DAY-TRADER, n. See IDIOT
Lauded Wall Street Journal columnist, Jason Zweig doesn’t pull any punches. He believes that active trading is a fool’s errand, and that value investing is the only intelligent approach to stock market investing.
In general, day traders make brokers rich while leaving themselves broker every day. We know this, so we tend to review platforms that promote responsible asset allocation. We search for investing products that give investors an edge through low fees, helpful visualizations, or great customer service.
However, we’re bucking this trend to review Questrade, a Canadian trading platform aimed at active traders. Why are we breaking our own rules? Less active investors can “hack” the platform to achieve low fees and balanced portfolios. Plus, Questrade’s manage portfolio solutions are worth a look for Canadian investors.
Low Cost Trading: Questrade’s Core Competency
Questrade offers data and research services for Canada’s active trading population. US Citizens can also open an active trading account, but Questrade doesn't support US retirement accounts.
Questrade offers two pricing tiers. Their standard price tier is “Democratic Pricing.” This tier offers $4.95 stock trades (plus 1 cent per share up to $9.95). Options cost $9.95 plus one dollar per contract. Users can buy and sell ETFs for free.
Questrade charges users with less than $5000 a $24.95 quarterly fee. Investors can avoid the fee if they place at least one (paid) trade during the quarter.
Heavy traders will want to sign up for an advanced market data plan. The market data plans provide fancy tools that allow traders to buy and sell stocks or options faster and with more data. Questrade’s research tools are top of the line. When it comes to ease of use and advanced analytics, Questrade surpasses options like Ally Invest or Merrill Edge (at least right now).
Interested traders, can investigate Questrade’s tools using a free practice account. This is a must for any aspiring day traders. You won't make money if you can't use the tools.
Market Data packages cost between $70-$89.95 and are best for people who would make at least 20 stock trades per month. This is because the cost of the data offsets the price of the trade at around $100.
Passive investors may find some of Questrade’s research tools interesting but useless. Questrade’s platform caters to day traders, and passive investors will find a lot to ignore.
Questrade Portfolio IQ
Canadian investors may want to take a look at Questrade’s managed portfolio solution. Right now, Questrade doesn’t support US based retirement accounts, so most US citizens will need to pass on the portfolio management.
Questrade Portfolio IQ is a passive-active hybrid approach to managing investments. The company invests in low cost exchange traded funds, and they use an asset allocation approach to management. However, active managers may tilt the direction of your portfolio based on market analysis.
Does active management give investors an edge? It’s tough to say. We know that most active mutual funds don’t outperform their benchmarks. However, a portfolio that leans in the right direction may produce higher returns. Questrade’s managed portfolio business is still small. They manage $5 Billion in assets. WealthSimple, Questrade’s primary Canadian competitor, manages $708 Billion in assets.
Why is Questrade’s portfolio so small? It might be the fees. Asset management fees range from .35% for portfolios greater than 1 Million dollars, and .7% for portfolios between $2,000 and $99,999.
At Questrade, many investors will pay high fees without personalized attention.
How passive investors can “hack” Questrade
If you’re a DIY investor, you can “hack” Questrade’s low fee structure and make it work for you. Questrade investors can buy and sell ETFs without a commission. Investors with portfolios greater than $5,000 will avoid quarterly maintenance fees too. Investors who meet those criteria can invest without fees.
These days, Exchange Traded Funds aren’t just broad market indexes. You can buy momentum ETFs, Smart Beta and more. You can design data backed investing tactics in your passive investment portfolio. With Questrade, you can do it without the fees.
Even though Questrade wants to lure in day traders, passive investors will see the best returns. Right now, the platform is best for Canadian investors. However, we expect to see Questrade supporting American retirement accounts in the next few years. At that point, American investors can start hacking Questrade too.
Questrade
Pros
- Commission free ETFs and no quarterly maintenance fees
- Low cost trading
Cons
- Managed portfolio fees are higher than we would like to see
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