Know your ETFs …

Article Excerpt

The U.S. is the world’s largest ETF market, with a wide range of funds—from those focused on domestic or global equities to those focused on bonds, commodities or, even, hedge fund strategies. Canadians investing in U.S.-listed ETFs must keep several factors in mind: • In the case of U.S.-listed ETFs that hold international assets, the foreign currency exposure may be hedged back to the U.S. dollar or left unhedged. • In most cases, Canadian investors carry currency risk from the movement of the Canadian dollar against the U.S. dollar. That may work for or against them. Many of the popular U.S.-listed ETFs holding international assets are also listed in Canada. That means investors must check if a fund’s currency exposure is hedged back to the Canadian dollar. That may influence investment returns. Gains on any U.S.-listed ETF you sell are taxed as capital gains; dividend distributions are taxed as income or “eligible dividends.” Canadians holding U.S.- listed ETFs may also face withholding taxes. For more on…

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