Hi, I’m Justin Bender, Porfolio Manager at PWL Capital in Toronto, and this is episode
two of my Do-It-Yourself Investing Series.
Today’s lesson is on How to Build an ETF portfolio at BMO InvestorLine.
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.
We’ll begin by hovering over the ‘Trading’ tab at the top left of the screen, and clicking
on ‘Equities’.
After reviewing the account balance details, we find that there is $25,000 of cash available
for investment within the Canadian dollar RRSP account.
The first three trading details will be the same for each of our ETFs.
The type of trade will be ‘Equity’, the action will be ‘Buy’, and the market will
be ‘Canadian’.
Let’s start by entering VCN as our symbol.
Hitting the ‘Tab’ key will populate a quote for the ETF to the right.
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 $9.95 from this amount, and divide by the
current ask price of the ETF, which is $28.53 in our example.
This equals 174 shares (we can just round down to the nearest whole share).
Let’s go ahead and enter 174 in the ‘Quantity’ field.
For the next step, I prefer to select ‘Price Limit’ instead of ‘@ Market’, as this
puts a cap on how much we are willing to pay for the ETF.
In the ‘Price Limit Of’ field, enter in an amount that is a few 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.
The ‘Settlement Funds’ drop-down menu should be set to ‘Canadian dollar’, as
we’ll be using Canadian dollars to purchase our ETFs.
The ‘Good Until’ drop-down menu should be set to ‘Today Only’, meaning that if
your trade does not get filled by the end of the trading day, it will expire.
Enter your phone number next, and click on the ‘Remember this contact information’
checkbox, so that you won’t have to enter it again during this trading session.
Once you’ve reviewed the order details, and verified that the ‘estimated total order
value’ is approximately the dollar amount that you’d like to purchase, enter your
trading password.
You can also click on the ‘Remember my trading password’ 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 ensure that ‘Equity’, ‘Buy’ and ‘Canadian’ are all selected
We’ll enter VUN next as our symbol, and hit the ‘Tab’ key to populate a quote
to the right.
We’ll multiply our total account value of $25,000 by 20%, subtract the $9.95 commission,
and divide this value by the current ask price of $37.94, which equals 131 shares.
We can then enter 131 in the ‘Quantity’ field.
We’ll select ‘Price Limit’, and enter a price that’s a few cents above the current
ask price.
After verifying the order details, we’ll click on ‘Submit Order’
We can then click on ‘Place another trade’.
We’ll ensure that ‘Equity’, ‘Buy’ and ‘Canadian’ are all selected
We’ll enter XEF next as our symbol, and hit the ‘Tab’ key to populate a quote
to the right.
We’ll multiply our total account value of $25,000 by 16%, subtract the $9.95 commission,
and divide this value by the current ask price of $26.07, which equals 153 shares.
We can then enter 153 in the ‘Quantity’ field.
We’ll select ‘Price Limit’, and enter a price that’s a few cents above the current
ask price.
After verifying the order details, we’ll click on ‘Submit Order’
We can then click on ‘Place another trade’.
We’ll ensure that ‘Equity’, ‘Buy’ and ‘Canadian’ are all selected
We’ll enter XEC next as our symbol, and hit the ‘Tab’ key to populate a quote
to the right.
We’ll multiply our total account value of $25,000 by 4%, subtract the $9.95 commission,
and divide this value by the current ask price of $20.49, which equals 48 shares.
We can then enter 48 in the ‘Quantity’ field.
We’ll select ‘Price Limit’, and enter a price that’s a few cents above the current
ask price.
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 $10,095.60 available.
We’ll ensure that ‘Equity’, ‘Buy’ and ‘Canadian’ are all selected
We’ll enter VAB next as our symbol, and hit the ‘Tab’ key to populate a quote
to the right.
We’ll take our remaining cash balance of $10,095.60 and subtract the $9.95 commission.
We’ll then divide this amount by the current ask price of $25.96, which equals 388 shares.
We can then enter 388 in the ‘Quantity’ field.
We’ll select ‘Price Limit’, and this time, we’ll actually enter a 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.
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.
We’ll hover over the ‘Trading’ tab at the top left of the screen, and then click
on ‘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, hover over the ‘My Portfolio’
tab at the top of the screen, and then click on ‘Positions’.
Here we’ll find that we now have about 40% of our portfolio in Canadian bonds, 20% in
Canadian stocks, 20% in US stocks, 16% in international stocks, and 4% in emerging markets
stocks.
If you have any questions, please feel free to send them to me by email: jbender@pwlcapital.com