Passive fund management for ETFs involves investing to mirror the holdings and performance of a specific stock-market index.
ETFs are highly efficient mutual funds with low fees because investors don’t pay for active management. Traditional ETFs passively follow the lead of whoever sponsors the index.
Sponsors of passive stock indexes do from time to time change the stocks that make up the index, and they do tinker with the rules for calculating the index. However, these changes are kept to a minimum. ETFs then adjust their portfolio holdings to reflect these changes, without considering any impact the changes may have on the performance of the ETF portfolio.
This traditional, passive style also keeps turnover very low, and that in turn keeps trading costs for your ETF investments down. We think you should stick with “traditional” ETFs.
Passive fund management stands in contrast to the “active” management that conventional mutual funds provide at much higher cost. Active management is when a fund manager picks stocks on an ongoing basis, rather than aiming to match benchmark indexes. To do this, they use research, forecasts, experience and judgments to make investing decisions aimed at outperforming the investment benchmarks.
Passive fund management is also known as indexing.
There is more work associated with active management than there is with passive management.
Learn more about topics like passive fund management by following TSI Network. Enhance your investment returns by using our three-part Successful Investor strategy:
Invest mainly in well-established companies;
Spread your money out across most if not all of the five main economic sectors (Manufacturing & Industry; Resources & Commodities; the Consumer sector; Finance; Utilities);
Downplay or avoid stocks in the broker/media limelight.
Take into account various options when you consider dividend vs index investing: Not all index investments are equal, and dividends are a true sign of investment quality.
Let’s start with the advantages of Canadian index funds
One big advantage of index funds when weighing dividend vs index investing… Read More
With all the TSX ETF investments available, it’s not too difficult to diversify your portfolio. Here’s how.
There are hundreds of ETF opportunities on the Toronto Stock Exchange (TSX) sponsored by investment managers like BlackRock Inc., BMO Asset Management and Horizons ETFs Management. The best TSX… Read More
To determine when to buy an ETF, some investors use technical analysis and other tools. But you need to dig deeper.
Investors often wonder: what is a good entry point when purchasing a stock or an ETF?
The first question before asking when to buy an ETF… Read More
Exchange traded funds (ETFs) are set up to mirror the performance of a stock market index or subindex. They hold a more or less fixed selection of securities that represent the holdings that go into calculating the index or sub-index.
Today, we look at two Canadian ETFs… Read More
The best Canadian funds are ETFs or mutual funds that aim to equal the performance of a Canadian market index
Canadian funds, specifically, index funds, are among the better financial innovations to come along in the past few decades.
The best Canadian funds do show better long-run performance… Read More
ETFs can be a good place to start your investing career, especially for a smaller portfolio, or for a RESP for your child. But watch out—there are both good and bad ETFs.
We still feel that investors will profit the most with a well-balanced portfolio of… Read More
The best dividend ETFs can lead to high yields and add stability to your portfolio
The best dividend ETFs will practice “passive” fund management, in contrast to the “active” management that conventional mutual funds or some new ETFs provide at much higher costs.
5 ways to know you’re picking the best ETF to buy
One way to invest in stock markets is to buy exchange traded funds (ETFs) that track major stock indexes. ETFs trade on stock exchanges, just like stocks. Prices are quoted in newspaper stock tables and… Read More
ETF management fees are better for investors that most fees on actively managed investments
ETF management fees are generally much lower that the fees on conventional mutual funds. That’s because most ETFs take a much simpler approach to investing. Instead of actively managing clients’ investments, ETF… Read More
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