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Getting started

To buy or sell ETFs, the frst thing you need todo is opena brokerage account. Youhave two options: a full-service brokerage or a discount (self-service) brokerage. The full-servicebrokerageoffers personalized service and advice from a client manager, but you pay higher trading costs of approximately $90per trade, plus commissions. Adiscount brokerage account lets youbuyand sell ETFs (as well as stocks, bonds andmutual funds) online or by phone. While there are no ad-visers tohelpyou, the trading commissions are low, in the $5 to $29 range. The major online discount brokerages include Scotia iTrade, Questrade, CIBC Investor’s Edge, QTrade, TDWaterhouse, RBCDirect Invest-ing, and BMO InvestorLine.

Once your account is up and running andyouhavedeposited funds, youcanstart trading, but remember: every time you buy and sell anETFyou’ll incur a fee. If youhave

a small account, brokerage commissions can erode an ETF’s low-expense advantage, ex-plainsDavidVomund, author of ETFTrading Strategies . For that reason ETFs are not ideal for portfolios worth less than $30,000, or for investors planningonusing a dollar-cost averaging strategy, where you invest a fxed amount at regular intervals, such as every month. The good news is that the trading commission is usually fxed, so the higher the value of the trade, the lower the percent-age cost. Because of that, ETFs are an excel-lent low-cost option for investors with larger portfolios.

Tools of the trade

BecauseETFs trade like stocks, youcanaccess manyof the tools that stocktradersusewhen placing orders. These can help you lock in gains and limit losses—advantages inherent to stocks but missing frommutual funds. For instance, a“limitorder”allowsyouto

TheETFAdvantage: part II

Yourfrst trade

Buying or selling an ETF is similar to trading a stock. But if you’ve never used an online brokerage account, it’s easy to feel intimidated. To make things easier, here’s a step-by-step guide.

1. Log on to your account

Open a discount brokerage account and log on to the secure trading site. Click on the link, tab or menu item that takes you to the entry form used to complete an order for a stock.

2. Enter theETFsymbol

Enter the ETF’s ticker symbol. You may also have to select the exchange. If you don’t know the ticker, click on “Symbol Search.”

3. Nowenter theamount

Enter the number of ETF units you’d like to purchase. In addition to a fat trading fee ($5 to $29), you may be charged a commission based on the number of shares purchased (typically $0.01 to $0.03 per share), but this fee usually only kicks in for orders of 1,000 shares or more.

4. Pickyour tradingorder type

Decide which type of order to use. The default is a market order, which completes your purchase or sale at the prevailing market price. See “Learning the trades” on the last page for other order types.

5. Set the time limit

Some online brokerages ask you to specify how long your order should be outstanding. The default is a day order, which lasts until the end of the current trading day. A good-till-cancelled (GTC) order remains open until you either fll or cancel the order, or 60 days pass.

6. Reviewandsubmit

Once you enter the order you’ll be asked to review it. Do this carefully! Once you confrm, the order will be sent to the exchange to be flled.

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