Reader Case: How Should We Invest?

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Kristy Shen (aka "FIRECracker") is Canada's youngest retiree. She used to live in one of the most expensive cities in Canada, but instead of drowning in debt, she rejected home ownership. What resulted was a 7-figure portfolio, which has allowed her and her husband to retire at 31 and travel the world. Their story has been featured on CBC, the Huffington Post, BNN, Business Insider, and Yahoo Finance. To date, it is the most shared story in CBC history and their viral video on CBC's On the Money has garnered 4.5 Million views.
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Photo credit: 401(K) 2013 @ Flickr

Since our last reader case, we’ve gotten more e-mail from readers asking us to analyze their situations. I have no idea why but this made me happy. Okay fine. I know exactly why. It’s because I’m a weirdo who gets a high from digging into other people’s finances. Call it financial voyeurism, a secret obsession…or just plain creepy, but that’s just me. My therapist says I’m not allowed to hover over people when they read their bank statements anymore. *Sigh*.

Anyhoo…so although we can’t use everyone’s situation as a reader case, this one caught my eye:

“My wife and I appreciate your blog, thank you for sharing all those very useful and usable stories.

Thanks to reading Garth’s and your blog we have cemented our commitment to go to index investing. 

So we would like to go down the 50:50 route. The question is how to do it technically? What bank do we use to open a TFSA account? How to manage day-to-day trading? What’s the cheapest way to rebalance (in terms of trader fees etc.)

What do you guys use (what software, what brokerage company)? We would like to fill both our TFSAs and my RRSP first (we would fill RRSP with bonds and then place rest of bonds and all equity on TFSA until we hit our limit, and the rest to a taxable investment account). 

My wife can use her bank, which offers a “world bond” fund, which seems pretty stable and NASDAQ index in Canadian Dollars, which has awesome track record in the past 10 years (they do not offer S&P 500). Should we even consider this? My intuition tells me there are much cheaper options. You mentioned TD e-series was good.”

What do you guys recommend? 

Brief breakdown: 

We are in late thirties with one child. We are earning $135k (plus some OT). Current net worth that we would like to invest: ~$90k. Zero debt.



QuestionLover is asking a LOT of questions (go figure). And I don’t know about you, but when I get a barrage of questions, my eyes glaze over, I pull out my phone and start binge watching John Oliver. But in this case, I realized these are really GOOD questions, and answering them would really help our readers. So I forced myself to slowly put away my phone, grab a cup of coffee, and get to work:


The question is how to do it technically?

  • Since it’s slightly below what you would need for a good advisor (usually 100K or up), I would suggest opening up a TD Waterhouse account and buying index ETFs (see “Investment Vehicle” section below for details)
  • (Update – July 11/2016: One of our readers mentioned Questrade, which offers free purchases for ETFs and $4.5-5 for sells. However, since we haven’t used Questrade ourselves and would never recommend products we don’t use, we don’t have enough information on it yet. That being said, we are currently researching into Questrade and WealthSimple (a robo-advisor) for readers with less than 100K, and will report back on the results. Stay tuned!)

What bank do we use to open a TFSA account?

  • TD Waterhouse (That’s the one we used, back when our portfolio was less than 100K. However, feel free to check out this list of Globe and Mail’s brokerage rankings posted by one of our readers. Thanks, Xerglacia! )
  • NOTE: this is NOT to be confused with a TD Investment account, which has similar funds but with higher fees.

 How to manage day-to-day trading?

  • Great question but too complicated to answer in a bullet point. We answer below.

What’s the cheapest way to rebalance (in terms of trader fees etc.).

  • With TD Waterhouse, if you have more than 50K in the account, the annual fee is waived, and the trading fees are $10/trade for ETFs. Not sure if it’s the cheapest in the country, but that’s what we used.

What do you guys use (what software, what brokerage company)?

  • In the earlier accumulation years, we used TD Waterhouse. Once we crossed half a million, we started using Garth as our advisor and his brokerage company is Raymond James.

My wife can use her bank which offers a “world bond” fund… Should we even consider this? My intuition tells me there are much cheaper options.

  • What is the MER on this fund? What are its underlying holdings?
  • Make sure you research all the fees and underlying assets before jumping in. Just because it’s “performed well in the past 10 years” doesn’t mean it’s a good choice. Banks have been known to show favorable results by cherry picking the time period and neglecting to show hidden fees.

*Phew* That was A LOT of questions. And now to zone out and watch me some sweet sweet John Oliver…

Just kidding. John Oliver is great, but math is WAY better (and yes, I am a lot of fun at parties. Why do you ask?).

Asset Allocation



50/50 is overly conservative, considering you’re still in your late 30s and have a long investment horizon. If you look at our Asset Allocation article, with a 10+ years horizon you should have 70% or more weighting in equities. That being said, if the goal is to just dip your toe into the investing waters before jumping in, your 50/50 allocation makes perfect sense. As you get more comfortable, and more used to rebalancing to a fixed asset allocation amid market crashes, you will gradually discover that investing isn’t that scary.


Investment Vehicle



When you choose index investing, you have the choice of going with mutual funds or ETFs (Exchange Traded Funds).

Most people have heard of mutual funds, but ETFs are a new investment vehicle that has only been around for the last 2 decades.

Let’s go over the differences between them.

Mutual Funds

  • A pool of funds collected from many investors, managed by the fund manager.
  • In return for this service, the fund manager charges a MER (Management Expense Ratio) fee.
  • If this fee is greater than 1%, run for the hills because it will gobble up your returns.
  • Since we advocate indexing, the mutual funds we’ll be referring to are index funds, mutual funds constructed to track an index (like S&P 500, or TSX)


  • A basket of assets that trades like a common stock.
  • Unlike a mutual fund, ETF do not have its value calculated once at the end of every day. It experiences price changes through the day, since it’s bought and sold like a stock.
  • And since ETFs are traded like a stock and does not have a fund manager, it has MUCH lower fees.
  • For example (disclaimer: for illustrative purposes only, and not to be taken as investment advice)
    • BMO S&P/TSX Capped Composite Index ETF has MER of only 0.06%, plus $10/trade via TD Waterhouse for portfolios >50K
    • In contrast, TD e-series Canadian Index fund has an MER of 0.33% (but all trade fees are included).

Once your portfolio grows to 100K, it makes sense to use ETFs since they have MUCH lower fees.

Back when we had less than 100K, we invested in the TD e-series mutual funds, which had lowest MERs of any mutual fund we looked at.

So why didn’t we just buy ETFs?

Well, because of trading fees. For example, if you only have 10K to invest, and you get charged $9.99 per transaction, and set aside a portion of your paycheck to buy every 2 weeks, that’s $259/year, or 2.95% of your portfolio! Whereas if you have 100K invested, the same transaction fee is only 0.295% of your portfolio.

Not only that, but for TD Waterhouse, if you have less than 50K, you get charged $29/trade instead of $9.99.

The bigger your portfolio, the smaller percentage the transaction costs. (We will discuss how to get your investment fees to be as low as possible in a future post.)

In the case of our reader, his portfolio is close enough to 100K, I would advise using ETFs instead of mutual funds.

Portfolio Tax Efficiency

Photo credit: 401(K) 2012 @ Flickr. License: CC BY-SA 2.0


Okay, so with 90K to invest, using a 50/50 allocation and indexing, your portfolio could look like this

  • 45K in CAD/US/international equities (15K in each)
  • 45k in fixed income

To structure the portfolio for tax efficiency:

Canadian Equities $15K
International Equities $15K
US Equities $15K
Bonds $45k
Total $60K $30K

Since they’ve never had a TFSA, they should have 82K room (41K each) built up since inception. And with their salaries at 135K, they should have enough RRSP room accumulated over the years.

TTR (“Time To Retirement”)

Photo credit: Tax Credits @ Flickr. License: CC BY 2.0


Now, with a salary of $135K, 90K savings by late 30s and zero debt, how long will it take them to become FI?

That really depends on their yearly expenses, but for a family of 3, if they were to be able to get their expenses down to 40K/year (totally doable since other FIers like MMM is doing it for 25K, and Justin is doing it for 40K with 3 kids), then after tax (assuming they max out their RRSP) they would have a take home income of $103,651.91. So with a savings rate of 61%, they should be able to retire in 14 years.

Cool huh? (Yup, I think charts are cool. Don’t judge)

Screen Shot 2016-07-10 at 10.59.39 PM



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41 thoughts on “Reader Case: How Should We Invest?”

  1. Apparently, Questrade fees are lower than TD Waterhouse.
    ETFs are free or almost free to purchase.
    To sale ETF : probably around $4.5 or $5/transaction. however, if the sales take place for multiple days, the selling fee can be little higher/different

    1. Yes, we’ve heard good things about Questrade, but since we’ve never used it we can’t in good conscience recommend it….YET (as I mentioned before, we never recommend products we don’t use ourselves). However, we are currently looking into Questrade and WealthSimple (a robo advisor) for the readers who are still building up their portfolio and don’t have enough for an advisor yet. Will report back the results 😉

      Thanks for mentioning Questrade. It’s good to know all the options out there.

  2. Thanks for this! I’ve been daunted to start with all of this because I’m definitely in the still paying off student loans and only have 10k to invest category. This helps me figure out where I can start without being able to hire someone like Garth!

    1. Glad it was useful, Laura! We are currently also researching Questrade and WealthSimple (a robo advisor) to help our readers, who are still building up their portfolios, to find the best non-advisor options. Will report back on the results.

  3. Check out the “MoneySense Guide to the Perfect Portfolio” (best $15 I ever spent) and These are the resources I used to set up a very simple index investing strategy. They help you figure out which institution go go with , depending on the size of your portfolio and which ETFs to buy with each. The couch potato blog even has PDFs comparing historical performance of the recommended portfolios. Super easy!

    1. Great suggestion, Michelle! We read Canadian Couch Potato a lot while we were setting up our investments, prior to hiring Garth. Very useful and simple for first time investors.

  4. This is probably going to sound slightly advertising-ish but currently has trades for $8.75 for most trades ($6.95 for active traders), but also has 60 ETFs that have 0 commissions, if you meet certain (4) criteria (
    I find the service itself pretty good, and it has pretty good customer service too.

  5. Keep it simple. Until you have more than 250k, trading fees can be surprising and combined with the ETF MER’s can outweigh the costs on a good mutual fund.

    If I were starting out again, until I had enough assets to build by own portfolio, I would stick with the Mawer Balanced Fund (MAW104). MER is 0.94%. No hidden fees on the underlying funds it holds like some bank portfolio funds. This is cheaper than an advisor like Garth that would be running around 1.25% by the time you consider the MER of the ETFs in whatever his model portfolio is.

    They have been around for a long time and performance exceeds or matches what is often quoted for a ‘balanced portfolio’ or the couch potato portfolios over just about all time periods I have checked. All you need to do is contribute when you have the money. Simple, easy, no stress.

    I am in no way affiliated with the company, but have convinced my parents to move out of their big bank equivalents to this fund, and personally hold the Mawer Europe fund as I got tired of researching Europe index funds that had returned zilch over the past decade, while the Mawer fund had returned a much better result. They use a portfolio approach instead of an index approach to achieve diversification. Sure this approach might occasionally get set back by a poor pick, but the index by definition holds ALL the Losers so it is always set back.

    Just my 2 cents.

    1. A fee based advisor’s fee is tax deductible while a mutual fund’s MER is not. While you’re working and at a high marginal tax rate (~50%), this can actually work out to be cheaper than you think since you get half of it back at tax time.

      As for these balanced mutual funds, I used them for a bit but I found they didn’t let me rebalance. Rebalancing into equities is what saved our butts in 2008, and I’m not sure how a single balanced fund would have performed if we couldn’t do that.

      Jeff, are all your assets in this one fund now?

      1. I agree that once you have sufficient assets an advisor makes a lot of sense, but you have to get to the 250k or even 500k assets and up to qualify first, so until then the tax deduction aspect is a non-issue.

        Money for many is a taboo subject and the thought of implementing a portfolio of ETFs and rebalancing is daunting. This is why I think that a balanced fund can often be a good service for many people. Simple and low cost. No trading commissions to buy/sell. The fund is rebalanced as necessary, just as advisors do for their clients.

        Personally I’m a believer in a portfolio approach. I currently hold 28 equities with a ~65/35 Canada/USA split, 7 etfs for bond, reit, preferreds, gold exposure and 1 mutual fund for Europe.

  6. I’m not sure why anybody who is index investing with less than $100k wouldn’t use Questrade over every other brokerage. I started Questrade about a year ago and currently have 2 TFSA and 2 RRSP accounts for me and my wife, and pay essentially nothing to buy as many ETF’s as I want. I send money to each account every month, and since trading is free, I re-balance on a monthly basis. If I had to pay $10 to buy an ETF I’d probably only buy once or twice a year.

    Selling is around $5 per ETF, but I’ve never had to sell one as I just re-balance by investing on a regular basis and allocating accordingly (bonds to RRSP’s, equities to TFSA’s).

    Another nice thing about Questrade (this may be available to others too) is you can set up automatic bill payments to your accounts there, so the money moves itself on a monthly basis from your chequing account (free to do) and you don’t have to worry about it.

    I’ve got nothing but praise for Questrade, it’s the perfect platform for anybody new to index investing.

    1. That’s a second vote for Questrade! Okay, checking them out now.

      Question: Have you had to deal with their customer service? I googled Questrade reviews and the only negative comment I’ve seen is someone who had interest charged mistakenly to their account, and couldn’t get a response for a whole week. I’m hoping this is an anomaly.

      1. I had a TFSA account with questrade about 7 years. I closed it because I want to consolidate everything under my main bank/brokerage. I don’t think they were offering free ETFs trading then, otherwise I may have reconsider.

        Anyways, they really messed up my withdrawal information to CRA and it took me about 2 years to get it all sorted out. It might have been faster if I was more proactive I guess. Although the customer service was good in replying to emails, it was frustrating because you would get a different rep each time you replied and weren’t really giving me a proper solution.

        Eventually, a good rep got my email thread and stuck with me and acknowledged that there was a known issue on their end. It was stressful thinking that I lost my TFSA contribution room!

        With the free ETF trading, I am really tempted to join again but that experience left a sour taste.

        1. “Anyways, they really messed up my withdrawal information to CRA and it took me about 2 years to get it all sorted out”

          Yikes! That doesn’t sound good. Other readers seemed to have good feedback on Questrade so I’m surprised that you had such a negative experience. Sorry to hear that.

          Here’s an article I found on MillionDollarJourney which reviews other Canadian Discount Brokerages:

          Maybe one of them will work out for you?

          1. Thanks. Yeah, it was awhile back when TFSA was only a couple of years old and CRA was giving me the runaround as well so maybe they were just working out the kinks. I am open to trying it out again but probably just in my non-registered where things should be more straightforward.

            At the time, I was really confused with how to use their trading platform with ECN fees, etc but it seems like reviews here are that they are quite user friendly.

            I’m still with CIBC as that’s my main bank as well. For me, it was matter of just consolidating everything and keeping things more simple as my investment accounts were all over. There are some pros and cons but I am choosing it more for the convenience. I also like that I can transfer money easily from my bank account to my brokerage.

  7. I opened my RRSP and TFSA 2 years ago with Questrade and had no issue whatsoever with them since opening my accounts. I think most of the negative comments are when they first started out and since then they have improved greatly their customer service.

      1. I’ve had to deal with their customer service on occasion, just to sort out documentation normally.

        These accounts can be a bit of a pain to set up initially as they require a TON of paperwork that have to be filled in perfectly, but they do try to make it as easy as possible by allowing e-signatures and uploading most forms directly on their site. They also tell you when something is missing and how to fix it.

        Any issues I’ve had has always been dealt with via email very promptly. Never had an issue with their service as of yet.

        I think the best thing about Questrade is how user friendly it is. Anybody new to investing gets guided through the process step by step, they make sending money to and from the accounts really easy and the user interface is fairly friendly (let’s fact it, trading platforms are an intimidating place to newcomers). Obviously the trading platform is a bit complex but you get used to it quickly. I think overall it’s aimed at people like us, rather than serious day traders, hence the free ETF’s

        The only negative I’ve come across when researching is apparently their reporting features aren’t as good as some competitors, as in tracking the performance of your portfolio I guess? I’ve never had an issue with it personally but then again I don’t ask for much detail like the day traders would. I’m not sure what their fees are like when trading in individual stocks either as I’ve never bought one.

        1. As another note, I’m not sure if you use it but I’d highly advise to anybody who is wanting to take control of their finances to use Mint. It’s excellent for tracking where your money is going and allows you to budget your expenses. I use it every day and don’t know where I would be without it.

          It’s such a life changer I’d almost dedicate an entire article to it as it can really change your financial situation by allowing you to take control of your finances. A lot of people go through life without knowing where their money is going and frankly it is shocking to see how laissez faire some people are with money. Before you start investing at all, you should be looking at where you can save money just from tracking where it is going. It’s amazing how buying lunch out every day can add up, for example, and people usually turn a blind eye to it. Mint really makes you stop and think.

          1. Mint worries me. It’s a great tool and very easy to use, but my biggest concern is that that you need to put in your banking passwords. Doesn’t the banks have a policy that says “if you share your password with anyone else, we are not liable if your account gets hacked”. From a useful point of view, it’s A+, but from a security point of view…I’m not sold on it. I’d rather download my bank account statements, import it into excel, keep track of everything locally, and secure it with a password.

            That way the banks can’t throw up their hands and recuse themselves of any security breaches by saying I gave away my passwords.

        2. That’s good to know. Maybe, like Phil said, the negative comments were from the beginning when they were still trying to iron on the kinks.

          We’ll have to play around with the system to see if it’s easy to use.

          1. I understand the concerns around Mint and security and your solution is fine if you are willing to put in the effort to do that, but let’s face it, most aren’t. When a piece of software can scan your bank transactions and automatically allocate it to an expense, and tell you if you are over/under budget for the month, then there really isn’t anything you have to do other than log in and look. Your solution is pretty labour intensive and I just don’t see a lot of people putting that effort in. I did used to do it your way until I discovered Mint.

            As for security, they do not hold your a bank account details on your Mint account, and if someone were to get your Mint login details, they have no access to your bank account details (card numbers, login etc.) so they couldn’t do anything. The only way they could do anything is if they hacked Intuit’s servers, which are apparently more secure than most banks (so I’m told!). Personally I am fine with it and don’t consider it any more of a risk than online banking.

            That being said, upon further research I am intrigued by YNAB, which I saw getting a lot of mentions on blogs. Perhaps you might want to look into it if you are interested in downloading transactions instead. Seems to be an app set up to import your bank transactions into and then going from there. No doubt more secure than Mint.

            1. I tried using an app called “Wallet” on my android phone while we were travelling. It worked great…until it crashed and lost all my data when it updated to a new version. Luckily, I’d exported it out as a spreadsheet before that happened, but I’ve been pretty weary of budget apps since then. I’ve heard about YNAB, but right now, I’m actually pretty happy using spreadsheets. Since I can code, I can write macros to automate the manual, tedious tasks, so it’s pretty slick. Dunno, maybe I’ll consolidate all the scripts into my own app in the future. That’s the problem with software developers. We always want to do everything ourselves. It’s both a blessing and a curse. Anyhoo…thanks for the brokerage and app suggestions. It’s always fun to see which apps everyone is using these days.

  8. Another excellent post… Thank you guys for sharing your knowledge and help readers like me on how to build portfolio’s. As a novice investor, this will guide me through FI. Keep it up…im hungry waiting for your upcoming post.

  9. I am currently using a robo-advisor for my accounts, and the fee is lower than TD Waterhouse: Shareowner.
    They charge 0,5% on top of the fund MER, rebalance automatically and even suggest a portfolio if you don’t know how to build one. Only catch: they charge 40$ to change the portfolio allocation, so if you are the type who wants to change tack to follow the wind it’s very costly.
    My total fees are under 0,75% for a portfolio covering world stocks and bonds with a north American slant.

  10. Watch out for hidden fees with Questrade. They charge %2 to convert CAD to USD!!! So be aware if you are trying to diversify outside of Canada. Not as cheap as they appear because it’s a 4% round trip for your money. Also, if you are reciving dividends in USD, the default account setting is to automatically converts those to CAD. This is even the case for DRIPS (USD->CAD->USD = 4%) so be sure to get the account setting right so they don’t automatically convert to you default currency(CAD).

    I still use QUestrade to buy some individual stocks but have moved my long term portfolio over to Wealthsimple. I’ve had a some small hiccups with Wealthsimple’s service but it’s been nearly a year and I’m happy with their fees and transparency

    1. Good to know! We’re currently testing out Questrade and the first thing we noticed is that they set you up with a margin account by default. This was a bit surprising since you could really shoot yourself in the foot if you’re not careful.

      Had no idea they charge extra for currency conversion! Thanks for letting our readers know!

      We’ll sign up for WealthSimple account and do a comparison.

  11. Are you advocating that ETF are better than mutual funds once you have build enough equity in your portfolio (ie 200k+). Could you state why?. Also aren’t mutual fund MER fees on average 1-2%. Thanks.

    1. If your portfolio is small (less than 100K), the trade fees will be a bigger percentage of your portfolio (eg $50/year on trading fees is 0.5% of 10K portfolio). MFs include those fees, so if you pick one with a low enough MER, MF makes more sense for a smaller portfolio (we used TD Waterhouse e-series with 0.33% before moving to ETFs). Once your portfolio is big enough, if you buy ETFs, the MERs are around 0.1% or lower, saving you a ton on fees. And if you look at the trading fees, it’s a tiny % of your large portfolio. ($50/year on trading fees, is only 0.05% of a 100k portfolio).

      That being said, one of the readers mentioned Questrade has 0 fees to buy, so in that case it might make sense to use ETFs regardless of the size of your portfolio. But we haven’t used Questrade so can’t recommend it.

  12. I’m eager to hear your review on WealthSimple and Questrade. I moved all my money from Investors Group (super expensive, I knew nothing), to ING/Tangerine Mutual Funds, to TD E-Series, and now it’s between Questrade and WealthSimple (super convenient that I don’t have to rebalance on my own).

    1. Nice! That’ll save you a lot of fees. We are currently reviewing WealthSimple and Questrade and will write a post about them in the future.

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