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How to Build an ETF Portfolio at Scotia iTRADE

In the fifth installment of my beginner DIY investing series, we’ll learn how to implement an ETF portfolio at Scotia iTRADE. Scotia iTRADE is a relatively high-cost brokerage for a newbie investor with modest assets, so please carefully review the fees below before making your choice.

$9.99 trading commissions

In order to qualify for $9.99 trading commissions, you’ll need to have at least $50,000 of combined assets with Scotia iTRADE, or a minimum of $50,000 in other Scotia products (such as mortgages or lines of credit with Bank of Nova Scotia). If you’re starting out with a smaller amount, you’ll pay a whopping $24.99 per trade.  If you’re in this situation, check out The Globe and Mail’s 17th annual online broker ratings for additional discount brokerage options.

Commission-free ETFs

Scotia iTRADE offers about 50 commission-free ETFs. Although this seems like an amazing deal, their current list largely excludes the cheapest plain-vanilla ETFs. There were two ETFs that made the grade though:

Upon receiving my recent confirmation notices from Scotia iTRADE, I was pleasantly surprised to find that no trading commission had been charged on my purchase of XEC. Investors may want to also consider swapping out the Vanguard Canadian Aggregate Bond Index ETF (VAB) in my model portfolios for the commission-free XQB.

no-fee-xec

Source: Scotia iTRADE

Watch those cash balances

Similar to BMO InvestorLine, trading commissions are not accounted for on the day you place your trades (so your quoted cash balance details are slightly inflated). One possible solution to this issue is to subtract the total trading commissions that will be payable for the day prior to placing your final trade.

Avoid the annual RRSP fee

If you have $25,000 or more of aggregate assets with Scotia iTRADE, they’ll waive their annual $100 RRSP fee. Other Scotia products that you hold are not included when meeting this threshold though (only Scotia iTRADE assets count).  Once again, if you have below this amount, you may want to look around for a brokerage with a lower account minimum.

U.S.-Friendly RRSP quarterly fees

Regardless of the size of your portfolio with Scotia iTRADE, they will still charge you $30 per quarter for a “U.S.-Friendly RRSP” account. Nearly all of the big bank brokerages have actual U.S. dollar RRSP accounts (and they don’t charge additional fees for the privilege of investing within them), so I would recommend looking around for another brokerage if you plan to hold US-listed ETFs at some point in the future.

For smaller accounts, use less ETFs

Although I’ve shown how to build a 5-ETF portfolio in my tutorial, you can get away with using just three ETFs to cut down on trading commissions. Instead of holding separate ETFs for US, international and emerging markets stocks, simply hold the iShares Core MSCI All Country World ex Canada Index ETF (XAW).

Stay tuned next week when we’ll learn How to Build an ETF Portfolio at National Bank Direct Brokerage.

 

 

4 Responses to How to Build an ETF Portfolio at Scotia iTRADE

  1. Al 17/11/2016 at 2:12 am #

    Another great article , thanks Justin.
    I was just wondering, how much of a difference (performance wise) would it be if we did ONLY use the commission free ETF’s.

    20% HXT (for the TSX60 – large cap canadian)
    20% HXS (S&P 500 – US large caps)
    15% VEF (developed world ex-North America)
    5% XEC
    40% XQB

    • Justin 17/11/2016 at 9:16 am #

      @Al: It would depend on the future returns of mid cap/small cap Canadian and U.S. stocks (as HXT and HXS exclude these, while VCN and VUN include them) as well as the currency returns of the developed markets (as VEF is currency-hedged, while XEF has exposure to the underlying currencies).

      Over the long term, I doubt the ETF differences would make a huge impact on the performance.

  2. James Liira 07/12/2016 at 1:02 am #

    I’m also looking at setting up with iTrade, first an RESP for my son using the commission free model something similar to what @Al posted above. I’m also looking at setting up an RRSP and am considering using the same model as I won’t be dealing with a large portfolio to begin with. I have considered going with couch potatoes Tangerine model, but all of our money and banking is currently done with Scotiabank and I think the $100 annual RRSP fee (until we surpass the 25k mark) is worth the ease of having everything in one easily accessible place. It seems a bit funny starting an RESP with $1500 and only buying only single digits within a given stock, but I guess you gotta start somewhere. With such a small fund, Justin would you recommend simplifying even further than a 5 ETF split? It is a family plan and we are thinking we’ll have 2-4 kids so the fund has potential to grow quite big over the years with $75 month per child contributions.

    • Justin 12/12/2016 at 9:31 pm #

      @James Liira: If having everything in one place is worth the $100 annual RRSP fee to you, I don’t see any issue with this (and it might even motivate you to save up the $25K even faster! 😉

      If you’re using the commission-free ETFs, it probably doesn’t matter if you use 5 ETFs.

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