#7 – Making your first ETF purchase

Congratulations if you have made it this far! It’s no easy feat opening up these trading accounts and understanding the theory behind passive investing (Although it’s ultimately much easier to understand than trying to understand how the snake-oil actively managed product salesmen operate). Anyway, pat yourself on the back if you’ve managed to get to this stage – most people put it in the “Too hard, I’ll do it later” basket, or the “I don’t have enough time right now, I’ll do it later”. The key aspect is that later never comes.

By the way, I read a really interesting blog post by Wilfred Ling the other day. The part I found really interesting was what he wrote about people in general:

“I also made the mistake of believing that it was actually possible for EVERYBODY to learn about investments. The hard truth I learn was that there are some who will never have the aptitude to learn about investments as it is a subject that is both academic and subjective. If an individual does not have the minimum academic background and abilities, they will not be able to learn investments. If an individual is not comfortable with making decisions based on subjective and ‘gut’ feelings, it is not possible to learn about investments.”

So count yourself fortunate if you have necessary aptitude to make it this far.

Back to business!

You’ve got login details? Check. Okay let’s go:

Let’s start with DBS Vickers. Once logged in you’ll see a wealth of tabs and information. It’s worthwhile just exploring by yourself for a while.

  1. Let’s say you know what you want to buy, like VFV for example. First go to Trading > Order Entry:DBS Order Entry Toronto
  2. Change the Market to Canada,
    Order To: Buy,
    Quantity to how many units you wish to buy,
    Order Type: Either Market Order, or Limit Order (Market Order will just buy at the prevailing rates until the order is filled, Limit Order will only buy at your set price – I would just go for Market Order as the volume for this ETF is quite good, it will usually get filled in seconds close to the Sell rate).
    Order Duration: Good for Today, or you can set a longer period of time but probably unnecessary. If your order is not completely filled in the day (unlikely), it will fill what is possible. (Also look into fill and kill / fill or kill).
    Traded currency: This is not actually an option, just telling you what it is traded in.
    Settlement Currency: Here you can choose either CAD or SGD to settle your transaction. I’ve found that if you settle in the native currency, and then call up DBS Vickers to lock in an FX rate, you will get a better rate than selecting the SGD option which will just use DBS bank’s published rates. When you call them up to book an FX rate, typically the larger the sum, the better the rate.
  3. Next click Order Preview:DBS Order Summary
  4. Click Submit!

At this point you’ve finally done it! The next part is the settlement portion which will more or less happen automatically, either with money you have deposited directly to DBS Vickers via cheque or through the DBS bank portal, or via a wire transfer from another bank. After the money is there, call up DBS to book an FX rate. You can do this at any time, before or after you make your trade. Alternatively if you let it settle in SGD, if you have set up GIRO to your DBS account will automatically take the necessary amount from your linked bank account.

One thing I want to mention to help keep your transaction fees low is the minimum trade amount. With Vickers it is either CAD $29, or 0.50% of the trade, whichever is higher. Your goal is to to exceed that $29 charge each time, otherwise you aren’t keeping your costs as low as possible.

For example, $10,000 x 0.5% = $50, or if we use some basic high school algebra (your teachers were right, it would come in handy one day!), a x 0.5% = $29, a = $29/0.5%, a = $5800. So to make you transactions worth it, always trade at least $5800 CAD otherwise you’re paying too much in commissions.

You don’t have to trade every month, it could be every other month, or every quarter, or every half. Whatever suits you. Alternatively if you may wish to check out Standard Chartered Bank who don’t have a minimum fee (but may whack you on the FX rate instead). One way or another, they’ll all get their pound of flesh.

I was going to give an example through Citibank’s platform, but it’s more or less the same. For me I am only buying my SGX based ETF’s through Citibank as they offer lower fees than Vickers. Unfortunately they don’t have access to the Toronto market, only HKSE and NYSE. (Reminder, avoid buying off the NYSE or any other US domiciled products unless you want to bear the risk of paying Estate Tax if you suddenly shift on from this world).

If you’re reading this and you really want a Citibank example, post in the comments and I’ll add to this entry.

Over and out!

#8 – How much do I need to retire?

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