ishares

ISHARES MSCI CANADA INDEX FUND $31.84 (New York symbol EWC; buy or sell through brokers; ca.ishares.com) is like a market-cap-based index fund, but its managers try to improve performance by tinkering with the index-fund formula. They do this through their Morgan Stanley Capital International Canada Index. The fund has an MER of 0.50%. The index’s top holdings are Royal Bank, 6.0%; TD Bank, 5.4%; Bank of Nova Scotia, 4.8%; Suncor Energy, 4.7%; Potash Corp., 3.6%; Canadian Natural Resources, 3.4%; Barrick Gold, 3.4%; Goldcorp, 2.9%; Bank of Montreal, 2.6%; CN Railway, 2.6%; CIBC, 2.4%; Manulife Financial, 2.3%; TransCanada Corp., 2.3%; and Teck Resources, 2.2%. If you want to own a Canadian index fund, you should buy the iShares S&P/TSX 60 Index Fund. You’ll pay about a third of the management fees....

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....

ISHARES CDN REIT SECTOR INDEX FUND $14.98 (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....

Gold hit an all-time high of $1,577.50 U.S. an ounce in April, before falling to around $1,500 U.S. Gold now trades at around $1,529.30 U.S. Like gold, silver reached an all-time high in April, when it hit $49.76 U.S. an ounce. It, however, fell sharply, and now trades at $35.88 U.S. Gold and silver could well regain their highs and move up even further over the longer term, although they will likely remain volatile. Higher prices would arise from investor fears that inflation or global political and economic instability will weaken key currencies, such as the U.S. dollar. If you want to hold a number of gold or silver stocks, these two exchange-traded funds offer top-quality global miners and low fees....

iShares Materials Capped Materials Index Fund, $21.19, symbol XMA on Toronto (Shares outstanding: 14.4 million; Market cap: $305.1 million; ca.ishares.com), holds 66 stocks in resource-related fields, such as mining, fertilizer production and forestry. This fund aims to mirror the performance of the S&P/TSX Capped Materials Index, which is made up of the largest resource stocks in Canada. The weight of any one company is capped at 25% of the index’s market capitalization. The fund’s MER is 0.55%. The fund’s top holdings are Potash Corporation of Saskatchewan at 13.5%; Barrick Gold, 13.3%; Goldcorp, 11.2%; Teck Resources, 6.9%; Kinross Gold, 5.1%, Agrium, 3.8%; Silver Wheaton, 3.5%; First Quantum Minerals, 3.3%; Agnico-Eagle Mines, 3.2%; and Yamana Gold, 2.6%....

ISHARES DEX UNIVERSE BOND INDEX FUND $29.98 (CWA Rating: Income) (Toronto symbol XBB; buy or sell through a broker) mirrors the performance of the DEX Universe Bond Index. The 473 bonds in the portfolio have an average term to maturity of 9.02 years. The fund’s MER is 0.32%. The bonds in the index are 68.8% government and 31.2% corporate. The fund yields 3.8%, compared to the Short Term Bond Fund’s 3.2%. Its yield to maturity is 3.02%, 1.00% above the Short Term Fund. That reflects the added risk of holding long-term bonds....

ISHARES DEX SHORT TERM BOND INDEX FUND $28.98 (CWA Rating: Income) (Toronto symbol XSB; buy or sell through a broker) mirrors the performance of the DEX Short-Term Bond Index. This index consists of a wide range of investment-grade federal, provincial, municipal and corporate bonds with between one- and five-year terms to maturity. The fund holds 252 bonds with an average term to maturity of 2.73 years. The bonds in the index are 67.4% government and 32.6% corporate. The fund’s MER is 0.26%. iShares DEX Short Term Bond Index Fund yields 3.2%. However, this high yield is due to the fact that some of the fund’s bonds pay above-market interest rates. But as a result, they trade above their face value. When these bonds mature, holders will only get the bonds’ face value, which means the portfolio will incur predictable capital losses. These losses will offset some of the appeal of the above-market yields....

The Bank of Canada is holding interest rates steady, even though the current 3.3% inflation rate is well above the bank’s target of 2%. The bank doesn’t want to derail Canada’s economic recovery with higher rates, or push the dollar any higher. Even so, the long-term outlook is for higher interest rates. That’s especially so in light of the potential for even higher inflation following the heavy deficit spending and expansion of the money supply that is still underway. We continue to advise against investing in bonds right now, because today’s low interest rates make them unattractive — and rising rates would push down their value....

The long-term outlook for China and India, and for Chinese and Indian stocks, is bright. And one of the best ways for you to tap into that growth is through low-fee exchange-traded funds (ETFs). ISHARES S&P INDIA NIFTY 50 INDEX FUND $28.21 (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), 9.7%; Infosys Technologies (software), 8.1%; ICICI Bank, 7.6%; ITC Ltd. (conglomerate), 6.2%; Housing Development Finance, 5.4%; Larsen & Toubro Ltd. (conglomerate), 5.3%; HDFC Bank, 5.2%; State Bank of India, 3.6%; Tata Consultancy Services (information technology), 3.5%; and Bharti Airtel (wireless), 2.7%....

ISHARES AUSTRALIA INDEX FUND $26.10 (New York symbol EWA; buy or sell through brokers), is an ETF that holds the 74 largest Australian stocks. Its MER is 0.53%. The fund’s top holdings include BHP Billiton, 15.3%; Commonwealth Bank of Australia, 8.6%; Westpac Banking Corp., 7.7%; Australia and New Zealand Banking Group, 6.4%; National Australia Bank, 6%; Rio Tinto, 3.7%; Wesfarmers, 3.5%; Woolworths, 3.3%; Newcrest Mining, 3.3%; and Woodside Petroleum, 3.0%. 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....