How to use ShareOwner to invest

This post is from a fan of My Own Advisor and avid dividend investor Tawcan.

I started investing in stocks in my mid 20’s. Back then I didn’t know much about dividend growth investing so I didn’t pay much attention to stocks that pay dividends. Stock capital gain was on my mind whenever I pulled a buy trigger. While a few stocks I owned paid dividends, I simply viewed dividends as nothing more than extra money. It wasn’t until I read The Lazy Investor by Derek Foster that I started paying more attention to dividend growth investing. One of the key things I’ve learned over the years is that one should start investing as early as possible to take advantage of the power of compound interest.

Did you know that if you start with $20,000 and compound it quarterly for 40 years at 5% annual interest rate, you’ll end up with almost $146,000? That’s without adding any new cash. That’s a pretty significant growth if you ask me!

When Mrs. T was pregnant with Baby T1.0, we discussed the idea of creating an investment portfolio for him. While we will be contributing to his RESP for his post-secondary education fund, we wanted to do something more than that. We wanted to create a legacy by establishing a dividend portfolio for him. The idea of giving Baby T1.0 a dividend portfolio is to provide him with more opportunities in the future. We believe that having a passive income will open a lot of opportunities when he becomes an adult. We plan to get him involved in our household finance and have him involved when it comes to managing his portfolio so he can learn about personal finance and investing. This should allow him to become responsible with money.

We planned to contribute a small amount of money to this investment account, buy some dividend paying stocks, and collect dividends. However, simply collecting dividends and wait until there’s enough money to buy more stocks may not be a good strategy. To us, it only makes sense to buy when the trading fee is less than 1% of the transaction cost. With a small portfolio, it may take years to collect enough money to do one transaction. This is where the dividend reinvestment plan (DRIP) comes in.

As a dividend growth investor, I think the best and easiest way to harvest the power of compound interest is to enroll in dividend reinvestment plan (DRIP). (Mark has also written about this on his site.)  Dividends received will be used to purchase more stock shares. When it comes to a DRIP, there are two different types:  with a traditional DRIP, or full DRIP, fractional shares can be purchased. So all the dividends received can be fully re-invested. In synthetic DRIP, typically offered by discount brokers, only full shares can be purchased. So you must ensure each dividend payment amount is equal or higher than the stock price.

Enrolling in full DRIP will typically require you to purchase one share of the stock and order a share certificate from the broker. Next, you need to contact the transfer agent for the respective stock to enroll in DRIP. It’s pretty straight forward but requires a bit of groundwork to set everything up. Furthermore, you may end up with different transfer agents so there may not be one centralized spot to check your portfolio. This is when we discovered ShareOwner.

ShareOwner was created in 1987 and is a unique broker in Canada that enables you to create and order an entire portfolio and provides automatic dividend reinvestment for all eligible stocks and Exchnage-Traded Funds (ETF’s) (over 400 Canadian and US stocks and more than 50 ETF’s). Once your ShareOwner account is set up, you can order as many stocks as you want in a single order with a flat commission fee of $40. I really like this fee structure because this is a great alternative to discount brokers. We ordered 15 dividend stocks for Baby T1.0’s portfolio, essentially $2.67 per trade.

To get started, you open an account on ShareOwner’s website, select which account you want to create, and fill out the paperwork. When we created Baby T1.0’s portfolio, we needed to mail in some paper before we could establish an account. The process, however, is very straight forward and only took a week before we received the account login information.

We’ve been using ShareOwner for about 2 years now and here are some key advantages that ShareOwner offers over other discount brokers like Questrade and TD.

Key Advantages:

  • Full DRIPs on over 400 Canadian and US stocks and more than 50 ETFs.
  • Order a specific dollar amount of each security. This is a really cool feature as you can specify how much money to buy per stock rather than full share amount. This allows you to utilize all the money in the account.
  • Flat commission fee of $40. We only made 1 trades to set up Baby T1.0’s portfolio. Since then, everything is on autopilot.
  • Automatic email notification whenever there’s an account update (i.e. dividends, trades).
  • You have the option for a scheduled purchase plan so you invest a certain dollar amount per desired time period.

Having said that, there are some minor annoyances I’ve found with ShareOwner:

  • Dividends received in US currency are converted to Canadian dollars first. When purchasing more shares, the amount is then converted to US. This mean you may get hit by the currency exchange rate twice.
  • The DRIP is on a scheduled slot, so it may take up to a month before dividends are re-invested.

After evaluating the advantages and annoyances, I think ShareOwner offers a great service for dividend growth investors with a very long-term view.  Although ShareOwner is not very well known, it’s a member of the Investment Industry Regulatory Organization of Canada and the Canadian Investor Protection Fund, so your investments are protected, just like with other discount brokers.

Overall we’re very happy with ShareOwner. We picked 8 US dividend paying stocks and 7 Canadian dividend paying stocks for Baby T1.0’s portfolio. One of the lessons learned is that maybe we should have picked more Canadian stocks to avoid the constant currency conversion. However, US companies like Johnson & Johnson and Procter & Gamble do offer better international exposure than a Canadian company like Fortis. Giving the desired sector exposure, I think the international exposure outweighs the currency conversion annoyance.

If you’re looking to start a dividend investment account leveraging the benefits of a full DRIP, I’d highly recommend taking a look at ShareOwner.

You can follow Tawcan’s investing journey and his quest for financial independence by visiting his site here.  Thanks for reading.

23 Responses to "How to use ShareOwner to invest"

  1. I’ve looked at shareowner a few times. I really love their passive investing. Setting up a portfolio seems to be the only work involved. This along with DRIP is what makes me consider switching to them.

    But I don’t think it is worth it for new investors. The $40 fee is a bit high. If you invest $1000 then you are already down 4% after your first purchase due to the fee. I can imagine that someone with over $100,000 would benefits a lot more from shareowner.

    For new investors or small money, I would still prefer discount brokers like Questrade or Virtual Brokers. With virtual brokers you can purchase shares for one cent per share as commission. It is hard to beat.

    Reply
    1. Hi Jon,

      The $40 transaction fee is high when you’re only investing a small amount of money. You’re better of when the initial investment is greater than $4,000.

      The thing with Questrade or Virtual Brokers is that you can’t enroll in full DRIP, so if you only have a small amount of money then you won’t be able to take full advantage of DRIP.

      Reply
    2. Thanks for your comment Jon. Agreed, there are other approaches for small-time investors but there is merit in using ShareOwner for full DRIPs. I know I’m thankful for using full DRIPs when I just started investing in dividend paying stocks many years ago now.
      http://www.myownadvisor.ca/drips/

      You raise a good point about fees, and keeping your transaction costs to <1% is a good thing – otherwise, a high MER on yourself 🙂

      Reply
  2. @Tawcan. Super summary of ShareOwners and Great that you’ve started Baby T on her path to financial success.
    I remember talking to John Bart, the founder of ShareOwner about the % cost of those $40 fees (they were only $29 then). He was totally focused on the diversification aspect that he felt it was well worth the small fee. I never agreed, but investors who benefited from ShareOwners owe him a debt of gratitude.
    I’ve had all my accounts with ShareOwners for many years, specifically because of the Full Dividend Reinvestment. It does make a difference and having even a few dollars reinvested grows and grows. They grow even faster when dealing with larger amounts using Full DRIPs.

    For those investing several thousand dollars at a time, the partial funds left in an account can be added to the new money, but if one only has small amounts or only invests periodically than the Full DRIP is the best option.

    I still like using Computershare DRIP’s and combining it with a Shareowner account if small investments are being made.

    Reply
      1. For FWIW, I started with ComputerShare and CIBC Mellon (now CST). That really helped me get hooked on DIY investing.

        Thanks for your post Tawcan. Even if folks don’t use ShareOwner, an informed investor is a better investor!
        Mark

        Reply
    1. Thanks Cannew. I liked Tawcan’s approach but I also have my bias as you know, since I started out buying CDN dividend paying stocks using Transfer Agents – so full DRIPs appeal to me, at least just starting out.

      I never had thousands to invest at a time, only a few hundred bucks here and there.

      Now my dividend portfolio is largely on autopilot (20+ synthetic DRIPs going), I simply add to my portfolio a few times per year and avoid all full DRIPs. When I have extra money it goes towards my mortgage so I can be debt free and work on my own terms in 10 years – that’s the plan anyhow 🙂

      Reply
  3. @tawcan: My wife bought shares of BNS and have them with Computershare for both our grandkids. When they were young she contributed $300 to $500 at a time over they years. The grand daughter is turning 18 and wants to continue investing in bns but add other shares. We’ll transfer a few shares of other companies into her DRIP account so she can begin investing $25 to $50 per month (a different on each time). Hopefully she’ll increase those amounts as she earns more. She’ll get full drip and no fees and at some point she’ll open a tfsa with ShareOwner, transfer some of her shares to avoid taxes and continue to get full drip on all her investments.

    Reply
  4. For our kids, we do something very similar. We save each month an amount in an automated investment plan. The funds insides do accumulate, so it is some sort of automatic dripping within itself. This way, we plan to have a nice amount of money for the kids by the time they go to college, get married or buy a house. Looks like in every country there are possibilities to invest early for kids. That is just great!

    Reply
  5. Over the years I also considered Shareowner. I agree with most of your comments. It looks professional, the portfolios are simple, but please correct me if I am wrong, there can be more costs, particularly if you pick their model portfolios. Also the different accounts themselves have annual fees… I would suggest everyone checks all those fees (my link), before they take the plunge Or it would be nice to see an “all in” sample here of a few example accounts to see how it all adds up over a year. I have cut and pasted one example fee here from their website… There is an annual 50 basis points added, plus the MER’s of the ETFs. Why not simply go to Ishares or to Vanguard directly and build your own portfolio if you want to go this route?

    https://www.shareowner.com/commissions.html

    Model Portfolio Accounts pay an all-inclusive monthly commission calculated as follows:

    Account Assets Less than $100,000 0.50% Annually
    Account Assets Greater than $100,000 $40 per Month

    The above amounts are in Canadian dollars and are calculated and charged monthly, in arrears. For example, for an account with $25,000 in assets the monthly charge would be $10.42 ($25,000 x 0.50% / 12) .

    The above charges include all Pooled trading to Buy or Sell securities in the portfolio, including dividend reinvestment trades and any re-balancing trades. All Model Portfolio trades occur on a monthly basis on the scheduled Pooled Trade date for each security in the portfolio. Note that there is an additional commission of $40 to Buy or Sell on an immediate basis.

    Does NOT INCLUDE management fees or expenses imposed by the fund companies, all of which can be associated with ETF investments.

    Reply
    1. @Paul:
      Yes the fees at Shareowners are higher than other brokers and most DIY or knowledgeable investors might be better off elsewhere.

      However, Shareowners does offer great service and for many beginners they have many learning tools and classes. Shareowners is by far the best choice for Retired investors, those who have established portfolio’s and hardly ever trade. If one is not withdrawing all the dividends the Full Drip’s will compound those dividends keeping the portfolio growing. My annual fees for our TFSA & RRIF accounts works out to 0.00033%, (100% stocks, we have no ETF’s).

      Reply
  6. The other option is to buy one share and register it with the transfer company, You can also get someone to sell you a share directly thus avoiding the fee of ordering a certificate. The big negative is it’s a lot of hassle to set up.

    Reply
    1. This is what I did in the past Rob. I bought my share outright, transferred it to the Transfer Agent, DRIPped it, then when I had enough shares to run a synthetic DRIP I stopped the process.

      The negative is, it is a pain to set up because it takes some discipline.

      Reply
      1. I looked at shareowner a number of years ago but not living in Canada I couldn’t open an account. But what did interest me is they offer fractional share reinvestment on stocks that normally don’t offer a DRIP plan, That and they offer quite a few US stocks. It’s a great place to start even inspite of the fees/

        Reply
        1. I think so Rob. If I didn’t get interested in investing via DRIPping blue chip stocks many years ago I suspect I wouldn’t be where I am now with starting to get my financial act together.

          Reply
  7. Just recorded the dividends received and reinvested in my sisters account. She has her accounts with RBC and gets Synthetic Drip’s rather than Full Drip’s offered by Shareowners.

    For the first two month of this year she left $319.89 of her dividends un-invested which would have bought 5.9162 extra shares. That’s a fair number considering each of those shares would also receive a dividend next Qtr.

    Of, course this is only significant for Retired people who are not adding new money to invest, unless one is not adding money on a regular basis.

    Reply

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