Sunday, 1 March 2015

Financial Basics 4 - Self-directed Accounts

This post is about what type of account you should have to contain all your different types of savings accounts. From the title you should expect that I am going to suggest a self-directed account and you are right. For clarity, I will refer to this as your Trading Account, so that I don't confuse it with the savings accounts (TFSA etc.). This trading account will be with one of the big banks or an online brokerage.  

The Bank
(A famous night club, now restaurant, in Calgary.  My wife used to go there in the 80s)


I use BMO Investorline. I have made a list of functionality below that you should look for in a trading account, and mine has all of these. Trades are $9.95 and you can find trading accounts with cheaper trades, but I only need to make about 20 trades per year.  

Functionality required of accounts
  • Ability to transfer funds between your regular chequing and your Taxable account.
  • The cash portion of the Taxable account should be accessible as a bank account so you can easily transfer cash in and out.
  • Easy contribution to RRSP and TFSA directly from your chequing account.
  • Easy monthly contribution to RESP.
  • Ability to purchase various ETFs (ishares, Vanguard etc) within the Taxable, RRSP and TFSA accounts.
  • Cost of a single trade (buy or sell stock or ETF) of no more than $10.  Less than this amount is better but not a deal breaker as you should not be making very many trades (1 to 2 a month).
If you will be trading in securities in US dollars, or need a US $ account and credit card for purchases in the US, the following features are required. They come free with an Investorline account.
  • US dollar conversion and US dollar cash account within Taxable account.
  • Ability to pay your US$ credit card from the US dollar account.
Known Institutions with self-directed accounts
  • BMO Investorline
  • RBC Direct Investing
  • Scotia iTrade
  • Qtrade Investor
  • Credential Direct
  • TD Direct Investing
  • (for more see the link below)
I see a lot of discussion in other forums discussing the merits of different trading accounts. In my opinion, some of the details are immaterial so long as the Trading account meets the requirements above. If you have experience with other institutions or banks and can provide additional, useful information on their account offerings then please email me or leave a comment and I will incorporate the information into this post. 


Article in Globe and Mail on online brokers here.
Million Dollar Journey has a review of online brokers (geared toward active traders) here.

That's all I got on this subject.

Disclaimer:  These posts are not fully comprehensive financial advice.  You should seek your own qualified investment, tax and legal advice.

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