Exchange traded funds trade on stock exchanges, just like stocks. Investors can buy them on margin, or sell them short. The best exchange-traded funds offer well-diversified, tax-efficient portfolios with exceptionally low management ETF fees. They are also very liquid.
Investors use ETFs in a variety of ways, and some investors work only with ETFs and no other type of investment in portfolio creation.
An amazing aspect of ETFs is their diversity. Some investors may create an entire portfolio solely from a few well-diversified ETFs.
ETFs trade on stock exchanges, just like stocks. That’s different from mutual funds, which you can only buy at the end of the day at a price that reflects the fund’s value at the close of trading.
Prices of ETFs are quoted in newspaper stock tables and online. You pay brokerage commissions to buy and sell them, but their low management fees give them a cost advantage over most 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 taxes generated by the yearly distributions most conventional mutual funds pay out to unitholders.
ETFs have a place in every investor’s portfolio, at TSI Network we also recommend 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.
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There is, however, room for both renewable and fossil fuel providers to operate profitably.
Here are two ETFs that aim to benefit from growing investor interest in renewable energy (see the supplement on page 80 for more information).
INVESCO GLOBAL CLEAN ENERGY ETF $12 (New York symbol PBD; TSINetwork ETF Rating: Aggressive; Market cap: $54.1 million) tracks the WilderHill New Energy Global Innovation Index....
Of course, you pay brokerage commissions to buy and sell these investments....
Higher commodity prices invariably spur producers to increase spending on new projects and to up their output. That frequently leads to the oversupply of the commodity and, eventually, lower prices.
The energy industry is no exception. Between 2002 and mid-2014, when oil prices were high, producers accelerated exploration and output....
Medical device companies operate in an expanding market now worth about $500 billion a year. An aging population, increasing health-care spending and technological advances have fuelled 5% growth per year. The industry is expected to maintain that pace for the foreseeable future.
However, developing a new medical device, gaining approval from various regulators and marketing the product can take years and is a costly exercise for manufacturers....
There are several ways to gauge the performance of an ETF, among them is a look at the fund’s total return. This method calculates capital appreciation (or decline) and adds any other income such as dividends.
First, capital appreciation is measured using the price gain or loss of the ETF over the holding period....
Here are some of the best- and worst-performing North American ETFs of the past year. But regardless of their return, we don’t recommend any of these funds.
The Leaders:
iPath Global Carbon ETN $21 (OTC symbol GRNTF; Market cap: $10.6 million) provides exposure to the global carbon-credits market....
Copper is a flexible and spongy metallic element that is an excellent conductor of heat and electricity as well as being corrosion resistant and antimicrobial. This makes it useful for a whole range of applications in the transport, electronics, electrical, medical, and construction industries....
Here is one ETF that provides exposure to top Chilean companies.
ISHARES MSCI CHILE ETF $50 (New York symbol ECH; TSINetwork ETF Rating: Aggressive; Market cap: $477.5 million) tracks the performance of the largest publicly listed Chilean companies.
Financial Services account for 23% of its assets, while Utilities (22%), Consumer Services (19%), Basic materials (13%), Oil and Gas (9%) and Consumer Goods (7%) are other key segments.
The ETF holds a portfolio of 31 stocks....
Oil supply from Iran and Venezuela is under threat. A sharp decline for either member of the Organization of the Petroleum Exporting Countries (OPEC) would remove supply from a tightly balanced oil market.
The decision by the U.S. to withdraw from the Joint Comprehensive Plan of Action, which regulates Iran’s nuclear activities, has created uncertainty about the country’s oil exports....