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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Here are two ETFs that aim to benefit from the continuing rise in consumer spending (for more information, see the supplement on page 49).
SPDR S&P RETAIL ETF $45 (New York symbol XRT; TSINetwork ETF Rating: Aggressive; Market cap: $427.8 million) invests in firms that are involved in the U.S....
Canadian firms make up 30.6% of the fund’s holdings....
The recent mania for bitcoin and other cryptocurrencies—which we think will end badly for most investors—is grounded in several factors....
The fund’s top holdings are HDFC Bank, 9.8%; Reliance Industries (conglomerate), 7.6%; Housing Development Finance, 7.6%; ITC (conglomerate), 5.5%; Infosys (information technology), 5.4%; ICICI Bank, 4.2%; Larsen & Toubro (conglomerate), 4.1%; and Tata Consultancy (information technology), 3.6%....
The best of those funds continue to offer very low management fees and well-diversified, tax-efficient portfolios of high-quality stocks.
Here’s a look at four international ETFs we see as buys, and two we feel you should continue to hold.
ISHARES MSCI EMERGING MARKETS INDEX FUND $47.90 (New York symbol EEM; buy or sell through brokers) aims to track the MSCI Emerging Markets Index.
The fund’s geographic breakdown follows: China, 29.8%; South Korea, 15.0%; Taiwan, 11.6%; India, 8.1%; Brazil, 7.4%; South Africa, 6.7%; Russia, 3.6%; Mexico, 2.9%; Malaysia, 2.5%; Thailand, 2.4%; Indonesia, 2.1%; and Poland, 1.2%.
Its top stocks are Tencent Holdings (China: Internet), 5.4%; Samsung Electronics (South Korea ), 4.6%; Alibaba Group (China: e-commerce), 3.8 %; Taiwan Semiconductor (computer chips), 3.7%; Naspers (South Africa: media and Internet ), 1.9%; China Construction Bank, 1.6%; Industrial & Commercial Bank of China, 1.2%; China Mobile, 1.20%; Baidu (China: Internet ), 1.1%; and Ping An Insurance Group (China), 1.0%.
iShares launched the ETF on April 7, 2003....
Investors that are prepared to broaden their horizons can expect to encounter great opportunities to enhance their portfolio returns and lower their risks....
After a decade of extraordinarily low interest rates, the U.S....
The quantitative approach focuses on the returns achieved by fund managers over varying time periods; in most cases, this approach adjusts those returns for the risks a fund manager takes on....
However, we continue to recommend investors limit their ETF selection to funds that track established indexes and steer clear of niche approaches such as relying on active management, sector rotation or other trading strategies....
Perpetual: Investors receive a fixed dividend in perpetuity or until redeemed by the issuer. That’s typically 5 years after they are issued.
Rate-Reset: Pay investors a fixed dividend for the first 5 years after being issued....