TD e-Series Funds are an excellent way to invest in a TFSA, RRSP, RESP, or non-registered account. This is because they have one of the lowest Management Expense Ratios (MERs) available on the market and give you the flexibility to manage your investment portfolio. Since you will be paying less in investing costs, there is a good chance that your investment returns may outperform that of many other investors engaged in actively managed funds that normally attract higher fees.
One downside to a TD e-Series funds account is that it is notoriously difficult and confusing to open a new account. This is partly due to the limited and unclear information available on TD Canada Trust’s website and also the lack of familiarity of staff at local TD branches with the e-Series funds.
My TFSA e-Series funds took me a little over 3 months to get set up. I had filled out the form I found on TD’s website and sent it in as directed, only to have it returned to me after about 4 weeks with instructions to take my documents to one of the local branches. After attending the branch and spending several minutes trying to explain my intent to one of the bank staff, I was able to eventually book an appointment with a financial advisor.
Long story cut short… the advisor did not understand what the e-Series funds was about and had to leave me in the office for a while (I guess to go and consult). After he returned, he informed me that I needed to open a mutual fund account and following this I could convert it into e-Series funds. Anyway, after about 13 weeks I had everything set to go.
My kid’s RESP e-Series funds was much easier to set up after I had learned the ropes…it was up in less than 4 weeks!
Related: RESP 101: Understanding the RESP
There are 2 ways to purchase the e-Series funds:
- By opening a TD mutual funds account and converting it to an e-Series funds. This works very well with smaller accounts as there are no set-up fees or commissions associated with this account. However, if you sell your funds within 30 days of purchasing it, you may be subject to a 2% Early Redemption Fee.
- Through TD Direct Investing. This is TD’s discount brokerage account service which gives you access to purchase a wide variety of investment asset classes including e-Series funds, other mutual funds, ETFs, stocks, etc. Commissions and fees apply depending on what you trade and your minimum account balance. A TD Direct Investing account can be easily applied for online or by calling 1-866-666-6178.
This post is focused on how to open the TD mutual funds account and then convert it into a TD e-Series funds account. Let’s get started!
Related: A Sample TD e-Series RESP Portfolio
Step 1 – Open a TD Mutual Funds Account
Go to a local TD branch and ask to open a mutual fund account. Take your Social Insurance Number (SIN) card and another piece of government ID along. The financial advisor or representative will ask you a series of questions to complete your investor profile and determine your risk tolerance.
It may be helpful to have taken a look at the Investor Profile Questionnaire here before attending your appointment. This will help you to create the investor profile that suits your investment needs and save you time at the branch. Your investor risk profile will influence the asset allocation allowed within your investment portfolio.
Do not talk about the e-Series funds at this time, just open the mutual funds account. If the advisor asks if you want to buy any funds at the time of account opening, decline the offer. If you want to set up a Pre-authorised Purchase Plan (PPP), submit a void cheque with your other documents. After appending your signature to a pile of documents, you will be provided with your account number as well as online banking details. A bank card will be mailed out to you later.
Step 2 – Mail in the e-Series Funds Account Conversion Form
After setting up your mutual funds account, the next step is to complete the e-Series funds account conversion form. Mail it to the TD e-Series Funds Administration address on the form. You should get a confirmation email in 1 to 2 weeks. If you do not get an email, check your online account to see if e-Series funds are now available to purchase.
For those who already have a TD mutual funds account, step 2 is all you need to follow.
Advantages of TD e-Series Funds
- Low Cost: Management Expense Ratios (MERs) for the e-Series funds are lower compared to other index funds. Also there are no commissions or fees for buying or selling e-Series funds. This low cost advantage can significantly boost your investment returns over time. For example, TD Canadian Index fund-e has a MER of 0.33%. This is low compared to CIBC’s Canadian Index fund (MER 1.14%), Scotia Canadian Index fund (MER 1%), and RBC’s Canadian Index fund (MER 0.72%). The MER is also much lower than is obtainable for actively managed funds which are generally over 2%. Exchange Traded Funds may have slightly lower MERs, however, for small accounts, e-Series may be cheaper overall when commissions on ETF’s are considered.
- Flexibility: All transactions are conducted online and can be posted at any time of the day or week. Additionally, you can automate our purchases by setting up a pre-authorized purchase plan (PPP).
- Low Minimum Amount: The minimum investment amount is $100 and you can invest as little as $25 per fund per purchase when using the PPP.
- Diversification: The e-Series funds offer a variety of index funds to choose from. These funds track entire indexes in Canadian, U.S, and international markets, making them well-diversified. Additionally, you can have several funds in your investment portfolio. I utilize TD Canadian Index fund-e, TD Canadian Bond Index fund-e, TD U.S. Index fund-e, and TD International Index fund-e with the allocation of each fund in line with my investor risk profile.
Disadvantages of TD e-Series Funds
- Limited Customer Service: This is pretty much a DIY investing account and local branch staff may not be able provide much help if you run into trouble. However, if you have questions you can call TD’s Easy Line at 1-866-222-3456 to speak to a representative.
- Portfolio Re-balancing: Over time, the different funds in your portfolio will grow at different rates and will eventually throw your asset allocations off. Once a year I rebalance my TFSA e-Series funds (and my kid’s RESP e-Series funds) portfolio to the original or desired asset mix by channeling new money to those funds that have fallen below their desired allocations.
There you go! You now know what it takes to open a TD e-Series funds account. You can view an updated post on how to rebalance your TD e-Series RESP Portfolio here.
If you have any questions, feel free to ask in the comments section below.