royal bank

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 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%....

BANK OF MONTREAL, $59.24, Toronto symbol BMO, recently completed its purchase of U.S. banking firm Marshall & Ilsley Corp. for $4.0 billion in stock. In addition, Bank of Montreal paid an additional $1.7 billion U.S. for all of the preferred shares and warrants that Marshall & Ilsley sold to the U.S. Treasury under the Troubled Asset Relief Program. Adding Marshall & Ilsley more than doubled the number of branches that Bank of Montreal operates in the U.S., and added 2 million customers. The bank will also save over $300 million U.S. a year by combining these new operations with its existing U.S. banking business....

PowerShares Canadian Dividend Index ETF, $18.44, symbol PDC on Toronto (Shares outstanding: 250,000; Market cap: $4.6 million; www.investco.ca), aims to replicate the performance of the Indxis Select Canadian Dividend Index. PowerShares Canadian Dividend Index ETF was launched on June 16, 2011. The units began trading at $20. However, the fund duplicates the PowerShares Canadian Dividend Index mutual fund, which started up in November 2009. The fund holds 35 stocks, eight real estate investment trusts (REITs) and two income trusts. It has an expense ratio of 0.50%, and yields 3.6%. Its top 10 holdings are Royal Bank, 10.0%; TD Bank, 10.0%, Bank of Nova Scotia, 9.7%; Bank of Montreal, 7.4%; CIBC, 5.6%; TransCanada Corp., 5.4%; Thomson Reuters, 5.2%; Enbridge, 4.6%; Great-West Lifeco, 4.4%; and Power Financial, 3.9%....

ROYAL BANK OF CANADA $53 (Toronto symbol RY; Conservative Growth Portfolio, Finance sector; Shares outstanding: 1.4 billion; Market cap: $74.2 billion; Price-to-sales ratio: 2.1; Dividend yield: 4.0%; TSINetwork Rating: Above Average; www.rbc.com) plans to enter the fast-growing market for exchange-traded funds (ETFs) in Canada. The bank will offer eight new ETFs that will mirror the performance of various corporate bond indexes. Unlike regular mutual funds, ETFs trade on stock exchanges. They also have lower management fees. This move will help Royal compete with large, U.S.-based investment firms, such as Vanguard Group Inc., which will soon start selling its ETFs to Canadian investors. Royal Bank is a buy.

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....

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....

Every Wednesday, we publish our “Investor Toolkit” series on TSI Network. Whether you’re a beginning or experienced investor, these weekly updates are designed to give you specific advice on how to spot the top stock picks. Each Investor Toolkit update gives you a fundamental piece of investing strategy, and shows you how you can put it into practice right away. Today’s tip: “How you can profit from our TSI Network ratings: Part 2” In last week’s Investor Toolkit, we analyzed 4 of the 9 factors we use to assign one of our TSI Network ratings (Highest Quality, Above Average, Average, Extra Risk, Speculative and Start-up) to every stock we recommend in our newsletters, including our flagship publication, The Successful Investor. Click here to read that article....