Earlier this year Vanguard Group announced they would be setting up shop in Canada. At that time, there was no information on what kind of products they would offer or if they would be dealing directly with the investing public or through advisors.
Today, Vanguard announced they have filed the preliminary prospectus for six exchange traded funds (ETFs) which will trade on the Toronto Stock Exchange (TSX).
Here are the ETF details:
Vanguard MSCI Canada Index ETF, which will seek to track the performance of the MSCI Canada Index;
Vanguard Canadian Aggregate Bond Index ETF, which will seek to track the performance of the Barclays Capital Global Aggregate Canadian Float Adjusted Bond Index;
Vanguard Canadian Short-Term Bond Index ETF, which will seek to track the performance of the Barclays Capital Global Aggregate Canadian Government/Credit 1-5 year Float Adjusted Bond Index;
Vanguard MSCI U.S. Broad Market Index ETF (CAD-hedged), which will seek to track the performance of the MSCI U.S. Broad Market 100% Hedged to CAD Index;
Vanguard MSCI EAFE Index ETF (CAD-hedged), which will seek to track the performance of the MSCI EAFE 100% Hedged to Canadian Dollars Index; and
Vanguard MSCI Emerging Markets Index ETF, which will seek to track the performance of the MSCI Emerging Markets Index.
The ETFs themselves are not a surprise – a Canadian index, Canadian bond with medium duration, Canadian short term bond, US market index, EAFE market index (EAFE is short for Europe, Australia and the Far East) and Emerging markets.
These are the basic building blocks of a diversified global portfolio. The big surprise in my mind is that the US & EAFE index ETFs are Canadian dollar hedged. This is similar to the approach taken by iShares that hedges most of their non-Canadian ETFs as well.
I disagree with this approach as I believe that currency fluctuations in a non-hedged ETF offers more diversification than the more expensive hedged ETF.
The big question regarding these ETFs will of course be the fees. Unfortunately, there was no word on the management expense of these ETFs. Currently, Vanguard offers low-cost ETFs trading on the New York Stock Exchange which are available to Canadians. Most discount brokerages charge high currency exchange fees, so having cheap ETFs available on the TSX will reduce currency exchange fees considerably.
Have you ever bought something and the price at the cashier was different than the sticker or shelf price? If so, you might be able to score a discount on that item.
The Scanner Price Accuracy Code is a voluntary code of practice which seems to be pretty common in larger stores and chains.
The way it works is that if an item is scanned incorrectly, the customer is entitled to up to a $10 discount on that item. If the item price is less than $10, then it is free.
The discount can be applied to multiple unique items. If you buy three cans of Campbell’s chicken soup and the price is wrong, you only get the discount on the first can. If you buy three different types of soup and they are all incorrectly priced, the discount will apply to each unique product.
I’ve had two occasions to use this code, both times at Canadian Tire. The first time was when I bought some light bulbs on sale at 50% off, but the scanned price was the regular price. I paid for the items and then went to customer service to get my $7.38 refunded. Given that I spent about 10 minutes of my lunch hour getting that money, it wasn’t really worth it, but I wanted to check out the process. That time I had no problem getting my money back.
Recently however, I bought some camping items at Canadian Tire and there were two scanning errors. Unfortunately, I had my kids with me and by the time we got to the cash, I didn’t pay any attention to the scanned prices, since I just wanted to get the hell out of there. The bill ended up being more than I thought, so when I got home I checked the receipt and there were two items with the incorrect prices.
A cooler I bought was on sale for $24.95, but I was charged the regular price of $44.95. I also bought two small propane tanks which were supposed to be $3.89 each, but I was charged $10.98 each. After checking the website, I realized that these tanks were also sold in 3-packs which cost $10.98.
I went back to Canadian Tire the next day and asked for price corrections which they did without complaint. However, when I mentioned the Scanner Price Accuracy Code, she wouldn’t give it to me on either item.
For the cooler, she said that the sale had ended when I bought it, but she would honour the posted sale price. She also added that she couldn’t verify that the sale price had been posted on the shelf when I made my purchase.
As for the propane tanks, she said that the tanks I bought had been part of a 3-pack and had probably been broken up by another customer (I doubt it). She said there was no error because the price reflected the 3-pack price.
I disagreed – in both cases the items were on their proper shelf and had the prices below them. The fact that there were reasonable explanations for price differences and that it might have not been the fault of Canadian Tire, doesn’t change the fact that the prices I was charged were different than the posted prices and as far as I’m concerned, they should have given me the discount.
Tips for getting the scanning discount
Look for a posted sign at the cashier station to see if the store adheres to this practice.
Watch the prices as the scanning occurs. It’s a lot easier to prove an error at that time, rather than later on.
Make sure you ask about the Scanner Price Accuracy Code if applicable. It’s very unlikely the cashier will mention it unprompted.
Don’t shop with your kids.
What do you think? Should I have gotten a scanning error discount? Have you ever gotten a discount (or been refused) using this code?
I’m on holiday this week (from the day job at least) and one of our activities was a day trip to Windy Lake Provincial Park. We had a great time – the lake is beautiful and there is a very nice beach which the kids loved. We checked out the campsite area and it appears that all of the sites are quite large and most are very private.
Beach at Windy Lake
Best of all they have some sites with Yurts – which are basically a cabin in the campground. A yurt site has a building with electricity along with a propane bbq. This will make camping a bit easier as you don’t need a tent or stove.
Of course purists will say it’s not “real” camping, but I don’t care. All I know is that camping with two little kids is a ton of work and if “cheating” a bit allows us to go more often, then that’s what we’ll do.
Media/book stuff
I did an interview with Roma Luciw of the Globe & Mail this week. She does a weekly “tips” column and I should be in the one next Monday or the week after. The topic will be “Withdrawing from the RESP”. We are also looking at doing an online discussion on that same topic which should be fun.
Work continues on the RESP Book 2nd edition and related projects. I have three deliverables:
2nd edition of the RESP Book (print edition).
Release a Kindle version of the RESP Book (2nd edition).
Release a Kindle mini-book which will just contain the withdrawal information from the RESP Book. This will be called “How to withdraw money from your RESP” or something similar. This mini-ebook will be aimed at people who are too cheap don’t want to buy the entire book, since they only want to know how withdrawals work.
Five Cent Nickel did an interesting analysis of the stock market last week. He calculated how much of a loss a buy and hold investor had for the week compared to someone who tried market timing and got it all wrong. The results are quite interesting.
Most Canadian investors use a financial advisor or a bank and invest their money in mutual funds. When it is time to sell, they just have to call their advisor and ask them to do the sell.
Selling individual stocks or ETFs (exchange traded funds) at a Canadian discount brokerage is a bit more complicated because you have to enter the sell order yourself instead of just telling someone else to do it.
If you own a stock or ETF, then you obviously figured out how to buy a stock or ETF at your discount brokerage. Sell orders are a bit different than purchases and this article might come in handy if it’s been a while since you have placed a trade of any kind.
Decide what to sell. It’s out of scope for this article, but you should know which stock or ETF you wish to sell.
Sell a stock or ETF. This is the topic which will be detailed here. I’ll be using the interface at Questrade discount brokerage to demonstrate how to make a trade, but whatever brokerage you use should have something similar. If you notice differences with your brokerage, please let me know and I’ll add that information to this article.
Here are the steps to sell a stock or ETF.
1) Know which security you wish to sell and how much.
I’m assuming at this point, you already know what stock or ETF you want to sell.
In my case, I wish to sell a real estate investment trust security that I own called RioCan. I have 204 shares of RioCan and I wish to sell all of them. This will be the example security I’m going to use for this article.
2) Find out the stock ticker symbol for the security
Every security that trades on a stock exchange will have a stock ticker symbol. This symbol will be needed to enter the sell order.
Since you already own the security, finding the stock trading symbol should be as simple as looking at your discount brokerage account.
In my Questrade account I log into the trading platform QuestraderWeb. I select “Positions” and I can see that the Symbol for RioCan is “REI.UN.TO”. Note that the “.TO” suffix refers to the Toronto Stock Exchange.
3) Find out which exchange the security trades on
There are different stock exchanges in different countries and the security you want to sell will be traded on one or more exchanges.
If the security you wish to sell is Canadian, it will likely be traded on the TSX (Toronto stock exchange) and you have to select that stock exchange when making the order. In the case of Questrade, you don’t select the exchange – you just include the “.TO” extension for any trades. If the security is American (such as a Vanguard ETF), you don’t need an extension – just enter the basic ticker symbol (ie VTI for the Vanguard total American stock ETF).
In my case, the REI security trades on the Toronto stock exchange. I need to use “REI.UN.TO” when attempting any trading of this security with Questrade.
Understand that some stocks are traded on both the Toronto stock exchange as well as the New York stock exchange. If we look at Bank of Montreal, the symbol “BMO.TO” is the ticker symbol of the security that trades on the Toronto stock exchange. The symbol “BMO” is the ticker symbol of the security that trades on the New York stock exchange. Make sure you use the proper ticker symbol and select the proper exchange!
Note that other discount brokerages have their own methods of notating the exchange.
Questrade – For TSX stocks, use the suffix “.TO” ie XRB.TO, for NYSE – use basic symbol ie XRB.
RBC Direct and TD Waterhouse – Choose the desired exchange and then enter the basic symbol ie XRB.
Interactive Brokers – Enter basic symbol and choose the appropriate choice from the list. Ie enter “RY” and you will see a list of exchanges.
Some brokerages will have shortcut links in the “positions” or “balances” page which will allow you to easily sell shares of any stock you currently hold.
5) Find the security price and calculate how many shares you should sell
Typically when an investor wants to sell a stock or ETF, they either want to sell a specific dollar amount or they want to sell their entire position.
If you want to sell all your shares, you just need to determine how many shares you own. If you look at the screen shot just above, you can see that I have 204 shares of REI.
If you want to sell a specific dollar amount of shares, you have to find out the most recent price for the security and calculate how many shares to sell. Unlike mutual funds which can be sold in partial units, stocks and ETFs can only be sold in whole shares. This means you probably can’t sell the exact dollar amount you planned, but you should be close.
Every major financial website will have a “get quotes” section where you can enter a security ticker symbol and it will tell you what price the security is trading at. This can also be done on the trading platform at your discount brokerage. I use Yahoo Finance for this purpose.
When I enter REI.UN.TO, I find out that the last trade was $26.72. If I want to sell $1,000 of REI or as close to that amount as possible, I have to divide the desired sell amount by the share price and then drop any decimals.
$1,000 (desired sell amount) / $26.72 (share price) = 37.425 shares. I drop all the decimals and I’m left with 37 whole shares which will net me $988.64 minus the trading commission.
Of course I can also choose to sell 38 shares which will give me a bit over $1,000.
In my case, I want to sell all the shares, so I just need to know how many shares I have.
At this point I have the:
Stock ticker symbol – REI.UN.TO
Number of shares to sell – 204
Approximate share price – $26.72
Now I know exactly what I’m selling and how many shares. I’m still not ready to place a trade, because there a few more things to cover.
6) Market order vs limit order
When placing a sell order, you can indicate that it be placed as a “market” order or a “limit” order.
A market order means you don’t put any conditions on the price of your order. Once you place the order, the sell will get completed (or filled) as soon as enough shares are offered on the exchange. For larger companies and high volume ETFs, this will happen instantly.
A limit order means you specify a lower limit for the sale price of the shares. For example my REI shares are trading at $26.72. If I put a sell order with a limit price of $26.85 (higher than the current price), the order won’t get filled until the stock price goes up a bit and someone agrees to pay $26.85 for my REI shares.
On the other hand, I might place a sell order with a limit price lower than the current market price – say $26.50. The reason I would do this is to avoid the possibility that trading is light and you end up selling the shares at a rate well below market. This is practically impossible if you stick to liquid, high volume stocks that have many shares trading at any given time. Note that in this case, your order will still be traded at “market” as long as your limit price is below the market price. So putting a limit of $23.50 does not mean I’m offering to sell my REI shares for $23.50. It just means I won’t accept a price less than $26.50 for the shares.
I would strongly urge that you don’t place orders when the exchange is closed, unless you put a limit on the order.
In theory, limit orders are safer than market orders. However, I’ve completed a fair number of market orders and limit orders and never had a problem with either. My current process is to always place a limit order just to be on the safe side.
7) Log into your discount brokerage account
At this point we’re ready to log in. With Questrade, you have to log into your main account at myquestrade.com and then log in to your trading platform. Other discount brokerages will have just one login.
Once I’m in the account, I select MY PLATFORMS and then Login to equities platform. If this is your first time, you have to select which trading platform you want to use. I use QuestraderWeb which is the free trading platform.
Now I choose “QUICK ORDER ENTRY” and then “Stocks” from the drop-down menu. The form on the right hand side is used to enter an order.
I’m going to break up my sell order, so I can demonstrate one sell with a market order and one sell with a limit order.
How to enter a market order
For my market order sell I’ll fill in the fields like so:
Symbol = REI.UN.TO
Quantity = 100
Transaction = Sell
Order Type = Market
Duration = Day*
Preferred ECN = AUTO
All or None* = Leave unchecked
*Duration – “Day” means that the order will only exist until the end of the trading day. If it is unfilled at that time, then it disappears.
Market sell order
The next step is to verify the share price by clicking on the QUOTE button at the bottom of the form.
Now we see a pile of new information on the quote screen.
Quote feature
The main info I’m interested in is the Last Price which is $26.68. This has gone down a bit since I looked at the price earlier.
Next step is to click on PREVIEW ORDER
Preview order
This is your last chance to verify the order information. Everything looks good, so now I will click on “SEND ORDER”.
The order was filled (or executed) instantaneously at $26.68.
Sell order execution
If I want to review the order details, I can click on “YOUR ACCOUNT” and “Messages”.
Order details
From this I can see the commission ($4.95) and the trade total of $2,663.05 which represents the share proceeds and commission.
Some brokerages (including Questrade) add another fee to the commission called ECN fees. They are fairly small, but if you are doing high volume trades, it can be a factor.
How to enter a limit order
Most of the steps for a limit order are the same as for a market order.
Start with “QUICK ORDER ENTRY”. The form on the right hand side is uses to enter an order.
The key difference with a limit sell is that I will be specifying a price which represents the lowest price I’m willing to sell the stock for. In the case of REI, the current market price is $26.68. If I select a limit that is lower than $26.68, the order will likely get filled at market (just like my market order) and the limit will just be there for protection.
Another strategy is to put a limit price that is higher than the current market price and hope that the market goes up and you can sell at a higher price. In this case you will have a pending order which can be cancelled. This is a good scenario for using the “GTC” or good till cancel order type so that the order doesn’t get cancelled at the end of the day.
I like to select a limit price that is just below the market price – perhaps 1 or 2% lower. In this case I’ll try setting the limit at $26.40 which is just below the market price of $26.68. If the stock is more volatile you might have to set a lower limit because the stock could jump through the limit before you place your order.
It’s not a bad idea to monitor the price movements of a stock for a little while to get a feel for the volatility. You want to set the limit low enough below the regular price points in order for the order to get filled quickly. For example if you check the price of a stock every 60 seconds and see the following: $23.12, $23.09, $23.14, that stock price is not moving around much and you can probably set a sell limit price of $23.00 and be fairly assured it will be filled.
For my limit order sell, I’ll fill in the fields like so:
Symbol = REI.TO.UN
Quantity = 104
Limit Price = $26.50 Note, you have to select the order type of “Limit” before this field becomes active.
Transaction = Sell
Order Type = Limit
Duration = Day
Preferred ECN = AUTO
Limit purchase order
The next step is to verify the share price by clicking on the QUOTE button at the bottom of the form.
Now we see a pile of new information on the quote screen.
Quote
I can see that the last price for REI is $26.68.
Next step is to click on PREVIEW ORDER
Sell limit order preview
This is your last chance to verify the order information. It look good, so now I will click on “SEND ORDER”.
The order was filled (or executed) instantaneously at $26.68 which is the exact same price as my market order.
Sell limit order completed
Some suggestions
If you are not familiar with placing stock or ETF trades, it can be a bit stressful if you are placing large sell orders. I suggest starting off with a small trade or two just to get familiar with the process. Yes, you will be burning a couple of commissions, but trust me – it’s worth it.
Another suggestion is to see if your brokerage offers a “test” area where you can place dummy trades to get familiar with the trading platform. Questrade offers a free trading platform trial which you can access to try some test trades.
Another option is just to use cheap index funds – they are a heck of a lot easier!
Please let me know if you have anything to add to this information based on your experience with different brokerages.
Pretty exciting week in the markets this week. Maybe a little bit too exciting for some.
I’ve been below my 75% equity allocation for several months due to an RRSP transfer and general portfolio neglect. I find it hard to buy a big chunk of equities all at once after the market has risen so much, so I’ve been waiting for a drop to buy.
I still haven’t reached 75%, but I’m a lot closer than I was.
Have I mentioned I’m doing a 2nd edition of the RESP book? 😉 I’m hoping to announce something on this in the next couple of weeks.
The Boston Globe reports on a very poorly designed lottery that is easy to game. Very interesting story.
The Oblivious Investor addresses recent market activity with risk tolerance in action. I like how he says that “rebalancing isn’t supposed to be easy”. And neither is investing in equities.
JD from Get Rich Slowly recently talked about a decision he made to cancel a trip to England. He had a $900 plane ticket which was non-refundable, non-transferable, non-everything. The $900 was gone.
In his post, he makes the argument that the $900 he spent on the ticket was a sunk cost since he couldn’t get it back.
With respect to Jd’s argument, I don’t think the $900 was really a sunk cost. Yes, the money was gone and he couldn’t get it back, but he could still use the service that the $900 paid for. By deciding not to go, he was giving up a plane flight worth $900.
Whether you give up $900 cash or give up an item worth $900, in my mind it’s the same thing. Since he could have still taken the $900 flight at the time he made his decision, it wasn’t a sunk cost.
I think of a “sunk cost” in the context of money that was spent on something and now you have a decision about a course of action which will ensure that you can’t get the original money back.
For example, let’s say you have a business that you have invested $50,000 in and it loses $1,000 per month. You’ve given it lots of time and work very hard, but it’s clear that you have to close the business.
It would be very tempting to say “but I put $50k into it, I can’t close it down since I’ll never get that back”. However, you have to turn it around and ask yourself – would I buy this business for $1 which requires 50 hour weeks and loses $1,000 per month? If the answer is no, then the business should be shut down. Note that the original $50,000 was not part of that analysis because it is a sunk cost and is irrelevant to the decision.
Similarily, maybe someone buys a stock at $100 and it drops to $50. Some people won’t be able to sell that stock at $50 or anything less than $100, because that decision will ensure they won’t get their original money back. Again, the proper analysis is to decide if that stock would be worth buying at $50 – if yes, then keep it, otherwise sell it. The difference in value between the current stock price and the original stock price is a sunk cost and is irrelevant.
In JD’s case, he paid $900 for a plane ride. When he decided to give up the trip, he can argue that the $900 was gone and is a sunk cost, but I would argue that he still had the option of getting on the plane (a $900 value) and therefore it is not a sunk cost. Or at least not a very good example of it.
What do you think? Was JD on the money when he used the “sunk cost” argument? Is my argument “sunk”?
Another big drop in the markets today. The TSX fell a bit more than four percent and the American S&P500 dropped almost seven percent today. I’ll admit I wasn’t too upset that my “flat” prediction I made after the S&P downgraded U.S. government debt was very wrong, since I was able to do some more buying.
Today’s market drops were bigger than last Thursday and add on to what has been a couple of very bad weeks in the market.
It might be tempting to bail out of the markets if you are nervous about your investments, but that would be a mistake.
Stay the course.
Don’t sell anything and keep on making your regular contributions.
Here is an excellent, easy to read post on market volatility and how your asset allocation should reflect your risk tolerance. Thanks to Mike @ Oblivious Investor for pointing out that post.
The big news this weekend in investing circles was the announcement that Standard & Poor has lowered the US Government Debt rating from AAA to AA+. This is the first time in 70 years that US debt hasn’t been rated triple-A. The other two major rating agencies Fitch and Moody’s kept their rating at AAA.
The United States has some economic problems, but there is no danger of it defaulting on its debt. Even if the recent “debt ceiling” debacle hadn’t been resolved, it is extremely unlikely that any interest payments on U.S. debt would have been missed.
Part of the reason given for the downgrade was that recent debt ceiling agreement will not reduce the deficit enough over the next decade to satisfy S&P. The problem with this logic is that S&P is extrapolating current events fairly far in the future and concluding that things won’t get better. The U.S. might not be going in the right direction in terms of finances, but there is plenty of time for the American government to turn things around, especially if they can raise taxes. Can the Americans get to the point where their debt ratings should be downgraded? Absolutely – but they just aren’t there yet.
Will the markets crash on Monday because of the downgrade?
I’m hoping so – only because I’m looking to make some equity purchases and lower prices would please me greatly. However, I doubt the downgrade will affect the market significantly. The reality is that whatever is good or bad about the U.S. government’s finances will be the same on Monday as it was on Friday. The downgrade won’t change very much. In theory, it’s possible that government borrowing rates will increase, but that is not certain. If U.S. treasuries remain as a “safe haven”, borrowing costs will not increase at all. The reality is that there aren’t many other “safe haven” options for large investors.
On the other hand, the stock markets have been trending down lately (especially on Thursday), so perhaps the downgrade will set off a stampede for the exits.
I’m predicting a flat U.S. stock market on Monday. Please note that I’ve assigned a probability of 51% success for that prediction. 🙂
What’s your prediction for the Monday stock trading session?
