Topic: How To Invest

Q: Pat: What do you think of this ETF—the BMO Discount Bond Index ETF? Thank you.

Article Excerpt

A: BMO Discount Bond Index ETF, $15.81, symbol ZDB on Toronto (Units outstanding: 31.3 million; Market cap: $494.9 million; www.etfs.bmo.com), aims to match the performance of the FTSE TMX Canada Universe Discount Bond Index. The 76 bonds in the portfolio have an average term-to-maturity of 9.7 years. The fund’s MER is 0.15%. The bonds in the index are 72.9% government and 27.1% corporate. The ETF yields 2.1%. We continue to advise against investing in bonds right now. That’s because today’s low interest rates make bonds unattractive, and rising rates would push down their future value. However, if you feel you need stable income and want to hold bonds, this bond fund offers low fees and high-quality holdings. It is also structured so that part of its return is taxed as interest and part as capital gains. (This is done through buying bonds that sell at a discount to their par value; as such, they have a lower interest yield because they will have a..