A Review of TD e-Series Funds

The TD e-Series funds are a darling of semi-DIY investors who want to lower their investment fees but are not yet willing or able to use a self-directed discount brokerage account.

Investment fees in the form of a Management Expense Ratio (MER) form the bulk of fees that investors pay when they invest in traditional mutual funds.

It is a known fact that MERs are significantly higher in Canada than elsewhere in the developed world. With equity mutual funds in Canada “boasting” an average MER of 1.98%, the average investor is faced with four broad options:

1. Continue investing in expensive mutual funds and take whatever returns you get. Enjoy the ease of having a 100% hands-off approach to your investment portfolio.

2. Invest with a robo-advisor using low-cost ETFs and a hands-off approach as well. Pay a lower MER than Option 1 at approximately 0.70% (including ETF fees).

3. Use index funds that are already individually diversified to build your investment portfolio. Pay a much lower MER (1% or less) and be prepared to re-balance your portfolio 1-2 times a year.

4. Self-directed investing (aka DIY investing) using a discount brokerage account to purchase stocks, ETFs, and other securities to create portfolios you are comfortable with.

With the fourth option, you will also need to rebalance your portfolio as often as necessary. Transaction costs (i.e. buying and selling commissions) can become significant depending on your trading frequency.

When making a choice between semi-DIY with index funds and full-fledged DIY with ETFs/stocks, it is important to consider your account size and how often you plan to trade.

The advice used to be that low-cost options like TD e-Series Funds (indexing) were preferable when your account portfolio was under $50K. This was because you could minimize your transaction costs when trading frequently in a small account.

However, with the advent of robo-advisors, all-in-one ETFs, and no-commission brokerage platforms, the possibilities are now plentiful.

An Overview of TD e-Series Funds

A common question I get is: “What is the difference between an index fund and a mutual fund?”

In summary, an index fund is a mutual fund that is passively managed and that replicates the returns of a benchmark index (e.g. the S&P 500).

TD Bank offers several funds to investors. To identify the ones that are designated as e-Series, look for the “-e” attached to the fund name.

In 2019, TD announced some changes to its line of index mutual funds (i.e. e-Series Funds). Of note is that the e-Series funds now hold TD-specific ETFs, track slightly different indices, can now be purchased through other online brokerages, and are slightly cheaper than before.

Some of the commonly used ones include:

1) TD Canadian Bond Index-e (TDB 909)

• Benchmark: Tracks the Solactive Broad Canadian Bond Universe TR Index
• Asset Mix: 100% Bonds
• MER: 0.44%
• Risk Rating: Low

2) TD Canadian Index-e (TDB900)

• Benchmark: Tracks the Solactive Canada Broad Market Index (CA NTR)
• Asset Mix: 97.2% equities, 2.5% income trusts, 0.20% cash and equivalents
• MER: 0.28%
• Risk Rating: Medium

3) TD International Index-e (TDB911)

• Benchmark: Solactive GBS Developed Markets ex North America Large & Mid Cap CAD Index 
• Asset Mix: 98.70% international stocks, 0.90% income trust units, 0.30% cash and equivalents
• MER: 0.45%
• Risk Rating: Medium

4) TD U.S. Index-e (TDB902)

• Benchmark: Solactive US Large Cap Index
• Asset Mix: 97.60% US stocks, 2.10% international stocks, 0.20% cash, and 0.30% income trust units
• MER: 0.33%
• Risk Rating: Medium

5) TD International Index Currency Neutral-e (TDB905)

• Benchmark: Solactive GBS Developed Markets ex North America Large & Mid Cap Hedged to CAD Index
• Asset Mix: 95.50% international stocks, 0.80% income trust units, 0.60% cash, and 3% other
• MER: 0.46%
• Risk Rating: Medium

6) TD U.S. Index Fund (US$)-e (TDB952)

• Benchmark: Solactive US Large Cap Index
• Asset Mix: 99.02% US stocks, 0.47% international stocks, and 0.25% cash
• MER: 0.34%
• Risk Rating: Medium

7) TD U.S. Index Currency Neutral Fund-e (TDB904)

• Benchmark: Solactive US Large Cap Hedged to CAD Index
• Asset Mix: 97% US stocks, 2.10% international stocks, and 0.30% income trust units, and 0.80% cash
• MER: 0.33%
• Risk Rating: Medium

8) TD Nasdaq Index Fund-e (TDB908)

• Benchmark: Nasdaq 100 Index
• Asset Mix: 97.60% US stocks, 3.20% International stocks, 0.30% Canadian stocks, and -1.20% cash and cash equivalents
• MER: 0.50%
• Risk Rating: Medium to High

9) TD European Index Fund-e (TDB906)

• Benchmark: MSCI Europe Index
• Asset Mix: 99.90% International stocks, 0.10% income trust units, and 0.15% cash
• MER: 0.50%
• Risk Rating: Medium

10) TD DJIA Index-e (TDB903)

• Benchmark: DJIA Total Return Index US$
• Asset Mix: 99.90 U.S. stocks
• MER: 0.33%
• Risk Rating: Medium

Opening a TD e-Series Funds Account

The availability of information on how to open a new TD e-Series Funds Account has historically been very poor, and that hasn’t changed.

You will often also find that the local branch employees are unfamiliar with the product.

To buy TD e-Series Funds, you will need to open a TD Direct Investing account.

Sample RRSP and TFSA Portfolios with TD e-Series Funds

To invest with the e-Series Funds, you probably want to combine a few of them to create a portfolio that reflects your risk tolerance and investing strategy, i.e. conservative, balanced, or aggressive.

A balanced TFSA/RRSP portfolio using the e-Series funds would look similar to this:

Name	Code	Allocation	MER
TD Canadian Bond Index Fund – e	TDB909	40%	0.44%
TD Canadian Index Fund – e	TDB900	20%	0.28%
TD U.S. Index Fund – e	TDB902	20%	0.33%
TD International Index Fund – e	TDB911	20%	0.45%
Average Weighted MER			0.39%

• MER: 0.39%
• Asset Mix: 60% Stocks and 40% Bonds
• Risk Rating: Low to Medium

For more information on how I vary the e-Series funds mix in an RESP portfolio based on a kid’s age, click here.

Re-balancing a TD e-Series Funds Portfolio

When you make up your portfolio using several funds, you will need to re-balance one to two times per year at a minimum.

This is because the different funds in your portfolio will perform differently, causing your asset allocation to stray away from your intended targets.

For a step-by-step tutorial on how I re-balance my portfolio, click here.

Conclusion

The TD e-Series funds are one of the few options Canadians have when they want to invest using index funds. Here’s a list of the other index fund options available.

Re-balancing your portfolio should take no more than 20 minutes or less per year. However, if you would rather not have to re-balance yourself, consider the services of a robo-advisor.

Related reading:

• How Much Money Will You Need To Retire?
• How To Buy ETFs in Canada
• How To Invest in Stocks in Canada
• 10 Investment Risks Investors Should Understand