Choosing the funds was the hard part. This module is about execution: placing the order well, investing on a schedule, and holding the fund in the account where it keeps the most of its return.
Two order types matter:
For ETFs, a limit order set at or a cent or two above the current ask is a sensible default. It fills right away in normal conditions and protects you from a bad price if something odd happens.
When to trade. Avoid the first and last several minutes of the trading day, when spreads are wider. For ETFs that hold foreign stocks, spreads are usually tightest when those foreign markets are open.
Dollar-cost averaging means investing a fixed amount at regular intervals, whatever the price. When prices are low, your fixed amount buys more shares. When high, fewer.
Example. You invest $300 a month for three months at prices of $50, $40 and $60. You buy 6, 7.5 and 5 shares, for 18.5 shares in total. You spent $900, so your average cost is $900 ÷ 18.5 = about $48.65 per share, which is below the simple average price of $50.
The real benefit is behavioural. A schedule removes the question “is now a good time?”, which nobody can answer reliably. Automate the transfer and the purchase if your broker allows it.
The same ETF can leave you with more or less depending on the account it sits in.
A common order of priority: first take any employer match, then fill your tax-sheltered accounts, and only then use a taxable account. Contribution limits change every year, so confirm the current ones for your country.
ETFs pass on the income they collect as distributions: dividends from stocks, interest from bonds, and occasionally capital gains. You can take them as cash or reinvest them automatically through a DRIP.
In a taxable account, distributions are taxed in the year you receive them, even if you reinvest. Reinvested amounts also raise your cost base, so keep records.
Foreign withholding tax. When a company in one country pays a dividend to an investor in another, the first country often keeps a slice. The US generally withholds 15% from dividends paid to Canadian investors.
Example. A US-stock ETF yields 1.5%. A 15% withholding costs 0.15 × 1.5% = about 0.23% of your investment a year.
Whether you can recover it depends on the fund’s structure and the account. For Canadians, US-listed ETFs held in an RRSP are generally exempt, while in a TFSA the tax is lost. It is a small drag, worth knowing about, and rarely a reason to avoid a good fund.
Educational purposes only; not financial advice. Any funds, tickers and figures are illustrative examples, not recommendations. Fees, tax rules and contribution limits change, so confirm current details with the fund provider and your tax authority. Worked examples use constant returns and are not forecasts. Written by Elizabeta Dimoska. Always do your own research and consult a licensed advisor.