However, if you are going to invest a large amount of money each time—say once a quarter—then the trading commission on an ETF becomes less of an issue. Not as annoying as waiting for a rental car—which is incredibly annoying—but annoying all the same. Air travellers start to feel effects of U. If you want to invest monthly, use index funds. In additional to the ongoing costs of these products—the MER—it is also important to consider the cost of commissions.
Index funds vs. ETFs
The problem is this "strategy comes with added risks like the possibility of being forced to withdraw funds when the market is down. She also recommends, for diversified international exposure, the Vanguard Global fund, which is the lowest-cost, low-volatility ETF on the Canadian market. Although the management fees are higher than similar holdings in the other portfolios, at 0. Similarly, the other equity-based ETFs in this portfolio have higher MERs than their sector peers that do not screen for volatility.
Lastly, the iShares Year Laddered Corporate Bond fund "provides some added volatility dampening" while addressing rising interest-rate risk associated with fixed income by reinvesting in new bonds annually as older holdings mature. One final note to investors: While these portfolios offer easy-to-manage, low-cost strategies to save for retirement, they must be rebalanced semi-annually or annually to ensure the original asset mix remains intact and aligns with your risk tolerance.
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In additional to the ongoing costs of these products—the MER—it is also important to consider the cost of commissions. For example, if you have an automatic RRSP contribution going into your investment account each month, index funds make it easy to invest in small amounts on a no-load basis. That is, without paying a commission. But investing small amounts into an ETF is a little trickier since you generally have to pay a trading commission each time you invest, regardless of the quantity you want.
CDZ , allow you to make a pre-authorized cash contribution without paying commission, but n ot all brokers offer this feature, so verify that yours does before you buy it. There is also a hybrid version out there called the TD e-Series. If you are going to make small monthly investments, index funds might make the most sense. However, if you are going to invest a large amount of money each time—say once a quarter—then the trading commission on an ETF becomes less of an issue.
Index funds simply re-invest dividends as they are paid out. Most ETFs, on the other hand, put the dividends into your trading account and you then need to take the cash and invest it. Not as annoying as waiting for a rental car—which is incredibly annoying—but annoying all the same. As well, index funds can be bought through a local bank branch or online bank. Exchange traded funds require you to open up an account at a discount or full service brokerage. If you have more money to invest, and are interested in doing more complex trades, ETFs are a better option.
You can buy and sell them during the trading day, and research more complicated niche products and strategies, like selling short.
My super simple and unscientific rule of thumb would be this: If you want to invest monthly, use index funds. But as you increase your assets move to ETFs because of the compelling advantage of cost.