In the fifth installment of my beginner DIY investing series, we’ll learn how to implement an ETF portfolio at Scotia iTRADE.
Scotia iTRADE is a relatively high-cost brokerage for a newbie investor with modest assets, so please carefully review the fees below before making your choice.
$9.99 trading commissions
In order to qualify for $9.99 trading commissions, you’ll need to have at least $50,000 of combined assets with Scotia iTRADE, or a minimum of $50,000 in other Scotia products (such as mortgages or lines of credit with Bank of Nova Scotia). If you’re starting out with a smaller amount, you’ll pay a whopping $24.99 per trade. If you’re in this situation, check out The Globe and Mail’s 17th annual online broker ratings for additional discount brokerage options.
Commission-free ETFs
Scotia iTRADE offers about 50 commission-free ETFs. Although this seems like an amazing deal, their current list largely excludes the cheapest plain-vanilla ETFs. There were two ETFs that made the grade though:
- iShares Core High Quality Canadian Bond Index ETF (XQB)
- iShares Core MSCI Emerging Markets IMI Index ETF (XEC)
Upon receiving my recent confirmation notices from Scotia iTRADE, I was pleasantly surprised to find that no trading commission had been charged on my purchase of XEC. Investors may want to also consider swapping out the Vanguard Canadian Aggregate Bond Index ETF (VAB) in my model portfolios for the commission-free XQB.
Source: Scotia iTRADE
Watch those cash balances
Similar to BMO InvestorLine, trading commissions are not accounted for on the day you place your trades (so your quoted cash balance details are slightly inflated). One possible solution to this issue is to subtract the total trading commissions that will be payable for the day prior to placing your final trade.
Avoid the annual RRSP fee
If you have $25,000 or more of aggregate assets with Scotia iTRADE, they’ll waive their annual $100 RRSP fee. Other Scotia products that you hold are not included when meeting this threshold though (only Scotia iTRADE assets count). Once again, if you have below this amount, you may want to look around for a brokerage with a lower account minimum.
U.S.-Friendly RRSP quarterly fees
Regardless of the size of your portfolio with Scotia iTRADE, they will still charge you $30 per quarter for a “U.S.-Friendly RRSP” account. Nearly all of the big bank brokerages have actual U.S. dollar RRSP accounts (and they don’t charge additional fees for the privilege of investing within them), so I would recommend looking around for another brokerage if you plan to hold US-listed ETFs at some point in the future.
For smaller accounts, use less ETFs
Although I’ve shown how to build a 5-ETF portfolio in my tutorial, you can get away with using just three ETFs to cut down on trading commissions. Instead of holding separate ETFs for US, international and emerging markets stocks, simply hold the iShares Core MSCI All Country World ex Canada Index ETF (XAW).
Stay tuned next week when we’ll learn How to Build an ETF Portfolio at National Bank Direct Brokerage.
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Is XQB really a comparable swap for VAB? There is a lot of volatility in the bond market now and it seems like there are some days in which these are moving in the opposite direction considerably, including today. I know these are meant to be long term holdings, but just wondering if these are really similar enough.
Are there any all in one etfs that are commission free on iTRADE that you would recommend?
@John: Scotia iTRADE currently offers $0 commissions on XGRO and XBAL (I just checked via my online Scotia iTRADE account), so you could consider whether these are appropriate for you:
https://cdn.canadianportfoliomanagerblog.com/wp-content/uploads/2019/03/iShares-AA-ETFs-2019-03-31.pdf
How does XGRO alone compare to multiple ETFs? Seems like a nice and simple option?
@John: Asset allocation ETFs are a game-changer for DIY investors (which is why I’ve included them in my “Light” model portfolios):
https://canadianportfoliomanagerblog.com/model-etf-portfolios/
Justin,
I was wondering if you were planning on updating the white paper on “Norbert’s Gambit and US-Friendly
RRSPs – A better way to buy US dollars in Scotia iTRADE accounts” as the US-Friendly RRSPs have now been discontinued at iTRADE.
Or is the Norbert’s Gambit section now relevant for all iTRADE accounts?
Thanks.
@James: I have no plans to update the Scotia iTRADE white paper on Norbert’s gambit, but I may record a video blog whenever I have some free time.
I’m also looking at setting up with iTrade, first an RESP for my son using the commission free model something similar to what @Al posted above. I’m also looking at setting up an RRSP and am considering using the same model as I won’t be dealing with a large portfolio to begin with. I have considered going with couch potatoes Tangerine model, but all of our money and banking is currently done with Scotiabank and I think the $100 annual RRSP fee (until we surpass the 25k mark) is worth the ease of having everything in one easily accessible place. It seems a bit funny starting an RESP with $1500 and only buying only single digits within a given stock, but I guess you gotta start somewhere. With such a small fund, Justin would you recommend simplifying even further than a 5 ETF split? It is a family plan and we are thinking we’ll have 2-4 kids so the fund has potential to grow quite big over the years with $75 month per child contributions.
@James Liira: If having everything in one place is worth the $100 annual RRSP fee to you, I don’t see any issue with this (and it might even motivate you to save up the $25K even faster! ;)
If you’re using the commission-free ETFs, it probably doesn’t matter if you use 5 ETFs.
Another great article , thanks Justin.
I was just wondering, how much of a difference (performance wise) would it be if we did ONLY use the commission free ETF’s.
20% HXT (for the TSX60 – large cap canadian)
20% HXS (S&P 500 – US large caps)
15% VEF (developed world ex-North America)
5% XEC
40% XQB
@Al: It would depend on the future returns of mid cap/small cap Canadian and U.S. stocks (as HXT and HXS exclude these, while VCN and VUN include them) as well as the currency returns of the developed markets (as VEF is currency-hedged, while XEF has exposure to the underlying currencies).
Over the long term, I doubt the ETF differences would make a huge impact on the performance.