Hi, I’m Justin Bender, Portfolio Manager at PWL Capital in Toronto,
and this is episode four of my DIY Investing Series.
Today’s lesson is on How to Build an ETF portfolio at RBC Direct Investing.
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’s $15,000 of cash available
for investment within the RRSP account.
We’ll begin by hovering over the ‘Place an Order’ tab at the top of the screen,
and then selecting ‘Stocks & ETFs’ from the drop-down.
This will bring us to the ‘Stock Order Entry’ screen.
First, we’ll select the Canadian dollar RRSP as our account.
Next, we’ll select ‘Buy’ as our action.
We’ll skip over the number of shares for now, and enter VCN in the ‘Symbol’ field.
We can also select the Canadian stock market from the drop-down menu
and click on ‘Show Quote’ – this will populate a quote at the top 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 $15,000 by VCN’s target allocation of 20% (or 0.2),
gives us $3,000.
We then subtract the trading commission of $9.95 from this amount, and divide by the
current ask price of the ETF, which is $29.26 in our example.
This equals 102 shares (we can just round down to the nearest whole share).
Let’s go ahead and enter 102 as our ‘# of shares’.
For the order price, I prefer to select ‘Limit’, as this puts a cap on how much we’re willing
to pay for the ETF.
In the ‘Limit Price’ 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 ‘Good through Day’, your order will expire by the end of the trading
day if it goes unfilled.
The ‘Special Instructions’ should automatically default to ‘Any part’.
If this is your first trade at RBC, you may be required to enter your phone number
before moving ahead.
We can then click on ‘Continue’ to move to the trade confirmation 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, you can click on ‘Confirm’.
And to place your next trade, hover over the ‘Place an Order’ tab at the top of the
screen, and then click on ‘Stocks & ETFs’.
For the next trade, we’ll select the Canadian dollar RRSP account, and then choose ‘Buy’
as our action.
We’ll enter VUN as our symbol, and select ‘Canadian’ as our market.
We’ll then click on ‘Show Quote’.
We’ll multiply our total account value of $15,000 by 20%, subtract the $9.95 commission,
and divide this value by the current ask price of $39.61, which equals 75 shares.
We can then enter 75 as our # of shares.
We’ll enter a limit price that’s a couple cents above the current ask price,
and then click on ‘Continue’.
After verifying the order details, we’ll click on ‘Confirm’.
We can then return to the ‘Stock Order Entry’ screen.
For the next trade, we’ll select the Canadian dollar RRSP account,
and then choose ‘Buy’ as our action.
We’ll enter XEF as our symbol, and select ‘Canadian’ as our market.
We’ll then click on ‘Show Quote’.
We’ll multiply our total account value of $15,000 by 16%,
subtract the $9.95 commission, and divide this value by
the current ask price of $26.70, which equals 89 shares. We can then enter 89 as our # of shares.
We’ll enter a limit price that’s a couple cents above the current ask price, and then
click on ‘Continue’.
After verifying the order details, we’ll click on ‘Confirm’.
We can then return to the ‘Stock Order Entry’ screen.
For the next trade, we’ll select the Canadian dollar RRSP account,
and then choose ‘Buy’ as our action.
We’ll enter XEC as our symbol, and select ‘Canadian’ as our market.
We’ll then click on ‘Show Quote’.
We’ll multiply our total account value of $15,000 by 4%, subtract the $9.95 commission,
and divide this value by the current ask price of $23.38, which equals 25 shares.
We can then enter 25 as our # of shares.
We’ll enter a limit price that’s a couple cents above the current ask price,
and then click on ‘Continue’.
After verifying the order details, we’ll click on ‘Confirm’.
We can then return to the ‘Stock Order Entry’ screen.
For our final trade, we’ll try to use up as much of the remaining cash as possible
We’ll once again select the Canadian dollar RRSP account, and then choose
‘Buy’ as our action.
We’ll enter VAB as our symbol, and select ‘Canadian’ as our market.
We’ll then click on ‘Show Quote’.
We’ll take our remaining cash balance of $6,044.13 and subtract the $9.95 commission.
We’ll then divide this amount by the current ask price of $26.48, which equals 227 shares.
We can then enter 227 as our # of shares.
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 ‘Continue’.
After verifying the order details, we’ll click on ‘Confirm’
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, hover over the ‘My Portfolio’
heading and then click on the ‘My Portfolio Holdings’ subheading.
Here we’ll find that we now have about $3,000 of our portfolio in Canadian stocks, $3,000
in US stocks, $2,400 in international stocks, $600 in emerging markets stocks, and $6,000
in Canadian bonds.
If you have any questions, please feel free to send them to me by email: jbender@pwlcapital.com