I’ve talked about dividend investing before and I’ve shared guest posts about index investing. These are the two kinds of intelligent public market “passive investing”. But I haven’t talked at any length about implementing your investment strategy. There’s one risk-free, surefire way to improve your returns: lower the cost of building and maintaining your portfolio. Questrade (no, not Questtrade) helps you do that. In more ways than one. Today I’m going to sing the praises of Canada’s premier discount brokerage.
Questrade is a discount Canadian brokerage. By “brokerage” I mean a financial services firm that connects you with markets to let you buy and sell marketable securities — stocks, options, bonds, mutual funds, currencies, precious metals, etc. For our purposes, we’ll focus mostly on trading stocks. By “discount” I mean that Questrade is by far the least expensive brokerage in Canada (on any metric that matters to me). It’s not just me saying that Questrade is the best, by the way. So how can starting an account with this company save you money?
The most important feature of a discount brokerage is its low commission on stock trades. Not only is Questrade the cheapest in Canada, but its pricing is straightforward and fair. The commission structure for Canadian stocks is as follows:
- 1 cent per share
- Minimum commission of $4.95
- Maximum commission of $9.95
Compare this commission to the $20 or $30 or more per trade at the Big Banks’ “discount” brokerages. I also love the simplicity of Questrade’s stock commission structure. I don’t need to stress about making a certain number of trades each quarter to qualify for a lower commission rate.
If you’re a dividend investor, you’ve got to love building a portfolio for as little as a Wilfrid Laurier per company. You could create a huge portfolio of diversified, high-yield, Blue Chip, Canadian dividend stocks for next-to-nothing. If you want to trade US stocks, there’s a $5 fee for each day you trade on US markets (so try to execute a bunch of trades on the same day), but the commission is still ridiculously low and embarrasses the competition.
If you’re an index investor, you can probably do better by using Questrade. How? Well, the best index mutual funds, in my opinion, are the TD eSeries index funds. They carry MERs that range between 0.33% and 0.53%. But if you buy index ETFs on the open market, e.g. Vanguard ETFs, you can pay an MER that’s as insanely low as 0.09%. NOT 9%. Not 0.9%. Not even a TENTH OF ONE PERCENT. 0.09%.
About 1% of the value of your mutual fund portfolio is pocketed by your broker each and every year. Questrade believes you deserve to get it back.
The fees paid to brokers are called trailer fees. They’re paid by the fund company directly to your broker as compensation for procuring your business, and they can be as much as 1% (or even more!) of your portfolio. All other brokers keep this fee. Except Questrade – we’re giving it back to you.
There are many other ways that Questrade could save you money. Let’s look at a recently-promoted one: their “USD in RSP” policy. Let’s say you transfer US dollars into your RRSP or TFSA. Questrade allows you to buy US dollar stocks with those US dollars — there’s no forced conversion fee before or after the sale. That can be a significant cost at other brokerages. Instead, the transaction is settled in the currency of your choosing: US or Canuck bucks. This may seem like a useless feature, but only until you have some American cash to invest. Don’t laugh — I know somebody who got a $5,000 US insurance settlement because of an accident on a trip. But with the US dollar in the toilet, he didn’t want to convert it to Canadian. Most importantly, I think the “USD in RSP” policy shows that Questrade is always on the look out for ways, big and small, to save its customers money. That’s why I use Questrade and why it’s the only brokerage I can wholeheartedly recommend.
Questrade seems to cycle through awesome deals throughout the year. Here’s a current example (assuming you’re reading this in early October 2012): a Questrade Client who opens a Registered Education Savings Plan before October 30th 2012 can get 10 free trades for the RESP. Again, that’s enough trades to set up a full portfolio for your kid’s college money. When you make the smart choice of becoming a Questrade Client, be sure to keep your eyes open for these kinds of deals.
Let’s sum up Questrade:
- Canada’s cheapest trades with no account minimum
- $50 in free trades
- Other stuff. Are you still reading this? Go sign up.