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Exchange-traded funds (ETFs) may have a place in your portfolio. That’s because, unlike many other financial innovations, they don’t load you up with heavy management fees, or tie you down with high redemption charges if you decide to get out of them. Instead, they give you a low-cost, flexible, convenient alternative to mutual funds. ETFs trade on stock exchanges, just like stocks. Prices are quoted in newspaper stock tables and online. You’ll have to pay brokerage commissions to buy and sell ETFs. However, ETFs’ low management fees still give them a cost advantage over most conventional mutual funds. As well, shares are only added or removed when the underlying index changes. As a result of this low turnover, you won’t incur the regular capital-gains bills generated by the yearly distributions most conventional mutual funds pay out to unitholders. Below, we update our advice on six ETFs — five buys and one we don’t recommend....

ISHARES CDN REIT SECTOR INDEX FUND $14.20 (Toronto symbol XRE; buy or sell through a broker; ca.ishares.com) holds the 13 Canadian real estate investment trusts (REITs) in the S&P/TSX Capped REIT Index. The weight of any one REIT is limited to 25% of iShares CDN REIT Sector Index Fund’s value. iShares CDN REIT’s expenses are just 0.55% of its assets. RioCan REIT is the fund’s largest holding, at 25.0%, followed by H&R REIT (12.0%), Canadian REIT (8.9%), Calloway REIT (8.6%), Boardwalk REIT (6.9%), Dundee REIT (6.9%), Primaris Retail REIT (6.2%), Canadian Apartment Properties REIT (6.1%), Allied Properties REIT (4.4%), Cominar REIT (4.4%), Chartwell Seniors Housing REIT (4.0%), Artis REIT (3.7%) and Extendicare REIT (2.0%)....

iShares S&P/TSX Capped Financials Index Fund, $20.99, symbol XFN on Toronto (Shares outstanding: 38.9 million; Market cap: $816.5 million; ca.ishares.com), aims to mirror the performance of the S&P/TSX Capped Financials Index, which is made up of the largest-capitalization financial-sector stocks on the Toronto exchange. The fund currently holds 26 stocks. The weight of any one company is capped at 25% of the index’s market capitalization, regardless of how big the stock is in relation to the index. The fund’s MER is 0.55%. It yields 3.2%. The fund’s top holdings are Royal Bank of Canada at 18.6%; TD Bank, 18.4%; Bank of Nova Scotia, 15.5%; Bank of Montreal, 10.2%; CIBC, 8.0%; Manulife Financial, 6.2%; Sun Life Financial, 4.0%; National Bank, 3.1%; Power Corporation, 2.1%; and Fairfax Financial Holdings, 2.1%....

iShares Diversified Monthly Income Fund ETF, $11.99, symbol XTR on Toronto (Shares outstanding: 24.9 million; Market cap: $298.6 million; ca.ishares.com) holds units of nine different iShares ETFs. Among these holdings are units of five bond funds that add up to 47.4% of the iShares Diversified Monthly Income Fund ETF’s assets. We don’t generally recommend bonds right now. That’s because bonds are unlikely to perform as well in the next few years as they have in the last few, mainly because interest rates will likely hold steady or rise. That means the fund would only earn interest income on its bonds; instead of capital gains, its bond holdings could produce capital losses....

The long-term outlook is bright for emerging-market economies and companies that operate in them. One of the best ways to tap into that growth is through low-fee exchange-traded funds (ETFs). ISHARES S&P INDIA NIFTY 50 INDEX FUND $25.31 (Nasdaq symbol INDY; buy or sell through brokers; us.ishares.com), is an ETF that aims to track the S&P CNX Nifty Index, which represents the 50 largest, most liquid Indian securities. The fund’s top holdings are Reliance Industries (conglomerate), 7.7%; Infosys Technologies (software), 7.4%; ITC Ltd. (conglomerate), 7.4%; ICICI Bank, 6.7%; Housing Development Finance, 5.9%; Larsen & Toubro Ltd. (conglomerate), 5.7%; HDFC Bank, 5.6%; State Bank of India, 3.4%; Tata Consultancy Services (information technology), 3.3%; and Bharti Airtel (wireless), 3.3%....

ISHARES AUSTRALIA INDEX FUND $24.34 (New York symbol EWA; buy or sell through brokers), is an ETF that holds the 73 largest Australian stocks. Its MER is 0.53%. The fund’s top holdings include BHP Billiton, 15.1%; Commonwealth Bank of Australia, 8.6%; Westpac Banking Corp., 7.0%; Australia and New Zealand Banking Group, 6.1%; National Australia Bank, 5.9%; Rio Tinto, 4.0%; Woolworths, 3.7%; Newcrest Mining, 3.4%; Wesfarmers, 3.3%; and Woodside Petroleum, 2.7%. Australia benefits from its stable banking and political systems. It is also rich in natural resources, and its exports are in high demand in Asian markets, including India and China....

Exchange-traded funds (ETFs) offer very low management fees. As well, the best ETFs offer well-diversified, tax-efficient portfolios of high-quality stocks. But the quality of ETFs varies widely. All too many ETFs exist to tap into popular, but risky, themes and fads. So you need to be highly selective with your ETF holdings. Here are six foreign ETFs we like:...

The federal government’s tax on income-trust distributions has now been in effect for a little more than six months, since January 1, 2011. However, Ottawa feels the income-trust business structure is still appropriate for real estate investment trusts (REITs), so it has exempted REITs from the new tax. That’s great news for Canadian income seekers. What’s more, as we predicted in our Canadian Wealth Advisor newsletter, most REITs have moved up in the past year—including our recommendations. That’s because REITs’ high yields have attracted a lot of investor attention as trusts converted to corporations, or cut their distributions in response to the new tax....

ISHARES S&P/TSX 60 INDEX FUND $19.21 (Toronto symbol XIU; buy or sell through a broker; ca.ishares.com) is a good, low-fee way to buy the top stocks on the TSX. The units are made up of stocks that represent the S&P/TSX 60 Index, which consists of the 60 largest, most heavily traded stocks on the exchange. Expenses are just 0.17% of assets. Most of the stocks in the index are high-quality companies. However, as it must ensure that all sectors are represented, it holds a few we wouldn’t include, such as Yellow Media Inc. The index’s top holdings are: Royal Bank, 6.9%; TD Bank, 6.3%; Bank of Nova Scotia, 5.4%; Suncor Energy, 5.2%; Potash Corp., 4.1%; Canadian Natural Resources, 3.9%; Barrick Gold, 3.9%; Goldcorp, 3.2%; CN Railway, 3.1%; Bank of Montreal, 3.1%; Manulife Financial, 2.6%; CIBC, 2.6%; BCE, 2.5%; TransCanada Corp., 2.5%; Cenovus Energy, 2.3%; and Teck Resources, 2.2%....

ISHARES DOW JONES CANADA SELECT DIVIDEND INDEX FUND $21.64 (Toronto symbol XDV; buy or sell through a broker; ca.ishares.com) holds 30 of the highest-yielding Canadian stocks. Its selections are based on dividend growth, yield and payout ratio. The weight of any one stock is limited to 10% of assets. The fund’s MER is 0.50%. It yields 2.7%. The fund’s top holdings are CIBC, 6.4%; Bonterra Energy Corp., 6.0%; National Bank, 5.2%; Bank of Montreal, 5.2%; TD Bank, 5.1%; Telus, 4.6%; IGM Financial, 4.5%; AG Growth International, 4.2%; Royal Bank, 3.9%; Bank of Nova Scotia, 3.8%; BCE, 3.7%; and TMX Group, 3.6%. The fund holds 51.8% of its assets in financial stocks. Utilities are next, at 24.0%. The top Canadian finance stocks have sound prospects. However, if you invest in this ETF, be sure to adjust the rest of your portfolio so it won’t be overly concentrated in the financial sector....