I held 150 shares of iShares MSCI EAFE Index Fund (EFA) in my RRSP account and wanted to switch to the Vanguard Europe Pacific Fund (VEA), which is 20 basis points cheaper. Before the recent cut in trading fees by TD Waterhouse, I was hesitant to pay $58 ($29 to sell EFA and $29 to buy VEA) to save $24 per year (0.20% of 150 shares of EFA at $79) and planned on switching sometime in the future when I am adding new money or rebalancing. At $10 per trade, it was much easier to justify spending $20 to save at least that amount every year over the long term.
I sold 150 shares of EFA and bought 250 shares of VEA with the proceeds and it is illuminating to see how much money could be saved by washing the trades. TD Waterhouse converted Canadian dollars into US dollars at a 2.5% premium one way and 4.39% the other way. The difference: $224. Even if I had paid a higher trading commission, the savings obtained from a wash trade would more than make up for any difference in commissions. If you trade US-listed stocks even occasionally in your RRSP account, it’s possible that you could save more money by choosing to wash your trades than paying a lower commission.