Hi, I’m Justin Bender, Portfolio Manager at PWL Capital in Toronto, and this is episode
six of my DIY Investing Series.
Today’s lesson is on How to Build an ETF portfolio at National Bank Direct Brokerage.
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 details, we find that there’s $20,000 of cash available for
investment within the Canadian dollar RRSP account.
We’ll begin by hovering over the ‘Transactions’ tab at the top of the screen, and selecting
‘Stocks’ from the menu - this will bring us to the stocks order screen.
First, we’ll ensure that we’re trading within the correct account – this is the
Canadian dollar RRSP in our example.
Next, we’ll ensure that the operation drop-down menu is set to ‘Buy’.
We’ll skip over the quantity field for now, and enter VCN as our symbol.
We’ll also ensure that the market is set to ‘Canadian’, and then click on the ‘Quote’
button – this will populate a quote below the trade details.
As 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 $20,000 by VCN’s target allocation of 20% (or 0.2),
gives us $4,000.
We then divide by the current ask price of the ETF, which is $30.07 in our example.
This equals 133 shares (we can just round down to the nearest whole share).
Let’s go ahead and enter 133 in the ‘Quantity’ field.
For the price, I prefer to select ‘Price Limit’, as this puts a cap on how much we’re
willing to pay for the ETF.
In the ‘Price Limit’ field, enter an amount that’s 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 ‘Day’ in the expiry field, your order will be cancelled by the end of
the trading day if it goes unfilled.
You can ignore the ‘Restriction’ field.
We can then click on ‘Submit’ to review your trade.
You’ll notice a warning stating that “the current commission is excluded from today’s
buying power”.
National Bank Direct Brokerage is currently offering commission-free Canadian ETF trades
if your order is for at least 100 shares.
We’ll see later on in this tutorial that a number of our trades below this amount will
be charged the standard $9.95 trading commission.
Once you’ve had a chance to review the order details, and verified that the ‘transaction value’
is approximately the dollar amount that you’d like to purchase, accept the warning by selecting
the check-box, and then click on ‘Confirm’.
And to place your next trade, hover over the ‘Transactions’ tab at the top of the screen,
and select ‘Stocks’ from the menu.
For the next trade, we’ll ensure that the Canadian dollar RRSP account and ‘Buy’
are selected.
We’ll then enter VUN as our symbol.
We’ll select ‘Canadian’ as our market, and then click on the ‘Quote’ button.
We’ll multiply our total account value of $20,000 by 20%, and divide this value by the
current ask price of $41.42, which equals 96 shares.
We can then enter 96 in the ‘Quantity’ field.
We’ll select ‘Price Limit’ and enter a price that’s a couple cents above the
current ask price.
We’ll ensure that the expiry is set to ‘Day’, and then click on ‘Submit’.
As the number of shares that we’re buying is below 100, a commission of $9.95 will apply
for this trade.
After verifying the trade details, we’ll click on ‘Confirm’.
We can then hover over the ‘Transactions’ tab at the top of the screen, and select ‘Stocks’
from the menu.
For the next trade, we’ll ensure that the Canadian dollar RRSP account and ‘Buy’
are selected.
We’ll then enter XEF as our symbol.
We’ll select ‘Canadian’ as our market, and then click on the ‘Quote’ button.
We’ll multiply our total account value of $20,000 by 16%, and divide this value by the
current ask price of $26.17, which equals 122 shares.
We can then enter 122 in the ‘Quantity’ field.
We’ll select ‘Price Limit’ and enter a price that’s a couple cents above the
current ask price.
We’ll ensure that the expiry is set to ‘Day’, and then click on ‘Submit’.
After verifying the trade details, accept the warning by selecting the check-box, and
then click on ‘Confirm’.
We can then hover over the ‘Transactions’ tab at the top of the screen, and select ‘Stocks’
from the menu.
For the next trade, we’ll ensure that the Canadian dollar RRSP account and ‘Buy’
are selected.
We’ll then enter XEC as our symbol.
We’ll select ‘Canadian’ as our market, and then click on the ‘Quote’ button.
We’ll multiply our total account value of $20,000 by 4%, and divide this value by the
current ask price of $22.29, which equals 35 shares.
We can then enter 35 in the ‘Quantity’ field.
We’ll select ‘Price Limit’ and enter a price that’s a couple cents
above the current ask price.
We’ll ensure that the expiry is set to ‘Day’, and then click on ‘Submit’.
As the number of shares that we’re buying is below 100, a commission of $9.95
will apply for this trade.
After verifying the trade details, we’ll click on ‘Confirm’.
We can then hover over the ‘Transactions’ tab at the top of the screen,
and select ‘Stocks’ from the menu.
For our final trade, we’ll try to use up as much of the remaining cash as possible
– we currently have $8,036.38 available.
We’ll once again ensure that the Canadian dollar RRSP account and ‘Buy’ are selected,
and then enter VAB as our symbol.
We’ll select ‘Canadian’ as our market, and then click on the ‘Quote’ button.
We’ll take our remaining cash balance of $8,036.38, and divide this value by the current
ask price of $25.65, which equals 313 shares.
We can then enter 313 in the ‘Quantity’ field.
We’ll select ‘Price Limit’, and this time, we’ll actually enter a price that’s
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’ll ensure that the expiry is set to ‘Day’, and then click on ‘Submit’.
After verifying the trade details, accept the warning by selecting the check-box, and
then click on ‘Confirm’.
Now that our final trade has been placed, we can view the new portfolio holdings by
hovering over the ‘Accounts’ tab at the top of the screen and then clicking on ‘Asset
Details’.
Here we’ll find that we now have about $4,000 of our portfolio in Canadian stocks, $4,000
in US stocks, $3,200 in international stocks, $800 in emerging markets stocks,
and $8,000 in Canadian bonds.
If you have any questions, please feel free to send them to me via email: jbender@pwlcapital.com"