Comments on: Reader Question: When to Switch to ETF’s? http://www.milliondollarjourney.com/reader-question-when-to-switch-to-etfs.htm Building Wealth through Saving and Investing Sun, 14 Mar 2010 05:55:47 -0400 http://wordpress.org/?v=abc hourly 1 By: Nikolai http://www.milliondollarjourney.com/reader-question-when-to-switch-to-etfs.htm/comment-page-1#comment-93636 Nikolai Fri, 24 Jul 2009 02:14:57 +0000 http://www.milliondollarjourney.com/reader-question-when-to-switch-to-etfs.htm#comment-93636 Hello, I have just noticed that Claymore now offers PACC, this allows you do buy the ETFs without paying the broker commissions - on regular basics. However, the minimum frequency seems to be once a month which is still OK, but I would rather do it every two weeks for a smaller amount. Hello,

I have just noticed that Claymore now offers PACC, this allows you do buy the ETFs without paying the broker commissions – on regular basics. However, the minimum frequency seems to be once a month which is still OK, but I would rather do it every two weeks for a smaller amount.

]]> By: Kitty http://www.milliondollarjourney.com/reader-question-when-to-switch-to-etfs.htm/comment-page-1#comment-27442 Kitty Sat, 08 Mar 2008 18:03:05 +0000 http://www.milliondollarjourney.com/reader-question-when-to-switch-to-etfs.htm#comment-27442 It looks to me like buying ETFs with low MERs isn't that great a cost saver because most of us still need to hire professional advisers to help us set up our portfolios K. It looks to me like buying ETFs with low MERs isn’t that great a cost saver because most of us still need to hire professional advisers to help us set up our portfolios

K.

]]> By: Weekend Reading - Feb 22, 2008 | Million Dollar Journey http://www.milliondollarjourney.com/reader-question-when-to-switch-to-etfs.htm/comment-page-1#comment-26112 Weekend Reading - Feb 22, 2008 | Million Dollar Journey Fri, 22 Feb 2008 10:32:25 +0000 http://www.milliondollarjourney.com/reader-question-when-to-switch-to-etfs.htm#comment-26112 [...] written about index funds vs ETF's before, more specifically "When to switch to ETF's".  I came to the conclusion that it's best to stick with cheap index mutual funds [...]

[...] written about index funds vs ETF's before, more specifically "When to switch to ETF's".  I came to the conclusion that it's best to stick with cheap index mutual funds [...]

]]> By: Should I buy a Mutual Fund or an ETF? http://www.milliondollarjourney.com/reader-question-when-to-switch-to-etfs.htm/comment-page-1#comment-24964 Should I buy a Mutual Fund or an ETF? Fri, 08 Feb 2008 20:26:55 +0000 http://www.milliondollarjourney.com/reader-question-when-to-switch-to-etfs.htm#comment-24964 [...] mutual funds. Of course this is an inexact science since it depends on your investment horizon. See this post over on Milliion Dollar Journey for a partial [...]

[...] mutual funds. Of course this is an inexact science since it depends on your investment horizon. See this post over on Milliion Dollar Journey for a partial [...]

]]> By: FrugalTrader http://www.milliondollarjourney.com/reader-question-when-to-switch-to-etfs.htm/comment-page-1#comment-6116 FrugalTrader Tue, 12 Jun 2007 09:28:04 +0000 http://www.milliondollarjourney.com/reader-question-when-to-switch-to-etfs.htm#comment-6116 Trevor, that all depends on your mortgage rate and what you feel will be your investment return going forward. Also, when you say that you div fund is returning 15%, is that in dividend payments only? If so, there is probably a <b>ROC</b> portion of the return, which actually reduces the amount of your deductible investment loan. You should consider switching to a fund that pays dividends ONLY. With that said, what is your mortgage rate? If it's 5%, paying down the mortgage will give you a <b>guaranteed</b> return of around 7.5% (depending on your tax bracket). So the question to ask yourself, do you want to go with the 7.5% guaranteed return, or bet that the dividend fund will beat 7.5%? Trevor, that all depends on your mortgage rate and what you feel will be your investment return going forward. Also, when you say that you div fund is returning 15%, is that in dividend payments only? If so, there is probably a ROC portion of the return, which actually reduces the amount of your deductible investment loan. You should consider switching to a fund that pays dividends ONLY.

With that said, what is your mortgage rate? If it’s 5%, paying down the mortgage will give you a guaranteed return of around 7.5% (depending on your tax bracket). So the question to ask yourself, do you want to go with the 7.5% guaranteed return, or bet that the dividend fund will beat 7.5%?

]]> By: trevor http://www.milliondollarjourney.com/reader-question-when-to-switch-to-etfs.htm/comment-page-1#comment-6100 trevor Tue, 12 Jun 2007 02:21:12 +0000 http://www.milliondollarjourney.com/reader-question-when-to-switch-to-etfs.htm#comment-6100 i'm doing a smith maneuver where i take readvancable home equity loc and put it into dividend funds. my question is about the dividend funds. the dividend has been 15% for a long time. would it be better to take the full 15% dividend and put it back into mortgage or take an 8% div. and buy more stock with the rest in case it goes down, i'll have protected a bit of my investment. thanks trevor i’m doing a smith maneuver where i take readvancable home equity loc and put it into dividend funds. my question is about the dividend funds. the dividend has been 15% for a long time. would it be better to take the full 15% dividend and put it back into mortgage or take an 8% div. and buy more stock with the rest in case it goes down, i’ll have protected a bit of my investment.
thanks
trevor

]]> By: Jim daddy http://www.milliondollarjourney.com/reader-question-when-to-switch-to-etfs.htm/comment-page-1#comment-4730 Jim daddy Fri, 18 May 2007 21:21:49 +0000 http://www.milliondollarjourney.com/reader-question-when-to-switch-to-etfs.htm#comment-4730 There are also these fees associated with locked in accounts: RSP Administration Fee RSP Administration Fee (per year or part thereof) $59 LIRA/Locked-In RSP (per year or part thereof) $100 There are also these fees associated with locked in accounts:

RSP Administration Fee
RSP Administration Fee (per year or part thereof) $59
LIRA/Locked-In RSP (per year or part thereof) $100

]]> By: sam http://www.milliondollarjourney.com/reader-question-when-to-switch-to-etfs.htm/comment-page-1#comment-4728 sam Fri, 18 May 2007 19:54:22 +0000 http://www.milliondollarjourney.com/reader-question-when-to-switch-to-etfs.htm#comment-4728 share owner charge $9 for every purchase lot(irrespective of no of shares..) so in a order if you purchase 1 lot of share/etf -$9 2 different lots-$18 3 different lots- $27 4 & above- $36 share owner charge $9 for every purchase lot(irrespective of no of shares..)

so in a order if you purchase 1 lot of
share/etf -$9
2 different lots-$18
3 different lots- $27
4 & above- $36

]]> By: Jim daddy http://www.milliondollarjourney.com/reader-question-when-to-switch-to-etfs.htm/comment-page-1#comment-4720 Jim daddy Fri, 18 May 2007 18:03:34 +0000 http://www.milliondollarjourney.com/reader-question-when-to-switch-to-etfs.htm#comment-4720 Yes, you do all your Efund business online. Yes, you do all your Efund business online.

]]> By: FrugalTrader http://www.milliondollarjourney.com/reader-question-when-to-switch-to-etfs.htm/comment-page-1#comment-4719 FrugalTrader Fri, 18 May 2007 18:01:21 +0000 http://www.milliondollarjourney.com/reader-question-when-to-switch-to-etfs.htm#comment-4719 Shareowner is a great way to go if you want to do dollar cost averaging with smaller amounts. Do they charge any fees? Shareowner is a great way to go if you want to do dollar cost averaging with smaller amounts. Do they charge any fees?

]]> By: sam http://www.milliondollarjourney.com/reader-question-when-to-switch-to-etfs.htm/comment-page-1#comment-4718 sam Fri, 18 May 2007 17:56:48 +0000 http://www.milliondollarjourney.com/reader-question-when-to-switch-to-etfs.htm#comment-4718 reg TD-e funds.. make sure you buy only e-funds.. when we went to TD Bank to open the account..the personnel was not even aware what e-funds where..& he has been in the bank for many years..he then called somewhere else & then he realised about e-funds..but he still could not open efund account..we opened a regular account there..went home printed a form for e-conversion..mailed them & got into e-funds.. reg TD-e funds..
make sure you buy only e-funds..
when we went to TD Bank to open the account..the personnel was not even aware what e-funds where..& he has been in the bank for many years..he then called somewhere else & then he realised about e-funds..but he still could not open efund account..we opened a regular account there..went home printed a form for e-conversion..mailed them & got into e-funds..

]]> By: sam http://www.milliondollarjourney.com/reader-question-when-to-switch-to-etfs.htm/comment-page-1#comment-4713 sam Fri, 18 May 2007 17:21:26 +0000 http://www.milliondollarjourney.com/reader-question-when-to-switch-to-etfs.htm#comment-4713 you could still do dollar cost average with ETF on http://www.investments.shareowner.com/home/v1/index.html i do them....but i am not sure if they are as sound a bank brokerage(eg. TD waterhouse...) i hold my investments long term...so i don't bother about initial brokerage cost..because i would save on MER year after year.. this is the point most miss while doing comparisons..they just take MER saved on the year of investments for calculations..not the savings obtained year after year.. you could still do dollar cost average with ETF on

http://www.investments.shareowner.com/home/v1/index.html

i do them….but i am not sure if they are as sound a bank brokerage(eg. TD waterhouse…)

i hold my investments long term…so i don’t bother about initial brokerage cost..because i would save on MER year after year..

this is the point most miss while doing comparisons..they just take MER saved on the year of investments for calculations..not the savings obtained year after year..

]]> By: FrugalTrader http://www.milliondollarjourney.com/reader-question-when-to-switch-to-etfs.htm/comment-page-1#comment-4707 FrugalTrader Fri, 18 May 2007 15:58:31 +0000 http://www.milliondollarjourney.com/reader-question-when-to-switch-to-etfs.htm#comment-4707 Just to clarify, the tax issue is only a consideration for non-registered portfolios. Just to clarify, the tax issue is only a consideration for non-registered portfolios.

]]> By: FinancialJungle.com http://www.milliondollarjourney.com/reader-question-when-to-switch-to-etfs.htm/comment-page-1#comment-4706 FinancialJungle.com Fri, 18 May 2007 15:55:17 +0000 http://www.milliondollarjourney.com/reader-question-when-to-switch-to-etfs.htm#comment-4706 Again, another culprit to consider is capital gain tax. If you have $5,000 worth of embedded capital gain, selling the index funds, and buying ETFs will set you back $5,000 x 30% x 50% = $750 in capital gain tax. (Assuming 30% tax bracket) Of course, the longer you wait for the switch, the bigger the tax will likely become. Again, another culprit to consider is capital gain tax.

If you have $5,000 worth of embedded capital gain, selling the index funds, and buying ETFs will set you back $5,000 x 30% x 50% = $750 in capital gain tax. (Assuming 30% tax bracket)

Of course, the longer you wait for the switch, the bigger the tax will likely become.

]]> By: FrugalTrader http://www.milliondollarjourney.com/reader-question-when-to-switch-to-etfs.htm/comment-page-1#comment-4696 FrugalTrader Fri, 18 May 2007 14:54:49 +0000 http://www.milliondollarjourney.com/reader-question-when-to-switch-to-etfs.htm#comment-4696 Jim: In your case, it's a tough call as you like to dollar cost average (buy a little at a time). Mutual fund index funds have a huge advantage in that respect as there are no transaction fees. In a lot of cases, the average MER for ETF's are <b>very close</b> to that of the TD-E funds. The biggest advantage of ETF's in your scenario is that you can specialize in certain sectors if that suits your investor/style. Otherwise, i'd stick with the efunds. Jim: In your case, it’s a tough call as you like to dollar cost average (buy a little at a time). Mutual fund index funds have a huge advantage in that respect as there are no transaction fees. In a lot of cases, the average MER for ETF’s are very close to that of the TD-E funds. The biggest advantage of ETF’s in your scenario is that you can specialize in certain sectors if that suits your investor/style. Otherwise, i’d stick with the efunds.

]]> By: Jim daddy http://www.milliondollarjourney.com/reader-question-when-to-switch-to-etfs.htm/comment-page-1#comment-4685 Jim daddy Fri, 18 May 2007 14:41:25 +0000 http://www.milliondollarjourney.com/reader-question-when-to-switch-to-etfs.htm#comment-4685 ah gotcha! Thanks for clearing that up. So when would you change over to ETF's? 100k? ah gotcha! Thanks for clearing that up. So when would you change over to ETF’s? 100k?

]]> By: FrugalTrader http://www.milliondollarjourney.com/reader-question-when-to-switch-to-etfs.htm/comment-page-1#comment-4684 FrugalTrader Fri, 18 May 2007 14:36:20 +0000 http://www.milliondollarjourney.com/reader-question-when-to-switch-to-etfs.htm#comment-4684 Jim: Say that you average 0.40% in your funds, with 4 funds of 10k each. Each fund will owe 0.40%/year which will equate to $40/year, so your total portfolio will have a fee of $40x4=$160/year. $160 on a $40k porfolio = 0.40%. I'm just trying to show that you don't add together your MER's. If you average 0.40% between all your MERs, that's your total MER from your portfolio value. The MER's are not added together. Jim: Say that you average 0.40% in your funds, with 4 funds of 10k each. Each fund will owe 0.40%/year which will equate to $40/year, so your total portfolio will have a fee of $40×4=$160/year. $160 on a $40k porfolio = 0.40%.

I’m just trying to show that you don’t add together your MER’s. If you average 0.40% between all your MERs, that’s your total MER from your portfolio value. The MER’s are not added together.

]]> By: Jim daddy http://www.milliondollarjourney.com/reader-question-when-to-switch-to-etfs.htm/comment-page-1#comment-4683 Jim daddy Fri, 18 May 2007 14:27:08 +0000 http://www.milliondollarjourney.com/reader-question-when-to-switch-to-etfs.htm#comment-4683 I have 4 funds ranging from .31-.48. If I add them together I have a total MER of 1.6. Too much? I have 4 funds ranging from .31-.48. If I add them together I have a total MER of 1.6. Too much?

]]> By: FrugalTrader http://www.milliondollarjourney.com/reader-question-when-to-switch-to-etfs.htm/comment-page-1#comment-4681 FrugalTrader Fri, 18 May 2007 14:16:22 +0000 http://www.milliondollarjourney.com/reader-question-when-to-switch-to-etfs.htm#comment-4681 Jim: If you have an average MER of <b>0.40%</b> with your TD efunds, then you are paying about $50k x 0.40% = $200/year. You might save a few bucks if you switch to ETF's with Questrade, but not a whole lot. If I were you, I would stick with the efunds. In my example, I used a 1% MER in my calculations. Jim: If you have an average MER of 0.40% with your TD efunds, then you are paying about $50k x 0.40% = $200/year. You might save a few bucks if you switch to ETF’s with Questrade, but not a whole lot. If I were you, I would stick with the efunds. In my example, I used a 1% MER in my calculations.

]]> By: Jim daddy http://www.milliondollarjourney.com/reader-question-when-to-switch-to-etfs.htm/comment-page-1#comment-4679 Jim daddy Fri, 18 May 2007 14:07:07 +0000 http://www.milliondollarjourney.com/reader-question-when-to-switch-to-etfs.htm#comment-4679 I have about 50k in Td Efunds. So according to this I should switch over. I still like the fact I can contribute small amounts to my account. What would you do with the cash you have saved up for a large contribution later on for ETF's? High intrest savings account? I have about 50k in Td Efunds. So according to this I should switch over. I still like the fact I can contribute small amounts to my account. What would you do with the cash you have saved up for a large contribution later on for ETF’s? High intrest savings account?

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