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How to Build an ETF Portfolio at Questrade

Investing in ETFs through a big bank discount brokerage is one of the cheapest ways to build a diversified portfolio – that is, until you factor in the cost of their trading commissions.  If your accounts and monthly contributions are modest in size, you may want to consider going with Questrade instead, a discount brokerage that offers commission-free ETF purchases.

Taking the ECN way out

Although Questrade does not charge traditional trading commissions, they do charge something called electronic communication network fees, or “ECN fees”, on most trades that take liquidity away from the market.  Examples of these types of trades include market orders or “marketable limit orders”, which is a limit order that is expected to be filled immediately (Marketable limit orders are the type of order that I recommend placing for all ETF trades).  For purchases of Canadian-listed ETFs, the ECN fees charged are $0.0035 per share.

In the example from my tutorial, I place five ETF purchases at Questrade and rack up only 60 cents in ECN fees (compared to about $50 of trading commissions at the big bank discount brokerages for a similar portfolio).  You can see why Questrade has become the choice for cost-conscious ETF investors.

Example:  ECN fees charged on a $5,000 ETF portfolio implementation

Exchange-Traded Fund

# of Shares Purchased

ECN Rate

ECN Fees

Vanguard FTSE Canada All-Cap Index ETF (VCN)

32

$0.0035/share

$0.1120

Vanguard U.S. Total Market Index ETF (VUN)

23

$0.0035/share

$0.0805

iShares Core MSCI EAFE IMI Index ETF (XEF)

30

$0.0035/share

$0.1050

iShares Core MSCI Emerging Markets IMI Index ETF (XEC)

8

$0.0035/share

$0.0280

Vanguard Canadian Aggregate Bond Index ETF (VAB)

80

$0.0035/share

$0.2800

Total    

$0.6055

Source:  Questrade

 

By | 2017-01-24T09:08:34+00:00 January 24th, 2017|Categories: DIY Investing|11 Comments

11 Comments

  1. Charles March 11, 2017 at 6:46 pm - Reply

    Thanks Justin ! You probably recommand to have a DRIP for each ETF ? How activate or ask it with Questrade ? Thank you 🙂

    • Justin March 12, 2017 at 12:56 pm - Reply

      @Charles: I would recommend setting up a DRIP on ETFs held in your RRSP and TFSA accounts (setting them up in taxable accounts can be a pain when you start tracking your adjusted cost base).

      Here’s a link to the process at Questrade: 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-#.WMV8pGczXZ4

      • Vito March 15, 2017 at 3:57 pm - Reply

        Hey Justin. Just a follow-up on your last comment about ACB. I understand its a pain to calculate the ACB in non-registered accounts, but with respect to TFSA (not RRSP, because I am aware of the tax treaty b/w USA and Canada), the only disadvantage I find with DRIPs in a TFSA is that you cannot claim the foreign tax credit for the 15% withholding tax. whereas in a non-registered account you can. Often wondered which is better, but after reading Dan’s article about his on CCP, it seems he leans more towards still investing into the TFSA.

        My question is, in a TFSA even though you don’t need to calculate the ACB, would it make more sense set up a DRIP or just take the dividends as cash and reinvest the dividend proceeds to buy more shares when annually rebalancing your portfolio?

        Cheers!

  2. Nick March 4, 2017 at 2:31 pm - Reply

    Justin I have a quick question why don’t you ever go to 10% on emerging markets on your model portfolio, just wondering the reson. I have a index portfolio as follows now is this fine, I’m 38 years old and plan to hold it til I’m 55, I retire with a defined pension through my work as well and it is adjusted to inflation. Should I take more risk or is a 70/30 fine

    VCN-20%
    VUN-20%
    XEF-20%
    VEE-10%
    VAB-30%

    • Justin March 5, 2017 at 12:54 pm - Reply

      @Nick: In my model portfolios, I typically allocate 1/3 to Canadian stocks and 2/3 to global stocks (US, international developed and emerging markets), so for a 70% equity portfolio, ~23% would be Canadian stocks and ~47% would be global stocks. Emerging markets make up roughly 11% of the world market capitalization (ex Canada), so if we multiply this percentage by our allocation to global stocks, we get about 5% (11% EM market cap x 47% global stock allocation).

      There is no perfect asset allocation – if you’re comfortable with your current weights, please feel free to deviate from my model ETF portfolios to suit your risk profile.

  3. Vito February 17, 2017 at 4:26 pm - Reply

    Hi Justin,

    You gave me a great explanation last week about how I questioned that in your video you showed VAB for your bond allocation vs. using VSB as in one of your two model portfolios, and I came back see your response again and I cannot find it. You had said that one of the two (VAB or VSB) is geared more towards the younger investor and I was hoping you wouldn’t mind explaining again and this time I will take a screen shot in the event that your comment threading is limited.

    Cheers Justin! and thank you again for the video tutorial, I trade with Questrade and always wanted to see an example of it, so really, thank you!

  4. JFLD January 25, 2017 at 4:50 pm - Reply

    Hello Justin,

    The fees are low indeed, but Virtual Brokers has ETF buying for free, so why bother paying at all when you can get it for free ?

    • Justin January 25, 2017 at 7:58 pm - Reply

      @JFLD: Virtual Brokers does not allow the Norbert’s gambit strategy (to convert CAD to USD cheaply) in their RRSP accounts (which would be a deal-breaker for DIY ETF investors who are trying to mitigate foreign withholding taxes by holding US-listed ETFs in their RRSP accounts).

      • JFLD January 26, 2017 at 6:19 pm - Reply

        Thank you Justin for your quick response.

        To be honest with you, I have never considered doing a Norbert’s gambit.

        Do you know the difference in total return between buying Canadian ETF with the higher fees and the US listed ETF? It seems to me that it will be marginal and I certainly might be wrong. The difference cannot be large enough to consider stopping using Canadian ETFs?

        One of the thing I do appreciate with this Norbert’s gambit is the much larger selection of ETFs available in the US and the lower fees as you mentioned. Just not sure the difference, if known, is worth the troubles of changing broker, transfering funds, pay fees, etc?

        You might be able to convert me depending on the excess return i could generate haha 🙂

        Thabk you in advance for your response and congratulation on your site, the informations provided and tips. I do enjoy readi g your article.

        Keep it up.
        Best regards
        JFLD

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