ishares

ISHARES DIVIDEND INDEX FUND $20.44 (Toronto symbol XDV; buy or sell through a broker) began trading in December, 2005. The fund currently holds the 30 highest yielding Canadian stocks. These stocks are included in the index based on their dividend growth, yield and average payout ratio. The weight of any one stock in the fund is limited to 10% of the fund’s assets. Its MER is 0.50%. The fund now yields 3.8%. The fund’s top holdings are: CIBC at 7.3%; Manitoba Telecom at 5.6%; National Bank, 5.6%; Bank of Montreal, 5.5%; Russel Metals, 5.3%; TD Bank, 4.7%; Royal Bank, 4.5%; Transcontinental Inc., 4.3%; Bank of Nova Scotia, 4.0%; IGM Financial, 3.8%; and Telus Corp., 3.8%....

ISHARES CDN REIT SECTOR INDEX FUND $13.36 (Toronto symbol XRE; buy or sell through a broker) holds the 12 Canadian real estate investment trusts (REITs) in the S&P/TSX Capped REIT Index. The weight of any one REIT in the value of the S&P/TSX Capped REIT Index is limited to 25%. RioCan REIT makes up 25% of the index’s value; H&R REIT, 14.9%; Canadian REIT, 10.1%; Boardwalk REIT, 9.0%; Calloway REIT, 8.1%; Canadian Apartment Properties REIT, 6.3%; Primaris Retail REIT, 5.9%; Cominar REIT, 4.6%; Chartwell Seniors Housing REIT, 4.2%; Innvest REIT, 4.0%; Extendicare REIT, 2.7%; and Dundee REIT, 2.6%. We’re glad to see that the top holding is RioCan, one of our favorite REITs. In fact, the top three holdings are among our recommendations. Note that iShares CDN REIT holds a couple of REITs we don’t recommend....

ISHARES CANADIAN BOND INDEX FUND $28.67 (CWA Rating: Income) (Toronto symbol XBB; buy or sell through a broker) mirrors the performance of the DEX Universe Bond Index. This index consists of a diversified range of investment grade Canadian government and corporate bonds, with a term to maturity of more than one year. At last report, the bonds in the index were 41.5% Government of Canada bonds, 26.7% Provincial government bonds, 2.1% municipal bonds and 28.8% corporate bonds....

ISHARES CANADIAN SHORT BOND INDEX FUND $28.31 (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 diversified range of investment grade federal, provincial, municipal and corporate bonds, with terms to maturity of between one and five years. Top issuers include the Government of Canada, Canada Housing Trust, RBC Capital Trust, the Province of Ontario and the Province of Quebec....

We generally advise against investing in bond funds because we doubt that bond fund managers can add enough value to offset their fees. However, if you need steady income and want to hold bond funds, here are two funds that have low fees and top-quality holdings, and that stay out of speculative trading. ISHARES CANADIAN SHORT BOND INDEX FUND $28.31 (CWA Rating: Income) (Toronto symbol XSB; buy or sell through a broker) mirrors the performance of the DEX Short Term Bond Index....

ISHARES MSCI JAPAN INDEX FUND $12.25 (American Exchange symbol EWJ; buy or sell through a broker) is an exchange-traded mutual fund that tries to match the return of the MSCI Japan Index (Morgan Stanley Capital International Japan Index). The MSCI Japan Index is a benchmark for Japanese equity performance. The iShares Japan Index Fund charges a fee of 0.59% of assets. The fund’s top holdings are: Toyota Motor at 5.0%; Mitsubishi UFJ Financial Group, 3.2%; Canon Inc., 2.1%; Nintendo Co., 2.0%; Sumitomo Mitsui Financial, 2.0%; Honda Motor, 1.9%; Mizuho Financial Group, 1.8%; Sony Corporation, 1.8%; Takeda Pharmaceutical, 1.7%; Matsushita Electric Industrial, 1.7%; and Mitsubishi Corp., 1.7%. Japanese stock markets remain volatile along with global markets. However, overall, we think that Japan’s economy will keep growing and push stock prices up....

ISHARES MCSI CANADA INDEX FUND $33 (American Exchange symbol EWC; buy or sell through brokers) is almost a market-cap based index fund, but it tinkers with the index fund formula to try and improve performance by using its proprietary Morgan Stanley Capital International Canada Index. The U.S.-based fund also has to work around foreign ownership restrictions. iShares MCSI Canada Index Fund is managed by Barclays Global Investors and has an MER of 0.54%. We think if you want to own a Canadian index fund then you should buy the iShares CDN LargeCap 60 units. You’ll pay about a third of the management fees....

ISHARES CDN LARGECAP 60 INDEX FUND $83.94 (Toronto symbol XIU; buy or sell through a broker) (formerly called iUnits S&P/TSX 60 Index Participation Fund) is a good low-fee way to buy the top stocks on the TSX. The units hold a basket of stocks that represent the S&P/TSX 60 Index. The index is made up of the 60 largest and most heavily traded stocks on the TSX. Expenses on the units are just 0.17% of assets. Most of the 60 stocks in the index are good quality companies. However, to meet the requirement that all sectors are represented, the index holds a few firms we wouldn’t include, such as Biovail Corp. The index’s top holdings are: Potash Corporation, 6.2%; EnCana Corporation, 5.9%; Royal Bank, 5.2%; Research in Motion, 5.0%; Suncor Energy, 4.6%; Canadian Natural Resources, 4.6%; Manulife Financial, 4.5%; TD Bank, 4.4%; Bank of Nova Scotia, 3.9%; Barrick Gold, 3.4%; Goldcorp, 2.8%; BCE Inc., 2.4%; Petro-Canada, 2.3%; Canadian Oil Sands Trust, 2.2%; and Sun Life Financial, 2.0%. The shares trade on the TSX, just like stocks. Prices are quoted daily in newspaper stock tables. You’ll have to pay brokerage commissions to buy and sell the units, although you’ll quickly make that back by paying lower management fees....

We still think high-quality mutual funds with a long-term focus will beat indexes over long periods. If funds invest as we advise — sticking with well-established companies and spreading their assets out across the five main economic sectors — they will tend to lose a lot less than the market indexes in periods when the indexes fall sharply. That’s because big market slides are particularly hard on the hottest, most popular stocks of the preceding market rise, and investing as we do leads you to avoid excessive investment in the hot stocks. Index funds, in contrast, do tend to load up on the hottest, most popular stocks as they rise. That’s because, as they rise, these stocks make up a rising proportion of the index. The most recent example is Potash Corporation of Saskatchewan., which now has the highest market cap on the Toronto exchange on the strength of soaring fertilizer and agriculture prices....

ISHARES CDN REIT SECTOR INDEX FUND $13.65 (Toronto symbol XRE; buy or sell through a broker) holds the 12 Canadian real estate investment trusts (REITs) in the S&P/TSX Capped REIT Index. The weight of any one REIT in the value of the S&P/TSX Capped REIT Index is limited to 25%. RioCan REIT makes up 25% of the index’s value; H&R REIT, 15.1%; Canadian REIT, 9.4%; Boardwalk REIT, 8.9%; Calloway REIT, 8.1%; Canadian Apartment Properties REIT, 6.0%; Primaris Retail REIT, 6.0%; Chartwell Seniors Housing REIT, 5.0%; Innvest REIT, 4.2%; Cominar REIT, 4.3%; Extendicare REIT, 4.1%; and Dundee REIT, 2.7%. We’re glad to see that the top holding is RioCan, one of our favorite REITs. In fact, three of the top six holdings are among our recommendations. Note that iShares CDN REIT holds a couple of REITs we don’t recommend....