11|
|TD Canadian Bond Index Fund - e||$4913.09||0.44%||$21.62|
|TD U.S. Index Fund - e|| $4827.32 ||0.33%||$15.97|
|Total|| $20069.89 ||0.37%||$74.51|
The fees won’t be exact. They will change slightly depending on the price of the funds and how much more is added to the investments over the year. Overall, fees would be around $75 for this portfolio. You will not see the fees because they are built into the fund price.
How to invest in TD e Series funds
There are 3 ways in which someone can invest in these index funds:
In the past, TD used to be the only place to buy e Series funds. TD has now made these funds more widely available and they can be purchased at brokerages like Questrade.
Now let’s take a deeper look at the three investing options.
TD Mutual Fund Account
You can purchase e Series mutual funds through TD EasyWeb which is very convenient. Using a TD Mutual Fund account is typically the cheapest and simplest way to invest in these funds.
Fees: There are no fees for buying and selling these funds through this account. Also, there are no fees for the account itself. You can make as many mutual fund trades as you like for free.
This method is perfect for: Someone who already banks with TD and wants a simple, low cost and a hands off way to grow their investments with e-Series funds. You can set up automatic funding from your bank account and automatic purchases of the funds. This a good option for those who want to contribute monthly to their portfolio.
See this guide for step-by-step instructions on how to buy TD e Series index funds through TD EasyWeb.
TD Direct Investing Account
You can also purchase e-Series funds through a TD Direct Investing account. TD Direct investing is TD’s online investment brokerage that you can use to buy stocks, options, ETF’s and mutual funds. It’s a more robust platform that allows you to do much more than purchase and sell mutual funds.
Fees: There are no trade commission fees when buying e-Series funds through TD Direct Investing. However, there is a quarterly maintenance fee of $25 ($100 per year) which can be waived by investing more than $15,000 or by setting up an automatic monthly investment deposit of at least $100.
This method is perfect for: Someone who doesn’t bank with TD and wants to grow their investments with e Series funds. With TD Direct Investing you can still setup automatic funding and automatic purchases of e Series funds with Systematic Investment Plan (SIP). This method is also good if you want purchase other investment products like ETFs or stocks.
See this guide for step-by-step instructions on how to buy TD e Series index funds with TD Direct Investment.
Questrade is a new option for being able to buy TD e Series funds. There are pros to using Questrade (lower account minimums and 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, a TD Mutual Fund or TD Direct Investing account is best for purchasing e-Series funds, but Questrade may be a good fit for some.
This method is perfect for: Someone who is wants e-Series funds to be a small portion of their investments, they are not planning on making many purchases throughout the year and want to keep their TD e Series investments with their other Questrade investments.
TD e-Series Funds Review
Overall, e-Series funds are a great option for DIY index investing. They have low fees; with low MERs, and no fees for buying and holding (if you use a TD platform).
TD e Series funds are a great option for someone who wants a hands-off, diversified index portfolio with automatic funding and purchasing, where the only work to be done is re-balancing your portfolio.