Often I’m asked to write posts about investing. I haven’t wanted to write about investing on this blog because I’m afraid of giving wrong advice. I’m obviously not a professional, but at the same time I think a lot of you have been in my position before: in your twenties, wanting to start investing, but not really sure where to start. Right? So I’m more than happy to share my story about how I started investing, the problems I ran into along the way, and how I taught myself to manage my own portfolio (it’s an ongoing process). :)
So here’s Part 1 of a 3 Part series.
Part 1: The Beginning
When I graduated college in 2006 I was 23. I owed over $20k to student loans and credit cards. Debt was my first priority, but I knew I wanted to start saving as well – even if it was just a little bit. I was making about $30k/year so I was only able to put aside $50/month ($25 into an Emergency Fund, and $25 into an RRSP) – but it really helped me establish a pattern of saving. And in the future, when I was finally out of debt, saving was already something I was used to doing. It made the transition from making payments on my debt, to making payments into my savings account pretty seamless.
When I first decided I wanted to save for retirement, I was really clueless. There wasn’t a lot of information out there on the internet that I could understand, and there were only about 4 or 5 Canadian PF blogs out there. All I knew was I wanted to start saving for my future, but I didn’t know how to start. So I went to TD Canada Trust (my only bank at the time), and spoke to someone about opening up an RRSP mutual fund account.
I remember sitting in her office, feeling very intimidated. I wondered what she thought of me, and the fact that I could only afford to save $25/month. But everyone has to start somewhere, and she was helpful in answering any questions I had. We went through a questionnaire to determine my risk-tolerance level, and eventually she signed me up for the TD Balanced Growth Fund (MER of 2.24%).
After that meeting, I was really pleased with myself because it seemed like this was the first step to becoming financially savvy. It made me feel grown-up to be investing in my future, and I became obsessed with tracking my little mutual fund’s progress. I set up a spreadsheet and tracked its performance on a daily basis. Seriously.
I understood that I wasn’t going to need the money for at least another 35 years, but I didn’t really get what 35 years meant. I wanted to see my money start to grow immediately. So I continued to check on my mutual fund on a daily basis. My stomach would drop every time my fund wasn’t doing well, and I’d cheer whenever it was doing well. This went on for about 6 months before the stress became too much and I told myself that 35 years = 13,000 days, and there was no way I could continue on like this. I needed to chill out. So I did. :)
It was about a year later that I first heard about the TD e-series Funds. I remember reading about it on a blog, and the big discussion was around Management Expense Ratios (MER) and how bad they were. I remember a few people referencing the TD e-series Funds in the comments and acknowledging how low their MERs were, and how they were likely the best mutual funds around.
When I went to check the MER on my Balanced Growth Fund, I was horrified and a bit embarrassed. How dare TD take so much from me! I felt like they were stealing profits from me, and the more I looked into the TD e-series Funds, the more I wanted to give it a try. Not just because I wanted to get away from funds with high MERs, but because I really wanted to learn how to manage my finances on my own. I wanted to know where my money was going, and I wanted to be doing it myself. The idea of DIY investing was really starting to appeal to me.
Part 2 coming soon…
I don’t know how many times I hear my friends tell me that they never check their credit card statements, have no idea what is included in their cell phone plans, or have no idea what their money is invested in.
In just the past few years, I’ve caught countless fraudulent charges on THREE different credit cards, incorrect billing on my cell phone account, and was almost caught in an international apartment rental scam. :| It can happen to anyone.
That’s why I’m in favour of mobile banking apps because I can check my balances and recent activity wherever I am. I also like any sort of program that will help me keep track of my spending. I personally like Quicken (because it’s super in depth), but lots of people are into Mint.
But what about investing? When it comes to giving somebody else large sums of your hard-earned money to invest, it can be pretty scary. That’s why I’ve always managed my own portfolio – I can keep track of where my money is going. However as I get older, and earn more money, I definitely want to diversify my portfolio. And although I’d love to keep doing it myself (and I likely will), I’m keeping an open mind when it comes to finding somebody else that would be better suited to helping me achieve my financial goals.
Anyway I recently came across the Be Fraud Aware website – a program by the B.C. Securities Commission, and I thought it was kinda cool. I immediately downloaded their free app. (This might only be relevant to British Columbians, but maybe your province or state has a site or app like this too.)
Basically this app lets anybody identify, spot, and report investment fraud – wherever they might be. I think this will be a really helpful app for people to get information, and report something immediately. Plus, it’s a way to stay up-to-date on the current fraud trends.
My favourite part of the app was reading through the disciplined persons list. It’s pretty detailed, and lists each person’s violations, sanctions, and payment ordered. For a nosy personal finance blogger like me, that’s really interesting. :) Plus, I actually do feel more secure having this app with me. I don’t know how often I’ll use it, but it’s nice to know that it’s there if I need to reference something.
Have you ever gotten scammed financially before?
I almost never write “how to” posts, but after posting about my investment portfolio last week, I’ve had a lot of people e-mail me to ask about the procedure for signing up for the TD e-series mutual funds.
I started investing in TD Canada Trust e-series mutual funds over six years ago, and have been a satisfied customer for most of that time. The e-series index funds are a popular choice because they are a simple way to invest, and have among the lowest Management Expense Ratios (MERs) for mutual funds in Canada. However, the downside is that there is virtually no customer service available for these products.
From my own experience, TD Canada Trust really doesn’t make it easy or straight-forward for investors to purchase or cash out these funds. I’ve blogged about my frustrations before. But since the e-series funds aren’t actively managed, as an investor, you have to manage your own account online. So if you don’t know exactly what to expect, you might get frustrated.
However, the hilarious thing is, you can’t actually open an e-series account online. Aaaaand you can’t open one up at a TD Canada Trust branch either. Instead, you have to fill out a form and mail it in. The same thing goes for cashing out your funds – you can’t redeem your money at a branch or online – it all has to be done manually by filling out a form. This barrier and lack of customer service can make it frustrating for investors.
Here is what I’ve learned about the TD e-series mutual funds:
Open up a standard TD Mutual Fund account
Whether it’s a TFSA, RRSP, or non-registered account, you will be able to open this up at any TD Canada Trust branch. To make it less confusing, don’t tell the representative that you’re going to be converting it into an e-series account. Just open up a regular TD mutual funds account. Make sure you get your account number (you’ll need it to fill out your paperwork) as well as an online banking login number.
You will have to make an initial deposit to open up your account. I’m not actually sure if you *have* to, but I was forced to when I recently went in to open up a TFSA mutual fund account. I told the representative that I didn’t want to deposit any money into the account. But since he said I had to, I told him to transfer the minimum $25 deposit from my chequing account as a one-time transaction.
The representative you meet with will take you step-by-step through a required Investor Profile questionnaire to determine your risk-tolerance level. They will then most likely try to sell you into a mutual fund with a high MER (he tried to sell me into the Comfort Portfolio series). However, it will be easiest to deposit your money in a simple “placeholder” money market fund until you get your paperwork in order and set up with the e-series account.
Convert your account
Now that you’re set up with a mutual fund account, before you are allowed to purchase the e-series index funds, you will have to fill out a consent form, along with an application form (which will include your pre-authorized purchase plan information), and mail it in. You will not be able to fax it in, or return it to a branch.
It takes probably about 1-2 weeks for them to process your paperwork after they receive it. But you’ll have to log onto the TD Canada Trust website to see if your account has been converted over to e-series. I’ve heard of some people getting confirmation e-mails, but I never got one. So just check online every couple of days after you send off your application form.
Cashing out your e-series index funds
Because the e-series funds are self-directed, you will receive virtually no customer service support. In fact, TD Canada Trust mutual fund representatives do not have the capabilities within their computer system to make any sort of e-series transaction for you – whether it’s buying, selling, or trading.
The easiest way to take money out of your e-series account – whether it’s for the Life-Long Learning Plan (LLP) or Home Buyer’s Plan (HBP) – is to switch the amount you want to withdraw over to a non-e-series product, such as the money market fund. I learned this the hard way. Once it is in a regular mutual fund, any mutual fund representative will be able to help you fill out the appropriate paperwork to get funds out of your account.
For more information, you can check out the TD Canada Trust website where they have compiled a somewhat useful database of information on the TD e-series funds.