Hi, I’m Justin Bender, Portfolio Manager at PWL Capital in Toronto, and this is episode
three of my DIY Investing Series.
Today’s lesson is on How to Build an ETF portfolio at CIBC Investor’s Edge.
For our example, we’ll be purchasing the five ETFs from my 40% fixed income / 60% equity
model portfolio – please feel free to download the model portfolios from my blog before getting
started.
After reviewing our account information, we find that there is $25,000 of cash available
for investment within the Canadian dollar RRSP account.
We’ll begin by clicking on the ‘Trading’ option at the left of the screen.
This will bring us to the ‘Stock Order Entry’ screen.
First, we’ll ensure that we’re trading in the correct account (in our example, this
is the RRSP account).
Next, we’ll select ‘Buy’ as our action.
We’ll enter VCN as our symbol, and select the Canadian stock market.
We can then click on ‘Get real time quote’ – this will populate a quote to the right
of the screen.
When we’re buying an ETF, we’ll be focusing on the ‘Ask’ price, which is the price
per share that an investor is willing to sell the ETF to us for.
To calculate the number of shares that we need to purchase, we’ll use our computer’s
calculator: Multiplying the total account value of $25,000
by VCN’s target allocation of 20% (or 0.2), gives us $5,000.
We then subtract the trading commission of $6.95 from this amount, and divide by the
current ask price of the ETF, which is $29.60 in our example.
This equals 168 shares (we can just round down to the nearest whole share).
Let’s go ahead and enter 168 in the ‘Quantity’ field.
For the order price, I prefer to select ‘Limit’, as this puts a cap on how much we are willing
to pay for the ETF.
In the ‘Limit’ field, enter an amount that is a couple cents higher than the current
ask price.
Even if you use a higher limit price to place your trade, you’ll still receive the lower
ask price if it’s available.
By selecting ‘Order Good for Day’, your order will expire by the end of the trading
day if it goes unfilled.
Lastly, ensure that the cash is being drawn from the correct account in order to pay for
your ETF purchases (this is the Canadian dollar RRSP account in our example).
We can then click on ‘Next’ to move to the trade verification screen.
Once you’ve reviewed the order details, and verified that the ‘estimated cost’
is approximately the dollar amount that you’d like to purchase, enter your trading password.
You can also click on the ‘Save trading password for this session’ checkbox, so
that you won’t have to enter the password again during this trading session.
When you’re ready to send the trade request, click on ‘Submit Order’.
And to place your next trade, click on ‘Place another trade’.
For the next trade, we’ll select ‘Buy’ as our action.
We’ll enter VUN next as our symbol, and select ‘Canadian’ as our market.
We’ll then click on ‘Get real time quote’ to populate a quote to the right.
We’ll multiply our total account value of $25,000 by 20%, subtract the $6.95 commission,
and divide this value by the current ask price of $39.53, which equals 126 shares.
We can then enter 126 in the ‘Quantity’ field.
We’ll enter a limit price that’s a couple cents above the current ask price, and then
click on ‘Next’.
After verifying the order details, we’ll click on ‘Submit Order’.
We can then click on ‘Place another trade’.
For the next trade, we’ll select ‘Buy’ as our action.
We’ll enter XEF next as our symbol, and select ‘Canadian’ as our market.
We’ll then click on ‘Get real time quote’ to populate a quote to the right.
We’ll multiply our total account value of $25,000 by 16%, subtract the $6.95 commission,
and divide this value by the current ask price of $26.50, which equals 150 shares.
We can then enter 150 in the ‘Quantity’ field.
We’ll enter a limit price that’s a couple cents above the current ask price, and then
click on ‘Next’.
After verifying the order details, we’ll click on ‘Submit Order’.
We can then click on ‘Place another trade’.
For the next trade, we’ll select ‘Buy’ as our action.
We’ll enter XEC next as our symbol, and select ‘Canadian’ as our market.
We’ll then click on ‘Get real time quote’ to populate a quote to the right.
We’ll multiply our total account value of $25,000 by 4%, subtract the $6.95 commission,
and divide this value by the current ask price of $23.44, which equals 42 shares.
We can then enter 42 in the ‘Quantity’ field.
We’ll enter a limit price that’s a couple cents above the current ask price, and then
click on ‘Next’.
After verifying the order details, we’ll click on ‘Submit Order’.
We can then click on ‘Place another trade’.
For our final trade, we’ll try to use up as much of the remaining cash as possible
– there is currently $10,059.14 available.
We’ll select ‘Buy’ as our action.
We’ll enter VAB next as our symbol, and select ‘Canadian’ as our market.
We’ll then click on ‘Get real time quote’ to populate a quote to the right.
We’ll take our remaining cash balance of $10,059.14 and subtract the $6.95 commission.
We’ll then divide this amount by the current ask price of $26.57, which equals 378 shares.
We can then enter 378 in the ‘Quantity’ field.
This time, we’ll actually enter a limit price that is the exact same as the current
ask price.
We want to try to use up most of the available cash while ensuring that we don’t place
the account into a debit position.
We can then click on ‘Next’.
After verifying the order details, we’ll click on ‘Submit Order’
Now that our final trade has been placed, we can verify the order details by clicking
on ‘View Order Status’.
Here we’ll find that all shares from the five ETF purchases have been successfully
filled.
If you’d like to review your new portfolio holdings, click on the ‘Account Information’
heading on the left hand side of the screen, and then click on the ‘Account Holdings’
subheading.
On the ‘Account Holdings’ page, you may need to click on the ‘Intraday Changes’
tab to show new ETFs that you’ve just purchased.
Here we’ll find that we now have about $5,000 of our portfolio in Canadian stocks, $5,000
in US stocks, $4,000 in international stocks, $1,000 in emerging markets stocks, and $10,000
in Canadian bonds.
If you have any questions, please feel free to send them to me by email: jbender@pwlcapital.com