Blogs & Comment

The cheapest way to invest?

Controlling costs is important when investing. Thats a basic rule. A recent reminder came by way of an Aug. 28 columnby the Globe and MailsRob Carrick, in which he looked at seven investment vehicles with rock-bottom fees. An appendix to his article also listed five recommendations from each of three bloggers, including yours truly (thanks to Rob C. for thinking of us).
Mr. Carrick and the three bloggers all mentioned Vanguards exchange-traded funds(ETFs), trading on U.S. exchanges: its Vanguard Total Stock Market ETF, for example, has a management expense ratio (MER) of just 0.09%. Everybody also mentioned the TD e-Series index funds: the TD Canadian Index, for example, has a MER of 0.31% (with no commissions to buy units, reinvest dividends, or rebalance). Another prominent recommendation was Barclay Canadas ETFs, notably the iShares CDN Large Cap 60 Index Fund (4) with its MER of 0.17%.
Two persons also mentioned Dividend Reinvestment Plans (DRIPs) and Share Purchase Plans (SPPs). DRIPs allow investors to reinvest dividends without commissions and SPPs allow investors to buy shares directly from companies without commissions, often at a discount to the share price.
Signing up for a DRIP/SPP usually requires owning at least one share. True, a broker would charge a commission on its purchase. But there are exchanges online, such as at, where investors can trade shares with other investors.
Leaving aside income trusts, there are over 4 dozen stocks on the TSX that have DRIPs. Of this group, about 20 also offer SPPs. One could consider building a passive portfolio based on these SPPs, and reinvesting the dividends of the acquired stocks through the DRIPs.
The 20 or so companies are nearly all blue chips and cover the finance, telecommunications, utility, energy, and resources sectors with an emphasis on the financial sectors (banks and insurance companies). This is not a completely diversified portfolio, yet most of the companies possess financial strength and enjoy a degree of market power by virtue of their size, industry structure, or regulatory framework. Moreover, they tend to pay good dividends and many raise those dividends regularly.