If you’ve been following personal finance news over the past little while, you may have heard about a groundbreaking offer from Scotia iTrade that no other Canadian stock broker offers – FREE ETF trades.
This is big news for index investors as they can avoid the $19.95 trading commission ($9.95 for those with $50k balance) when they rebalance their portfolios. If the investor holds five different ETFs in the portfolio, the savings can be quite significant depending on how often he/she rebalances.
Sounds great but the down side is that there are some limitations to the ETFs that can be traded for free. Some of these considerations include low trading volumes (low liquidity), tracking error, and management expense ratios.
Here is more info about the ETFs eligible for commission free trading:
In Canada, only Scotia iTRADE® brings you commission-free* online trading on 46 ETFs from Claymore ETFs®* and other leading Canadian ETF providers1. Covering a number of sectors the 46 ETFs that are available for commission-free* online trading through Scotia iTRADE include:
- 31 Claymore Funds
- 8 iShares Funds
- 7 Horizons Funds
A full list is here.
Of the ETFs offered, there a few that I hold and/or watch regularly. They include:
- CLF – Claymore laddered short term government bonds (MER: 0.17%)
- CBO – Claymore laddered short term corporate bonds (MER: 0.28%)
- CPD – Claymore preferred shares (MER: 0.50%)
- CDZ – Claymore Dividend Achievers Index (MER: 0.67%)
- CMR – Claymore money market (MER: 0.27%)
For the Couch Potato Index investors out there, it seems that a portion of trading commissions can be reduced by using the short term bond ETFs and perhaps the money market fund for the cash component. However, for those who want a completely commission free portfolio (besides MER), they can consider:
- Canadian Index: CRQ (MER: 0.71% ) or HXT (MER: 0.07% – but take note that they use SWAPS rather than holding actual stocks)
- US Index: CLU (MER: 0.72% ) or HXS (0.15% again, they use SWAPS)
- International Index: CIE (MER: 0.73%) or
- Global Real Estate: CGR (MER: 0.74%)
- Short Term Bonds: CLF (MER: 0.17%)
Is this free ETF offer attractive to you? Are you considering switching to iTrade?