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
Fees
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:
Fund | MER |
---|---|
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
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.
Read more about purchasing these index funds through Questrade.
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.
Ernest says
So say someone invested enough for a purchase they want. That person plans on maintaining their portfolio but needs to withdrawl say 90% of their investment. What kind of taxes/ fees/ penalties are there?
Let's Talk About Money says
It’s a bit hard to say without more information, but assuming the assets you’re talking about are TD e-Series ones, it depends on which types of accounts you’re using. If all of your investments are held in a TFSA, and you want to withdraw 90%, you should face no fees, taxes or penalties (being cautious that you can be charged a fee if money invested has only been in the account for a short amount of time – I believe it’s 30 days). All of the fees are built into the price of the TD e-Series, so you shouldn’t see any additional costs.
Now this would be a whole different thing if your investments are in an RRSP or other non registered investment account. I wouldn’t be able to provide you an answer for that, as I’m not an expert on Canadian tax law, but you would face taxes on any assets that you withdrew from that account, based on your income and profits seen from the investment.
RV says
why anyone would keep re-balancing their portfolio? I know my risk tolerance, as well as my target date, and I am planning to invest once and leave my portfolio alone for the next 5-10 years without re-balancing. Why would I need/want to re-balance it? Thank you.
Let's Talk About Money says
I would suggest checking out this article from the Canadian Couch Potato Does Rebalancing Boost Returns?.
Essentially, you diversify your portfolio into multiple index funds to minimize your risk – if one index tanks, it’s only a small portion of your portfolio. If over time an asset in your portfolio grows compared to others, you are increasing your portfolios reliance on that asset, and therefore increasing your risk.
As an example, lets say you start with 30% of your portfolio in the TD Canadian Index. Over the next 8 years, it does great and the rest of your funds do just ok, and now your portfolio is 50% TD Canadian Index. Now you are getting ready to cash out your investment and the TD Canadian Index tanks, and now that you are ready to withdraw, your largest asset has now lost a lot of value. If you had re-balanced throughout the years, you would have mitigated some of the risk, and it would have been a smaller portion of your portfolio that had lost a lot of it’s value.
As you’ll read in the link above, re-balancing isn’t mandatory, and holding steady on a portfolio of index funds isn’t a bad strategy. But re-balancing may help you maximize your gains from that portfolio.
RV says
Thank you so much; this is great. Although your blog is focused on E-series, do you have an opinion about “low-cost solutions” such as D-series available via TD Direct Investing? I was considering to invest in E-series via TD Direct Investing account, but since it gives access to other options, including D-series, Mawer funds, etc., I’ve got a second thought. Although the MER fees of D-series and Mawer are higher than that of E-series (usually around 1% for D-series vs 0.33-0.55% for E-series), those “low cost solutions” help to eliminate the question of re-balancing as they are being re-balanced by professionals on regular basis for a relatively modest increase in MER fees… Any thoughts? Thank you.
Let's Talk About Money says
For myself, one of my main goals is to find funds with the lowest MERs. When it comes to the time and energy spent on re-balancing my portfolio myself, it is very minimal. You are right that an additional 0.5% is not a lot – it would be about $110 over the year for my portfolio, but that is still $110 I would like to keep myself, for what essentially is 30 minutes of work to re-balance. I also like having control of my portfolio, knowing what percentage of each market my funds are in, and the ability to change my level of risk (stock to bond ratio) as needed.
That being said, I’m not fully informed on the D-series funds, and how they are managed, so it’s hard to fully comment on whether it’s worth it or not, as I don’t have all of the facts.
I think as long as you are informed, and you know the pro’s and con’s of each option, you should invest in whichever one you are most comfortable with.
RV says
Thank you. I really appreciate your insight.
Cody says
When purchasing funds through the TD mobile app, you’re given an option to check a box: “Includes Commission?” – yes or no. What does that mean exactly in light of the e-series funds having no commission?
Thanks!
Let's Talk About Money says
Sorry for the delay in response – I’ve been on vacation and so haven’t been able to be very responsive to emails and comments.
The desktop version of the TD Direct Investing site has the same option with the “Amount (including comission)” box. This just means that it will include your commission cost of $0. They have to include this option in case you are buying a fund through the app that actually does have comission on it. But for e-Series, you can check it, and not worry about additional fees.
Alfredo says
Hi,
I want to thank you for all the information you have posted on the TD e-series Index Funds. It’s been very helpful and now I feel more confident getting started with the process.
I do have a few questions. Currently I have a TD High Interest TFSA and I would like to know if I should keep this account or converted to a Mutual Fund TFSA?
Also which is the best account to use tu buy TD e-series Index Funds a Mutual Fund RSP or Mutual Fund TFSA?
Let's Talk About Money says
Thanks! I always appreciate hearing that my articles are helping people and making them feel more comfortable to jump into index investing.
With a TD High Interest TFSA, this account is purely a savings account, and won’t provide you the ability to actually purchase TD e-Series funds (or any other mutual funds). You can keep that account, but you’ll also need to open a Mutual Fund TFSA so be able to purchase funds. When you do that, make sure that you get TD to directly transfer your funds between your High Interest TFSA and your Mutual Fund TFSA – if you withdraw from one account and add it into another, that will affect your contribution limit for the year.
As for whether to use RSP or TFSA, that’s kind of an on-going debate in the finance world and really depends on your long term plans. I personally invest in my TFSA as it provides more flexibility with how you can access your funds (for instance, if I plan to withdraw in the next few years for a big purchase). But if you are investing with the plan of using that money strictly for retirement, than the RSP might be the better route, where you can take advantage of the immediate tax rebates, and reinvest for long term growth. That is a very simplified view of the TFSA vs RSP debate though. Here is a post from the WealthSimple website that provides a bit better breakdown of which option to go with: https://help.wealthsimple.com/hc/en-ca/articles/115015719107-Should-I-use-a-TFSA-or-an-RRSP-
GM says
If you are buying international or US index funds are you eligible for the dividend tax credit in Canada?
Let's Talk About Money says
I’m not an expert in tax law or accounting, so I don’t have any definitive answers for you here unfortunately. Are you planning to hold these within a registered account (TFSA or RRSP)? If so, you don’t pay any taxes on the dividend gains, so I doubt you would be eligible for any dividend tax credits – I’ve never claimed any. If you are holding these funds in a non-registered account, then this is a little outside of my knowledge area – and would suggest talking to a TD Direct Investing rep to get some clarification on whether those funds count as Canadian.
Sorry I can’t be more help.
An says
Thank you for your very informative blog. I have few questions and hope you have time to share your thoughts. I just started my RRSP last November2018 with TD Direct investing, I have an auto transfer of 100$ monthly set up.
1. When do I start to buy? Are there fees in every buy transaction?
2. I have around 16,000$ RRSP in Manulife that I wanted to transfer, would you think it will be a good idea to transfer considering the transfer fees against the yearly MER of Manulife?
Thanks so much.
Let's Talk About Money says
You can essentially start buying whenever you like, although $100 is the minimum buy through TD Direct Investing, so if your account is under $400, you may have trouble buying funds based on your target allocations (for example, with $100 you would only be able to buy a single asst, or with $400 you would only be able to buy an equal amount of every fund, which may or may not line up with your target allocations). So I would maybe wait until you have $500 – $600 to get started, although if you are investing in the long term and eager to get started, you could start by buying 1 of the funds, understanding that it is risky in the short term, but in the long term it should pay off.
When buying e-Series funds, there are no transaction fees, so you can make as many small purchases as you like.
Depends a bit on what the MER is for your Manulife mutual fund, but if the MER is, let’s say, 2% more than the TD e-Series funds, on $16,000, that extra 2% would cost you an additional $320 over the year. You can compare that to whatever the transfer-out fee is for Manulife. Also, if you talk to TD investment rep and tell them you are transferring over $15,000 to them from another RRSP, they will likely reimburse you for your transfer fees, as they want your business.
Good luck with your TD e-Series investments!
An says
Thanks for your reply and Im here again for few more questions. I called Manulife and they said that my RRSP is under Segregated Fund Contract and will mature on Jan 2028. If I will move now, I will need to pay $213 for DSC(deferred sales charge). I am not familiar with these fees and terms 🙂 Anyways, there will be no transfer fee. As per TDDI, they will not cover the DSC.
Im my Manulife statement I read these info:
Next Bonus Date: April 2024
Bonus Base: $7,700
Auto Investment Instructions: 100% Manulife Money Market Seg Fund Class A
I am not sure if the bonus money of $7,700 in 5 years is worth to stay with Manulife.
Let me now your thoughts. Appreciate your help. AN
Let's Talk About Money says
This scenario goes a bit outside of my level of knowledge unfortunately. Without knowing the ins and outs of your Manulife investments, it’s hard to provide any opinion or advice. Is this the fund that you are invested in: https://funds.manulife.ca/en-US/profiles/MCP3103 ? You may need to talk to a Manulife rep to understand what the bonus is, because if you have $16,000 invested in what looks like predominantly Canadian bonds, I don’t imagine that you will receive a straight $7,700 bonus at the end of 5 years.
I would suggest talking to a Manulife rep and have them walk you through exactly what your investment entails, including fee’s and dividend payouts, and then use that information to decide whether it best to stay with Manulife in the short term, or whether it makes sense to pay some of the fees to move over to TDDI.
Sorry I can’t be more help than that.
matt says
What are the average annual returns with e series portfolio set up the couch potato way?
Let's Talk About Money says
The Canadian Couch Potato website releases a good overview of returns based on their different portfolios. You can see up-to-date to the end of 2019 here for TD e-Series:
https://cdn.canadiancouchpotato.com/wp-content/uploads/2020/02/CCP-Model-Portfolios-TD-e-Series-2019.pdf
chad says
Are the e-series funds and investment that I have to manage or re-balance often? Or something I can just start investing in monthly till retirement? I’m complete novice to investing. Starting a little late in life and my current rrsp of 10k is with TD but has very high MER. I would like to just switch it if that’s possible. I currently use easyweb.
Let's Talk About Money says
That’s great to hear, never too late to start. For rebalancing, once a year is most likely enough. If you’re contributing monthly, you can add cash to funds that are lagging behind, which would essentially keep your portfolio balanced on an on-going basis.
chad says
Great thx. Have you written any articles on the basics of rebalancing a simple portfolio? Or point me in the direction of some reading?
Thanks
Again
Let's Talk About Money says
I’ve created a guide that goes through how to rebalance through a TD Mutual Funds accounts here: https://letstalkaboutmoney.ca/step-by-step-how-to-re-balance-your-td-e-series-portfolio/
The content also applies to rebalancing through TD Direct Investing, but doesn’t have the specific steps for that.
Caleb says
I intend to open a RESP account ( can I open the RESP in a TFSA account?) with TD, set up a monthly, probably pre-authorized deposit of 200, to waive the maintenance fee, as you have mentioned in the piece.
Obviously these are volatile times, do you think it is the best time to dive into the world of MF or should I bid my time for when the market bottoms and then buy MF at cheap rates?
Secondly, I had this breakdown of a model portfolio pulled from an online forum in which the advice was given to invest 7.69% into TD Canadian Bond Index and 92.31% into TD Canadian index, TD US Index and TD International Index split 3 ways equally in which each year the portfolio is balanced so that the TD Canadian Bond Index is increased by 7.69%, it will eventually lead to 100% in TD Canadian bond index over a 13-year period. What do you think?
Or do you think I should just go for those Target education Fund by the big banks (eg RBC Target Education Fund 2035), which is still a form of MF but actively managed by a professional with the upside of having an above average MER.
Let's Talk About Money says
Hi Caleb,
Trying to time the market is a tricky thing, especially for a DIY investor. You’ll never really be able to tell “when the market bottoms”, especially in these unprecedented times. We could be at the bottom now, or we could see a continued decline over the next little while. The passive investment strategy says over the long term, markets go up, and if you wait it out long enough, you should see profitable returns. But that’s not to say that if you put your money in now, you won’t see it decline right away. With monthly deposits, you’ll be able to Dollar Cost Average, or spread out your investment to mitigate some of the risk. You just need to assess your risk tolerance – are you prepared to see losses that could be incurred during a recession in the short to medium term? If not, then maybe a high interest savings account or GIC is better for you at the moment.
I don’t think I have the expertise myself to comment on the viability of that strategy. It depends on your timelines, and again, your risk tolerance. All I can really say is that using that strategy starts quite aggressive, and transitions quite quickly over 13 years to very safe. When reading the book “The Millionare Teacher” the authors strategy is to match your bond target percentage to your age, so as you get older, your portfolio slowly transitions to less risky, 1% every year. Changing almost 8% every year is a fairly big jump.
Again this comes down to your comfort levels. The 2.13% MER on the RBC Education fund is more then I would want to be charged for fees and goes against my own investing philosophy, but if you would prefer to have someone else manage and rebalance your portfolio, then it may be worth it for you. I’m also not overly familiar with the ins and outs of the RBC Target Education fund, so it may have positives that I’m now aware of.
Hope this helps, and sorry for not actually directly answering any of your questions.
Anita says
Is there a difference in the MER for the eSeries from the EasyWeb vs Direct Investing? (Also, sorry, but there is no apostrophe in fees. 🙂 )
Let's Talk About Money says
No difference in MER between buying e-Series from EasyWeb or Direct Investing. And thanks for the edit!
Anita says
Thanks for the info – saved me a lot of hassle switching! Your rebalancing calculator is amazing. Thank you! 🙂