ETFs can offer big cost savings over mutual funds

Article Excerpt

ETFs have two major advantages over traditional mutual funds. First, they are easy to trade on stock exchanges, which gives them better liquidity. Second, and perhaps more important, ETFs provide a low-cost investment option. In many cases, they also have superior performance results compared to mutual funds, even before fees have been taken into account. Compare the following: Various ETFs track the Canadian equity market. Many of them try to deliver a performance close to the market indices; for this, they charge very small fees. The iShares S&P/TSX 60 Index ETF, for instance, tracks large Canadian stocks for an annual fee of 0.18%, and Vanguard’s Canadian All Cap Index ETF charges just 0.05%. The BMO S&P/TSX Capped Composite ETF includes over 200 Canadian stocks representing 95% of the market; its expense ratio is also 0.05%. Similarly, almost all the major mutual fund providers offer Canadian large-cap or overall market index-tracking funds that do the same job as the ETFs highlighted above. The only real difference is that mutual fund fees are generally…

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