If you’ve got a smaller sum (say $500 or so) that you’ve been meaning to invest, but have been putting it off, it may make sense to put the cash to work if your brokerage offers commission-free trades, either on a broad range of securities or just a handful of exchange-traded funds (ETFs). Undoubtedly, commissions are trending lower (towards zero), and if you’re a new investor who’s looking to make that initial splash in the stock market waters, there’s never been a better time. In any case, with various brokers offering a solid roster of no-commission ETFs, it makes sense to hit the buy button, regardless of how much you’ve got to put to work.
Recently, TD Bank (TSX: TD) announced around 100 ETFs that go for $0 commissions. Though the big bank is just catching up, it is taking a step in the right direction. And I think that adding to the commission-free list of ETFs could open the floodgates to new retail customers with limited amounts to invest.
The key for market newcomers is having skin in the game and steadily adding to a position over time. With the rise of commission-free products, the barriers to entry into the investing world have been lowered significantly. And in this piece, we’ll check in on a pair of investments that might make sense to consider as a first stock or ETF.
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TD Bank
TD Bank stock is a fantastic choice for a first stock. The shares have been gaining rapidly over this year, now up just shy of 65% year to date. Undoubtedly, the big banks were out of fashion until they weren’t. With a robust 3.41% dividend yield and a still cheap-looking 10.91 times trailing price-to-earnings (P/E) multiple, as well as a lower beta (of 0.89 at the time of this writing), the name still looks more than buyable, especially as the big banks stay incredibly profitable going into the new year.
Add the tech and AI adoption into the equation, and I find it’s far too early in the game to give up on the big Canadian banks, which I find to be a far better bet than their U.S. counterparts, primarily due to valuation. With a good amount of U.S. retail exposure and plenty of innovation underneath the hood, I’d not be afraid to stash TD stock at or around the top of a radar going into the new year.
Vanguard S&P 500 Index ETF
Vanguard S&P 500 Index ETF (TSX: VFV) is one of the gold standards for Canadian investors looking for a low-cost way to bet on the S&P 500. Though just about any S&P 500 ETF would do, I like the VFV the best. It doesn’t require a currency exchange since shares trade right here on the TSX Index, and with high liquidity and a low MER (management expense ratio), it’s tough to top the Vanguard icon, even though a number of rivals have popped up on the ETF scene in recent years. Either way, Vanguard typically leads the race to the bottom as far as fees are concerned.
So, even if a new S&P ETF were to come to be, Vanguard would likely follow suit to lower MERs in response. While the S&P 500 might be viewed as pricey by some and destined for lower returns moving forward, I still think the diversified basket of 500 stocks is worth adding to, even with a limited sum. As one of the commission-free ETFs over at TD Direct Investing and other brokerages, the VFV really does shine, especially if you’re not sure of what to buy at any given time.
