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Guidance on transferring mutual funds and managing regularly monthly contributions

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asked Dec 08, 2014 08:14 PM by
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Hi Jin,

First of all, thank you for providing this service. It has been very helpful.

I am investigating the most cost-effective approach to moving my mutual fund investments from my advisor into a self-directed account.

My wife and I have our funds distributed into 50% RRSP, 30% TFSA, 15% RESP, 5% non-registered. Across all accounts, we have about 70% of front-loaded funds and 30% of back-loaded/DSC funds. The MER is about 2.5%.

I am planning to transfer all of the funds in-kind, sell all the front-loaded funds, and transfer the money into the portfolio of choice. As for the back-loaded/DSC funds, I am able to transfer 10% of the back-loaded shares to front-loaded on an annual basis, so I'll slowly move the back-loaded shares into the Moneygeek portfolio on a yearly basis.

Once in our self-directed accounts, we'll need to work through the practicalities of monthly contributions. Assuming a portfolio with 4 ETFs/stocks, and 5 accounts (RESP, RRSP, Spousal RRSP, TFSA, Spousal TFSA), there would be 16-20 purchases/month. I want to minimize the commissions, so is it reasonable to purchase the 4 ETFS/stocks from my non-registered account on a monthly basis, then re-destribute the shares into the respective accounts?

Thank you

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answered Dec 08, 2014 09:37 PM by
Jin Won Choi gravatar image Administrator

Hi Matt, good to hear from you.

There are a few considerations with respect to cheaply implementing the portfolio.

First, 'How to put the portfolio into action' tab in the model portfolios page contains a tool that optimally allocates the portfolio between the different types of accounts. When you use this tool, you'll find that it often assigns just one or two ETF/stocks in each of the accounts. (P.S. I haven't incorporated RESPs in the tool yet, but for now, you can treat it like it's TFSA). Since each account won't mirror each other, you should be able to contribute to the portfolio without making 16 purchases each month.

Second, most Canadian discount brokerages now offer free ETF purchases. If you have an account with one of them, I expect that some 3 quarters of your purchases will be commission free. The only stock you'll have to pay commission for is BRK-B.

Between the first and second considerations, I expect that you'll only have to pay commissions on 1 or 2 trades a month. However, if you want to cut your commissions down further, you can do one of two things.

First, you can first buy BRK-B and transfer them in kind like you suggested. Second, you can just pool your money for BRK-B and buy them every quarter.

Because BRK-B operates in so many different industries, you can almost think of it like a diversified fund. Like most diversified funds, it normally won't move very much from month to month. Therefore, I don't see a big need to maintain the exact allocation on a monthly basis.

I hope that answers your questions. Let me know if you have more. Jin

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Thanks, Jin!

mmikitka ( Dec 09, 2014 06:55 PM )edit
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Asked: Dec 08, 2014 08:14 PM

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