I switched jobs recently and one of the benefits of the new job is a matching program for contributions to retirement accounts. The Group RRSP program is administered by one of the large mutual fund companies and offers more than 50 different funds to choose from. As a rule, I stay away from mutual funds, but I decided to participate anyway because of the generous company match.
Researching more than 50 different funds is a time-consuming affair, so I had parked the money temporarily in a money market fund. Recently, I discovered that the program offers a few index funds from TD Asset Management that can be used to construct a fairly diversified portfolio even with relatively small sums of money. The funds offered are:
TD Canadian Bond Index Fund (tracks the Scotia Capital Universe Bond Index)
TD Canadian Index Fund (tracks the TSX Composite Index)
TD US Index Fund (tracks the S&P 500 Index)
TD International Index Fund (tracks the MSCI EAFE Index)
I split the portfolio between the above funds in the ratio of my target asset allocation (Bonds: 20%, Canadian Equities 19%, US Equities 35%, International Equities 26%) and future contributions will also be split in the same ratio. Once a year, I will rebalance the portfolio to meet the target asset allocation. Easy peasy, no?
I realize that the portfolio lacks exposure to small-cap equities, REITs, emerging markets, high-yield bonds, real return bonds etc., but for a small portfolio it is well diversified. Surprisingly, retail investors can construct a portfolio with even lower expenses using TD eFunds. The MER for the equivalent e-series funds range from 0.31 to 0.48%. That’s cheap!
