Stop waiting for stocks to hit bottom. The time to start building a portfolio that takes advantage of the market decline since late February is now.
The quick, cheap and easy method for doing this: Select a balanced exchange-traded fund and make contributions on a Bi-Weekly or monthly basis. I’ll leave it to you to find the right balanced ETF using the balanced fund instalment of The Globe and Mail 2020 ETF Buyer’s Guide. The main task is to find a fund that reflects the mix of stocks and bonds that best matches your needs. There are conservative, balanced, growth and all-stock versions (where the balance is between global stock markets).
Next, pick the right broker. ETFs trade like stocks, so most firms will charge a standard stock-trading commission of up to $10. A few brokers waive all or some ETF trading commissions – those are the firms you want for your plan to pick up stocks on the cheap with regular investments. If you’re making regular ETF purchases for modest amounts, a commission of close to $10 for each purchase is prohibitive.
Both Questrade and Virtual Brokers offer free ETF purchases – you pay the regular commission to sell. National Bank Direct Brokerage offers free ETF buy and sell transactions if you trade in blocks of 100 shares or more. Qtrade Investor offers 100 commission-free ETFs, including the iShares Core Growth ETF Portfolio (XGRO) and the iShares Core Balanced ETF Portfolio (XBAL).
Scotia iTrade also offers a limited number of ETFs with no commissions, although the firm seems to want to keep this quiet. The only way to get a list of available no-commission ETFs seems to be using the ETF Screener and clicking the box to screen for commission-free trading eligibility. XBAL and XGRO were on the list.
Balanced ETFs have management expense ratios in the 0.2-per-cent range, which means they’re not cost-free. But in choosing a broker with zero ETF commissions, you’ll eliminate the drag of trading costs as markets recover from the downturn of 2020.
Plan to keep your investment plan going indefinitely. We don’t know how the pandemic will play out, which means it’s tough to call a stock market rebound. By making regular purchases in a balanced fund, you don’t need to sweat the timing.
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Rob Carrick