You have just two choices if you want to build an ETF portfolio the sound and sensible way.
That's through a regular investment plan where you put money into your portfolio every payday or every month, and you keep on doing it for 20 or 30 years. ETFs can be an expensive way to invest in this way because of the $10 stock-trading commissions that typically apply when you buy and sell them at most firms. But at a small group of online brokerage firms, you can buy ETFs at no cost. Which are the best for long-term portfolio-building? Two of them – Questrade and Virtual Brokers.
Both firms let you buy Canadian and U.S.-listed ETFs with no commissions. You pay regular fees to sell, but that's immaterial for a couple of reasons. One, both firms have lowest fees in the online brokerage business. Two, we're talking here about portfolio-building, not trading. You'll do a little selling to rebalance your portfolio once a year, but the vast majority of your transactions will be buys.
Both Qtrade Investor and Scotia iTrade offer a limited selection of ETFs on an entirely commission-free basis. But here's the problem: The list at both firms doesn't include some of the best low-cost ETF options. For example, I found only one TSX-listed Vanguard product between the two firms, and it wasn't a core fund. Vanguard's ETFs are either the lowest-cost in their category or close to it. Also absent on the shelf of commission-free shelf at both firms are the low-fee options from the BMO ETF family. There are quite a few iShares ETFS available at both firms, but neither offers the dirt cheap iShares S&P/TSX Capped Composite Index Fund (XIC), with a management expense ratio of just 0.07 per cent or so.
This isn't to say that you can't build a portfolio with the commission-free ETFs offered by Qtrade and iTrade. It just wouldn't be the kind of ultra-low cost portfolio that exemplifies the best of ETF investing. To see what I'm talking about, check out my Freedom 0.15 portfolio. It has an aggregate management expense ratio of just 0.15 per cent based on three ETFs, none of which are on the zero-commission list at Qtrade or iTrade.
If I had to pick a winner between Questrade and VB, it would be the latter. That's because Questrade may charge electronic communications network (ECN) fees on some trades, zero-commission ETF purchases included. VB doesn't charge ECN fees on commission-free ETF purchases.
Rob Carrick