Reader Tim managed to jump through the hoops to set up a TD Bank e-Series Funds RESP account for this two children and has the following question:
My plan is to invest approx $100 to each of the 2 plans every two weeks in order to qualify for the maximum government match. I want to take advantage of dollar cost averaging but the problem is that there seems to be a minimum of $100 investment for each of the funds. I was hoping to diversify between 4 e-funds but it would seem I have to invest more money or invest less often in order to do that.
As I tend to invest a lump-sum amount into our kids’ RESP, I don’t have experience with investing regularly in a RESP. But I think Tim can invest regularly by setting up a Pre-authorized Purchase Plan for the TD Money Market Account. A Pre-authorized Purchase Plan (PPP) allows investors to invest as little as $25 on a regular basis — from as often as every week to as infrequent as once a year. The PPP can be set up for purchasing $100 of the TD Canadian Money Market fund for each of the two accounts. Every other month (or so), the account should have enough contributions plus CESG payments in the money market fund to switch into other e-Series mutual funds. Use this automatic rebalancing spreadsheet to figure out how to divvy up the holdings in the money market fund.
Another option is to set up a PPP for each of the e-Series mutual fund in your portfolio. If you are planning on purchasing four e-Series funds, you’ll set up a contribution of $25 (the minimum required for a PPP) for each fund for a total of $100. The CESG is deposited into the account in a money market fund and can be used to rebalance the portfolio, say once every year. Note that all the PPP purchases made on the same day in one account show up as one transaction in the chequing account. I’d like to hear your opinion if you have set up a RESP account and invest in it regularly.
[Note: The original post incorrectly mentioned that each mutual fund purchase via a PPP is treated as a separate chequing transaction. Thanks to readers who pointed out the error in the comments.]
