Defensive investing at a lower cost – Virtual Brokers special offer

Defensive investing at a lower cost – Virtual Brokers special offer

A big part of my investing philosophy is buying and holding great Canadian and U.S. companies for dividend income.  I feel dividend investing is a great way to earn both steady income from my portfolio and grow my portfolio value over time through stock price appreciation.

While dividend investing with certain companies is all fine and well, it does come with risks.  I know the financial future of any one company can be cloudy at best.  This is why I also invest using low-cost, diversified, Exchange Traded Funds.  Along with the diversification many ETFs provide, I also feel keeping your trading commissions low and your ongoing money management fees low are your tickets to a get wealthy eventually – a strategy I would highly endorse!

I do my best to keep tabs on great offers available to investors with these characteristics in mind and sometimes companies reach out to me directly – which is always nice.  This site is dedicated to providing free information and offers from time-to-time to help you get more out of your hard-earned dollars.  I share these offers to consider because at the end of the day:  nobody should care more about your money that you do.

Picking up on the theme of keeping trading commissions and costs as low as possible, ideally for as long as possible, there are a number of low-cost discount brokerages in Canada competing for your dollars.  (Editor’s note:  I believe competition is a great thing for the consumer.)   Some of these discount brokerages keep their costs rock-bottom low by operating in a virtual environment – there is no storefront to worry about.

One of those brokerages is Virtual Brokers with their extremely low-cost fee structure you’ll read about soon enough.

“VB” reached out to me recently to get my take on some defensive investing ideas now that the U.S. stock market is frothing near all-time highs.  Here was our conversation…

Virtual Brokers to Mark – what’s your market take right now?  Markets can remain overvalued for an extended period of time.  Have you considered playing more defense with your portfolio?

Yes and no.

The market has been on quite a run for the last number of years that’s for sure.  The Dow is near an all-time high this year.  Although the TSX continues to slump this year, in the calendar year 2016 our Canadian market returned over 21%, so that’s a heckuva year if you stayed invested and didn’t tinker with your portfolio.

Seasoned (or even novice) investors probably know by now the longer this market goes without a correction, the larger the correction will probably be. This is not to freak you out.  It’s just the way market history has played out.  Therefore I guess to your question it might be time to get defensive, and I’m doing that a little bit this year by owning some of the same blue-chip stocks I currently own; companies that have paid dividends for generations.

Avoiding market volatility has become a hotter topic of late.  I read an interesting article on that here.

Personally, I do not fear an absolute market crash.  (I actually celebrate small market declines).  I do appreciate however some investors, maybe those closer to retirement, might not cheer as much as I do on that.  This means their financial products might need a better balance between market caution and optimism.  This is where I’ve witnessed more DIY investors going the low-volatility route with many ETFs.  I’ve toyed with the idea myself since I can see the benefits but I don’t own any yet.

Virtual Brokers to Mark – with your stock purchases this year does that mean you’re not buying any ETFs?

No, I should clarify, we are.  While we hold individual stocks inside our TFSAs and within my non-registered account, we do hold mostly low-cost, diversified ETFs inside my wife’s RRSP and my own RRSP.  (My wife’s RRSP is the only registered account with any meaningful contribution room left.)

I mentioned to you I’m a big fan of low-cost ETFs and I probably always will be.  This makes me a hybrid-investor.  I don’t have to worry about stock selection this way.  Rather, using my ETF selections I can consider an all-in-one indexed ETF or a smart-beta ETF (factor-based investing if you will) or an income-oriented ETF; wrapping most of the dividend stocks I want to own into one tidy package.

Finally on the subject of low-costs, ETF management expense ratios can be quite favourable compared to their mutual fund alternatives.  The buyer always needs to beware though since not all ETFs are created equal.  I would suggest some due diligence is required (beyond reading my site of course)!

Virtual Brokers to Mark – so what should an ETF investor look for?

I wrote about some of those things here so thanks for asking!

Really though, I can’t emphasize enough that part of your get wealthy eventually strategy should be keeping investment costs to the bone for long periods of time.  Doing so can help ensure even small sums of money (for new investors) can accumulate to large pots of cash given enough time and compounding power.

With your brokerage account, always consider your transaction costs and how often you’ll buy (or sell).  Try not to do too much of it really.  There are a lot of brokerages who claim to charge a minimum of $0.01 per share for an ETF transaction, which is great, but there’s also a minimum associated with that.  It’s usually no lower than $4.95.

Savvy investors should also consider the broader cost picture.  There can be small back-office processing fees, like ECN/exchange fees for ETF transactions you should be mindful of.  I suggest you comparison shop brokerage fee structures.  (This is the VB low-cost fee structure here.)

Experienced investors will also do their homework. This means smart investors often look at unbiased research tools such 5i (My Own Advisor partnership), Recognia, and Morningstar just to name a few.  Among dozens of other resources these companies are great for the DIY investor – even if you only use them for the first few years to grow your financial knowledge.  They can definitely help investors avoid buying the wrong products for their financial plan.  Such resources could save you thousands of dollars in financial mistakes. To be honest, if I was using some of these resources earlier in my investing career I could have saved myself a bunch of money mistakes.

Virtual Brokers offer

At the end of the day you need to decide what your financial plan is, how that strategy should unfold, and what products are best designed to meet your long-term savings and investing goals.

I’ve decided to be (and remain) a DIY investor.  That could be your path as well.

If you choose to go down this road, fans of my site, Virtual Brokers (partnership) have a special offer for you.

Check out this Virtual Brokers promotion for all U.S. and Canadian ETFs.  (VB was rated the #1 Canadian online brokerage by the Globe and Mail.)  With this summer VB promotion it will cost you $0 to buy and sell ETFs for the next few months.  Compared other brokerages like Questrade or Qtrade, that charge $4.95- $9.99 per transaction, Virtual Brokers is a deal.

Closing thoughts

As always, with any offer on this site, you are welcome to contact the company highlighted in my posts to ask about my partnership with them or the fine-print details about the offer itself.  I encourage you do to so!

So, whether you are defensive, aggressive or anywhere in between as an investor – stay an informed investor.  Ask as many questions as you need to feel more comfortable and confident.  Thanks for reading.