Canadian sector funds: 1 buy, 1 hold

Article Excerpt

Last month we recommended some international ETFs—but at the same time, we noted that Canadian investors often have a bias for investing in their home markets. And we agree with that bias—we still recommend that most Canadians hold the bulk of their portfolios in Canadian stocks, or ETFs that hold those stocks. Here we highlight two ETFs that invest in top Canadian stocks. One holds financial stocks and the other holds utility shares. (Please see the supplement on page 39 for more on investing in utilities.) ISHARES S&P/TSX CAPPED FINANCIALS ETF $43.23 (Toronto symbol XFN; TSINetwork ETF Rating: Aggressive; Market cap: $1.25 billion) tracks the S&P/TSX Capped Financials Index. This index includes the top Canadian financial-sector stocks. Stocks are weighted based on market capitalization, but individual holdings are capped at 25%. Most of the portfolio holdings are classified as Banks (66.9%), followed by Insurance (19.7%), and Diversified Financials (13.2%). The ETF holds 26 companies with 89% of the assets allocated to the top 10 stocks: Royal Bank…