ETF Index Investing Course
15. How to Buy ETFs With and Without Rebalancing
Don't have Excel?
You can also open and edit any spreadsheets using Google Sheets for free. Here's the link for more info on Google Sheets:
If you run into any problems and need help then just let me know in the comments section at the bottom of this page.
I got a great question from Kim asking about how to modify the spreadsheet if you wish to hold more than 5 ETFs.
To accomodate this, I created a new spreadsheet with placeholders where you can insert many more ETFs if you wish. The link is below:
Spreadsheet when buying more than 5 ETFs
I'll personally keep using the original spreadsheet as I prefer just buying 4-5 ETFs per month, so definitely use the original spreadsheet too if that is your approach.
Of course, there are some good asset allocations out there that hold many more than 5 ETFs. If you wish to learn more about them, you can check out the book: Global Asset Allocation: A Survey of the World’s Top Asset Allocation Strategies.
Also, Canadian MoneySaver Magazine publishes their ETF portfolio too which consists of more than just 5 ETFs.
I'm personally sticking to my 4-5 ETF portfolio since the returns are very similar and it's more convenient and less administrative. Yet, you might be able to squeeze slightly larger returns by some of these even more diverse portfolios (like the ones shown in the book which summarizes the most popular ones). Just make sure that you don't stop investing as often because it's too labour intensive to buy a 9 ETFs every month for example. In other words, don't get lazy. 🙂
AlDecember 16, 2019
Thank you for this helpful tutorial.
My question relates to video 15 on re-balancing. Specifically @ time 11:30. In order to find the current market value in CAD at Questrade for each ETF, I have located this by going to the main page on Questrade, then to TRADE > POSITIONS. From here, am I imputing the amounts under “Mkt Value” or am I to manually calculate “Open qty x Avg price” ?
I apologize if this question may have been covered already.
Really appreciate this content.
By Kornel SzrejberDecember 18, 2019
Hi Al. Great question. Yes, this is the correct way to do it. Keep in mind though that when you are in this view, you are only looking at your holdings in 1 specific account. On the top right of that screen, it will tell you what account you are in (i.e. TFSA, RRSP, RESP, Margin). So, make sure that you go into each of your accounts to pull this as you want a holistic number to see how your ENTIRE portfolio is allocated (not just one account). In other words, when rebalancing, you need to look at your portfolio as a whole.
Another way of getting that number which may be easier, is under your “Accounts” page, go to Reports -> Investment Summary. Then scroll down and you’ll see all the ETFs that you own across all your accounts. You can see the “Mkt val” there too and can use that. This way you don’t have to go individually to each account either.
There is also a little filter button on the top right which you can use to enter an ETF ticker. For example, if your Canadian Index ETF is XIC, then just put XIC in the filter and you’ll see the market value of all your XIC holdings across all your accounts. This may be easier for you as then you can just add them up and you’re done for your Canadian portion.
A word of warning: If you’re going with this 2nd method (Investment Summary Report), I found that it doesn’t always include trades that you did that day. So whenever I’ve used it, I just pulled the numbers the next day after I’ve done some trading.
Lastly, keep in mind too that if you have a spouse you want to do the same for them. So in other words, when rebalancing, you want to base that rebalancing on both of your portfolios (ie. viewing your portfolio totals as one entire portfolio for the purpose of rebalancing).
Hopefully that answers everything. Let me know if something isn’t clear and I’ll elaborate.
KavNovember 13, 2019
Could you please explain what the rest of the parameters on questrade when trading are (25:45 of the video)? And how should one use them to decide what stocks/etf/etc to buy. e.g., P/E, div, yield.
By Kornel SzrejberNovember 14, 2019
Most of these figures aren’t used very much by us passive index investors.
We’re not trying to time the market, and we aren’t doing “active investing” where we are plugging these numbers into a financial model in an effort to determine if a given stock is over or undervalued.
With that said, here are my insights on what you see on that screen:
Bid/Ask: We need these to know what number to put in when we sell/buy the ETF. I talk about these in the videos. The main thing here is when evaluating an ETF, the difference between the bid and the ask price should be very small (for example, a few pennies).
If you are buying/selling during market hours and if you are sticking to broad indexes like I do (ex. S&P 500, S&P TSX, etc.) then the difference between the bid and the ask will be very small like this. This is called the “bid-ask spread”.
The bid-ask spread can get large (which is bad for you) if you are getting into buying smaller niche type investments that are less liquid.
All the ETFs that I suggest you look into (and the ones that I buy) have very low bid-ask spreads so this is not really a concern for you, if you are following the course.
The “High”: Not relevant, since we are not trying to time the market. The stock market goes up more than it goes down so just because the price may now be at a high, that doesn’t mean that we shouldn’t buy it.
Volume metrics: We want this to be high as it can help indicate that the ETF is liquid. Since I only buy very large, broad market ETF (like the ones I mention in the course), this doesn’t become a concern as all the ETFs that I mention are very large in size and very are liquid, so it’s not a concern for the type of investing that I do and teach in this course.
52w low: This is the 52 week low. Just like the 52 week high number, it can help you see where the price is now, relative to the highest and lowest price that it’s been in the last 52 weeks. In theory, if we are not timing the market (which we shouldn’t), then this shouldn’t matter to us as we are investing for the long term, and so the last 52 week high and low are not relevant in the grand scheme of things.
If you are trying to time the market a bit, then the way that some people use it is if the price is close to the 52 week low, then that may signal that now is a good time to buy it if you have some extra cash sitting on the sidelines.
If on the other hand, we are close to a 52 week high, then some people will try to hold-off on investing extra cash in that ETF until there is a bit of a drop so that they can hopefully buy it at a depressed price. This can be dangerous however, since while you’re waiting for the price to go down, the price may keep going up and up. You might not get that “low” number for years, or you may never get it at that low of a price ever again. And so, in the meantime, while you are keeping cash on the side for such a day, you are missing out on gains and are missing out on all the dividends payments that you would have received.
So me personally, I try to invest the cash as soon as I get it (like when a dividend payments comes in as the markets go up more than they go down long-term, and so one of the best things that you can do is to get in the market ASAP, so that you don’t miss those days when the market is really performing well and growing your investments.
The dividend and yield ratios: This is tempting to use, but research has shown that it is not optimal to make investments decisions based primarily on dividend statistics. The bottom line is that you shouldn’t care what the dividends are, and should instead care what the “total return” is of the investments. Ed wrote a really good article explaining this here:
Ed’s article is legnthy, so if you feel like watching something instead, this video explains it very well too:
Since his article, I have consistently heard the same advice from other highly respected professionals in the field saying the same thing, how we should be looking at total return and not the dividends that we get on our ETFs/stocks.
Does this answer your question sufficiently?
KavNovember 8, 2019
Could you please explain what the information on questrade when you search for a stock/ETF mean? Such as those shows in the video at 31:55, div, yield, P/E, etc.? How should one consider these when trying to figure out what ETF/stocks to buy of course besides doing research. Does SEC.TO actually pay dividend for example, and how should one interpret that?
By Kornel SzrejberNovember 14, 2019
I replied to your question in a previous comment that you made on this page.
One thing that wasn’t covered was your dividend question of how to know if a stock/ETF pays dividends: The answer is that you would know this by looking at the “yield” number. If there is a yield, then you know that the stock/ETF is issuing dividends.
MarshallOctober 6, 2016
What if we only want to invest $100 once per month and based on the ETFs current price the chart recommends buying 0.68 or 0.42? Do I round up to purchasing one? (I’m investing in 5 ETFs not 4)
Can you please clarify?
By Kornel SzrejberOctober 9, 2016
Hi Marshall. You always want to round down. If you round up for all your purchases, then when you get to the last one you won’t have enough money to purchase the correct amount.
I realize that if you are investing $100 a month, then you might not have enough to buy all 5 ETFs that month (depending on the ETFs you chose). Therefore, there might be months where you can only purchase 4 ETFs instead of 5. If this happens, then the next month just make sure you purchase the one that you didn’t purchase last month. Is that helpful? Do you have any follow-up questions?
MarshallOctober 14, 2016
Yes, Thank you! That was helpful. I found that even when Investing $100 each month across 4 ETFs it still wasn’t enough. Using the Google Doc that you have provided, and the current ASK price for each of the 4 ETFs it worked out that It was still telling me to only purchase 0.76 OR 0.48 of the ETFs, which we both know isn’t doable. So, I decided to change my ETF choices and pick 3 much broader ETFs. This way it kept it simplistic and also gave me a nicer round number of “ETFs to Buy”. Numbers that I could round down too. I also increased my investment from $100 to $200 Monthly.
By Kornel SzrejberOctober 19, 2016
That’s awesome Marshall, and no problem. Congrats on doubling your monthly investment too!
I like your idea about sticking to the broader ETFs. If you’re investing 100-200 per month, the extra admin work doesn’t seem worth it to remember which one you bought last month vs this month, etc.
Congrats again and it’s a pleasure helping you.
GhassanAugust 5, 2016
Thanks for all the videos and detailed descriptions.
You’ve touched briefly on investing in both TFSA and RRSP accounts. Can you please elaborate more on best practices for choosing between the two when investing?
By Kornel SzrejberAugust 16, 2016
Great question. It’s a pretty in-depth topic and we actually covered it pretty well in one of the previous episodes with Rob Carrick from the Globe and Mail. You can get the entire episode here:
Let me know if you have any follow-up questions and if that was helpful.
All the best,
KimJune 17, 2016
I am looking at utilizing your spreadsheet. How do I add more rows if I have more than 5 ETFs in my portfolio?
By Kornel SzrejberJune 19, 2016
Hi Kim. I can create another version of the spreadsheet that allows for more than 5 ETFs. I’ll have it ready for you and everyone else on Monday.
Have a great weekend.
By Kornel SzrejberJune 22, 2016
FYI: I sent you an email with the spreadsheet and I’ve posted it above too for everyone else, along with an explanation. Enjoy! 🙂