Tag Archives: RRSP

What Happens When You Sell a BMO Mutual Fund in Your BMO InvestorLine Account

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I admit it. In the heady days of the late 1990s I bought a BMO mutual fund for my RRSP. Actually I bought 3. Eventually the time came when I moved these mutual funds into an account at BMO InvestorLine and then in 2012, I decided to sell them. Here’s what happened.

Written: 2012
Reviewed: 2023
Revised: 2023

NOTE: Starting in 2022, the rules for fees for mutual funds have been changing in Canada. This is impacting how some brokerages handle the purchase and sale of the funds. Please check fee information carefully before buying or selling a mutual fund in case the rules described here have been changed. For example, CIBC Investor’s Edge has stated it will change how it charges for mutual funds starting April 1 2023, but it hasn’t stated how it will change  yet!

Why Did I Buy BMO Mutual Funds in My RRSP?

In best “Wealthy Barber” manner, I bought small amounts of several mutual funds in my RRSP every month for a while to dollar cost average. Once some promotion or other ended, I stopped buying any more units. After a spectacular drop in market value against book value, I stopped reading my statements. For about 10  years.

I do not recommend others copy this style of investing!

However, after ten years, the funds were showing respectable performances. So I left them alone, as a sort-of in joke with myself.

Fast forward to last week in 2012, when I finally decided to get rid of the first of these funds. I had a very small holding of the BMO Dividend Fund. During the year after I brought the fund into my self-directed account at BMO InvestorLine, the market value had dropped. Eventually it rallied up to within $100 of what it was worth when I moved it in. So I decided to sell  it. I could make $100 just “week-trading” TD shares, and get a respectable dividend if I actually had to wait months or even years to make that $100.

So before the 2 p.m. deadline for sales of BMO mutual funds, I placed an order to sell ALL.

After the Sell All Order Was Submitted
The next day, Thursday, my order was reported as Filled, but nothing changed in my Holdings report.

The next, next day, Friday, the sale appeared in my Transaction History list back dated to the day I submitted the Sell order. The cash also appeared in my account, ready for me to re-invest.

However, it also created a puzzle. The Transaction History said the money was for the sale of only 121 units, not 121.759 units.

Of course it was now a Friday, so I decided to give it another business day or two to see what had happened to my partial units.

Did I Give Away My Partial Units in the Mutual Fund?
By Monday, I had an additional line item in the Transaction History. It says that .759 units were released at no price with 0 value! I started to steam a bit (that’s over $30 worth of cash, buster!) till I remembered I’m dealing with BMO InvestorLine. Reporting the way I expect seems to be unusual for them.

So I went online and checked the closing price for the BMO Dividend Fund for the day I sold the units. Then I divided the dollars deposited in my account by that price. The result: 121.759. So I had been paid for the partial units, they just didn’t report that I had been paid the way I expected.

BMO InvestorLine Has Room for Improvement in Reporting the Sale of the Mutual Funds

So all’s well that ends well, although the reporting in 2012, frankly, could stand some improvement. It should either report all of the units, whole and partial, sold and the price and the total sale value as one line item in the Transaction History; Or, it should report two lines, each with the number of units or partial units, the price and the total sale value of that part of the transaction. But perhaps that would make it a little too easy for users?

Do You Pay a Fee to Sell a Mutual Fund Held in a BMO InvestorLine Account?

There was no fee for the sale of this no-load fund. In 2021, BMO InvestorLine did not charge a fee on virtually all of the mutual funds it offered to buy and sell. However, sometimes there is a fee charged by the source of the mutual fund. Always check the prospectus or phone a mutual fund company before buying or selling their fund, no matter what self-directed broker you may be using to make the purchase or sale. Always check the brokerage fee schedule, too, for any changes that could add new fees. I can’t keep up with them!

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Have you sold a mutual fund through a self-directed plan? Did anything surprise you? Any sneaky fees or commissions we should know about? Please share your experience with a comment.

Why Would It Be Worth Buying or Selling Only a Few Shares?

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Because you usually must pay a trading commission of $7-10 (in 2023), it’s usually best to buy and sell significant numbers of shares to lower the cost per share for the transaction. There are some circumstances, though, where it’s worth buying or selling only a few shares. Here’s why:

Written: 2012
Reviewed: 2023
Revised: 2023

TFSA Limits May Require Buying Fewer than 100 Shares

Some stocks are expensive. In 2012, a single share in the TD Bank cost $81.70. That means 100 shares of TD would cost $8170 plus the fee.

The  annual TFSA contribution limit for 2013 is $5500. The annual limit for 2012 was $5000. The annual TFSA limit for 2023 is $6500.

So in 2012, you could only buy $(5000-fee)/81.70 shares of TD with that year’s TFSA contribution. If the fee was $29 exactly, you could buy only 60 shares. (You’d be left with a few extra dollars: you can’t buy partial shares through most online brokerages.) Similarly RRSP and RDSP limits may also require buying fewer than 100 shares.

RESP Limits Also May Limit the Number of Shares Purchased

RESP limits may be even smaller than TFSA limits. In fact if you only have one child and you are only planning to contribute the amount per year matched by the government CESG (grant), you could be investing as little as $2500 per year. That won’t buy a lot of shares of CNR at the 2012 price of $98.40.

Adding to a Stock Position with Incremental Purchases
Sometimes, you like a stock so much you want to buy and hold it for months or years. In that case, you may decide you want to add more to your collection when you see it at a good price. You may have a limited amount of cash available to invest, though. For instance, you might have received dividend payouts from several other stocks, plus a capital gain on a small sale.

Again, you may decide you want to buy say, 50 shares of CNR to add to your existing shares.

The slight advantage of this strategy is you only have to pay one fee when you sell all of your holding in the company, even if you had to pay several fees to buy the shares. For example, if you bought CNR 3 times and then sold it all off at the end, you would pay 3x$29+1x$29 = $116 in fees. If you bought and sold CNR three times, you fees would be 3x$29+3x$29 = $174.

Taking Partial Gains by Selling Part of a Stock Holding May Require Selling Fewer than 100 Shares

Sometimes a stock does well, in fact really well. It’s tempting to hang onto it hoping it will continue to go up in value. But a nagging voice inside may say it would be better to take the profits in hand now. After all, at any time a stock can also plummet.

For instance, as I was tempted to take $15 a share profits in CNR the other week, the stock fell $5 a share on a low earnings warning for Norfolk Southern. Oops! Waited too long.

One compromise approach is to take partial profits.

Say you bought 150 shares of CU at $50. After 8 months, the shares have increased in value by 20% which is an increase of $10 per share. You may decide to sell 50 of your shares. That would ensure you a profit of 50x$10 = $500 (less fees) on an investment of 50x$50 = $2500.

Your remaining 100 shares could continue to earn dividends and hopefully continue to increase in value. Meanwhile you could take your original $2500 plus $500 (less fees) profit and try to find another investment with the potential to grow 20% or more, again.

The actual number of shares you keep or sell isn’t particularly important. What is important is that you can sell fewer than 100 shares if it helps you manage your money and risk effectively.

Disposing of Split Shares
You may also want to sell a small number of shares is after a company reorganizes its stock. For example, you may own 100 shares in Really Big Company. Then, they reorganize, spinning off a new smaller company. As a shareholder, you may be given an additional 25 shares in Really Tiny Company as part of the deal. If you don’t want them, you will want to sell them. Luckily, it is possible and permissible to sell just 25 shares.

This is exactly how I ended up the proud owner of 4, yes 4!, non-voting shares of Telus stock. I won’t tell you the obscene capital gain I have earned to date on those 4 shares, by the way. Let’s just say we could do lunch!

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Have you ever bought or sold fewer than 100 shares? What made it worth your while? I’d love it if you would share a comment with your experiences.