May 242018
 

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So you are ready to start investing in Exchange Traded Funds (ETFs). You understand how mutual funds are costing you tens of thousands of dollars and it’s time to take control of your own future. Or maybe you are a crazy gambler and want to try your hand in the stock market. Either way it’s time to actually open an account. But where should you start?

What to consider when opening a brokerage account

First things first. What’s a brokerage account?

BROKERAGE ACCOUNT – A financial account specifically used for buying and selling investments on a stock market exchange.

Most people open them in one of two ways:

  1. Contact your big bank (BMO/RBC/Scotiabank etc) and set up a direct investing account if they offer one.
  2. Sign up with an online brokerage. AKA a discount brokerage

Most people don’t do either of these things. They have a “family friend” who works at an investment company such as Investors Group or Primerica. Their “friend” will invest their money for them in mutual funds. Don’t do this. Open your own account so you have control over your own money.

What’s that? You don’t know anything about brokerage accounts? Well consider the following points:

  1. FEES – Investing is never free. All brokerages will charge you somehow. But the most important consideration is their TRANSACTION FEES. AKA the price to buy and sell stocks. A good price is $0, but the most common decent price is $5/trade. A bad price is $10 and a terrible price is $30. Also check for annual account fees. Again a good fee is $0.
  2. ONLINE PLATFORM – Unless you can’t use a computer you’ll be doing online trading. The platform should be easy to use, responsive, and intuitive. But it largely comes down to personal preference. The alternative is calling the bank to place trades. It takes me about 30 seconds to place an online trade, but over the phone trading takes about 10-20 minutes.
  3. BRANCHES – Probably the biggest advantage to the big banks is a physical location where you can go talk to someone. The online brokerages will let you call or online chat with them but no physical location. It’s up to you if this is important. I’ve never felt like I was missing out doing all my trading online. If there’s something I can’t do online it’s not a bank for me. #millennial
  4. INVESTMENT TRACKING – Is it easy to track your investment performance? Mutual fund providers including most of the big banks are the worst for this. Your brokerage should provide a useful method for tracking how your investments are performing. If you can’t track things you can’t make corrections when things go wrong.

Do some research before you decide on any brokerage, but don’t let research get in the way of investing. You can always close your account and move your investments between brokerages, even with registered accounts.

Why Questrade is best in three categories:

1. LOW FEES

The big banks typically charge $10 per trade (that’s $10 to buy something, and $10 to sell something). Questrade only charges $5 per trade and ETFs are free to buy. Let me say that again. ETFs can be bought for ZERO COMMISSION FEES. Sure you’ll pay when you sell, but that won’t be for decades. And you’ll be able to sell in big lump sums effectively reducing your selling fees. Meanwhile you can buy a measly $200 of ETFs every week without having to worry about commission fees. If you follow the investing strategy on this site, zero commission ETFs are a major win.

Questrade isn’t the only brokerage offering free ETFs, in fact it’s standard practice for any discount brokerage. But right there that rules out the big banks. If you have to spend $10 to invest $200, you’re already down by 5%, how long will it take to make that up?


2. ONLINE PLATFORM

I have been a Questrade client for nearly 3.5 years now and I’ve had zero technical issues with their website. Their interface is slick and intuitive. Their mobile app doesn’t have the functionality of the web interface, but it works for buying and selling on the fly.

The platform has a lot of functionality, but 95% of the time you’ll only be interested in your positions, balances, and watchlist. What are the positions, balances, and watchlist? Let’s go over each:

Positions

A “position” refers to any one stock (or ETF) holding. It reports the number of shares you own and their performance. This is your most interesting tab. Some definitions:
P&L – Profit & Loss – This number will be green for profit and red for a loss. Open P&L is what you’d get if you sold all your shares at that moment. It will change day to day. Closed P&L is from stock you’ve already sold. It will not change unless you sell more shares.
%P&L – is your total percentage return from each stock. And P&L day is how much the stock value has changed so far that day.

Questrade’s mobile and web positions tabs are as follows:

I bought HXT.TO at a value of $32.58 per share. The current value is $33.69. If I were to sell at this moment I’d earn $222 (minus sales commissions of $5). My gain would be 3.41%. Today my gain has dropped by $4. I have $0 in closed P&L because I haven’t sold anything yet.

 

The web interface is similar to the mobile version, but also shows your stock allocation. The % portfolio column will add up to 100% and tells you the ratio of each stock to your entire portfolio. (i.e. if you held $1000 each of four different stocks they would all show 25% for % portfolio). The web interface also lets you customize and sort the columns.

Balances

The balances tab displays your cash and your buying power, which for registered accounts is the same as your cash. It’s more complex if you have a non-registered (aka taxable) account where you can borrow extra money on “margin”. If you only open a TFSA or RRSP account you won’t need to worry about the difference. The tab also shows your open P&L for both currencies. (Questrade allows you to hold both CAD and USD in your accounts. Holding USD allows you to buy US stock on US exchanges. Don’t worry about that until you get used to trading CAD)

You can see I hold both CAD and USD in this account, and currently I have $101.13 of spare Canadian cash and $14.64 USD to invest. My USD holdings are doing slightly better than my CAD holdings as you can see with the Open P&L

 

Online Balances - You can see I hold both CAD and USD in this account

The web interface is basically identical to the mobile interface except for the % P&L for the day. I captured this image on the weekend when the exchanges were closed so my daily P&L is 0%. Also it was taken on a different day than the mobile interface so my P&L numbers have changed.

Watchlist

The watch list gives you a snapshot of any stocks or ETFs that you decide to follow. You shouldn’t be trying to time the market, but the watch list will give you an idea of how the market is performing on any one day. Pay most attention to the Chg % column, which tells you the daily change in value.

The watchlist

The mini-chart is convenient to see and compare the daily activity of each stock. You can see how many of the ETFs listed here are linked in some way because their charts have similar curves. Questrade also lets you customize and sort the columns.

Clicking on any stock will take you to its detailed chart where you can track it’s performance over various timelines. The web interface also has the buy/sell tab on the right. You can see the bid/ask values, which are how much the stock can be bought or sold for at this moment. When you buy a stock, you will pay the Ask price. The stock is normally listed as the average between the bid/ask price (AKA the bid/ask spread). Don’t worry about understanding this before your account is opened.

The chart for HCB and the buy tab on the right

The page for each stock shows the current price, % change for the day, the chart, and the buy/sell tab on the right.

 

Caption

The mobile interface has the chart, but obviously charts are better viewed on a wider display.

The interface may be intimidating to a new investor. Luckily you just need the basics of any online platform to buy and sell ETFs. Your focus should be on the intuitive nature of the site, something Questrade does very well.

RBC for comparison

I recently closed my account with RBC and transferred all of my investments to Questrade. One major reason was the RBC interface and the instability of it:

RBC technical 1

When this error message never goes away it's no longer temporary...

When this error message never goes away it’s no longer temporary…

I was fed up with having to call RBC whenever I needed something. Their website was consistently having problems. Why does a major bank have so many technical issues like this? The error above came when I requested my most recent (and also final) statement. Looks like I’ll be waiting on hold with them AGAIN.


3. STATEMENTS

The monthly statements from your brokerage should be visusally appealing with the most useful information easy to find. Useful info should be a summary of your balance changes, investment performance, and individual stock performance.

Have you ever taken a close look at your mutual fund statements? No? Maybe it’s because they overwhelm you with useless information. Compare the following statements from Investors Group and Questrade:

INVESTORS GROUP – BALANCES

The pie chart is the only graphic on the entire statement,. It has no information on the performance of my mutual funds

The pie chart is the only graphic on the entire statement. It has no information on the actual performance of my mutual funds. And they added this “Fee Rebate” line in the activity summary to make it seem like they’re doing you a favor. “Never mind the 3% MER which is costing thousands per year, focus on the $30 fee rebate”

QUESTRADE – BALANCES

The balance page of my Questrade statement. It has a convenient chart that shows how my month end balance has changed over the past month in addition to my balance changes

The balance page of my Questrade statement. It has a convenient chart that shows how my month-end balance has changed over the past 12 months. The balance in this case reflects the total value of all stocks and cash held in the account. As you can see summer 2015 was not kind to me.

INVESTORS GROUP – PERFORMANCE CHART

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That’s right, there isn’t one. As far as I know they never report your % gain. Or if they do they don’t make it easy to find. Or you have to calculate it yourself by comparing your opening balance to your current balance.

QUESTRADE – PERFORMANCE CHART

Questrade offers an intuitive chart that shows your total investment return each month. Investors group has no such chart, and doesn't tell you anything about your % return. You have to calculate it yourself

Questrade shows how your portfolio performed on a month by month basis. You can see that in August I lost 7% but gained 4.2% in October.

INVESTORS GROUP – POSITIONS

cap ca

Investors Group offers information about your funds, but as you can see there’s no line for % gain or profit or loss or anything. There’s no chart, and you need to manually compare your opening balance to your current balance. You want to compare all your funds on one page? Too bad, there are only 3 per page. I hope you like statements that are 20 pages long

QUESTRADE – POSITIONS

cap acp

Questrade lists all your holdings on one page. The information is similar to Investors Group with one very important difference. They show your P&L and % return outright. Having all holdings on one page makes it easy to find the best and worst performers at a glance. % port is referring to the percentage of your entire portfolio that this stock consists of. In my case HXS is 30.52% of my holdings (in this account only).

Investors group presumably hasn’t updated their reporting methods in decades. They would rather you NOT understand your investments and their performance. If you did know, you’d realize how much money you are actually losing by using their services. They are salespeople that prey on lazy investors.

Conversely, Questrade provides an intuitive, helpful platform that you’ll actually want to use. Their clients are people interested in knowing how their investments perform.


Conclusion

Remember the three points to consider in a brokerage:

  1. Fees
  2. Online Platform
  3. Statements

I’ve been with Questrade for about 3.5 years and never had an issue with any of these points. Meanwhile the big banks and Investors group have given me problems with all three points. When you are ready to buy your own index funds you’ll need to open a brokerage account somewhere. If you are ditching mutual funds to save money don’t just go halfway and open an expensive brokerage account. Find an inexpensive, easy to use brokerage. For me this is Questrade .

If you are ready to open an account with Questrade you can use my promo code below to get $50 in free trades (that’s $50 worth of commission fees for buying and selling anything).

PROMO CODE: jqzswtbb

Happy investing! Check out my calculator to see how much you are saving!

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