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ETFs

What are ETFs?

ETF is an acronym for exchange traded fund. These exchange traded funds are used to track indexes as closely as possible, since investors cannot actually buy an index outright.

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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ETFs Library Archives

ETFs

Invest in the recovery of the Thai economy

The Thai economy is emerging from the slump caused by the political turmoil of 2013-15. During that period, a military coup ousted the country’s prime minister and installed a military-led government.

As a result, economic growth fell sharply as exports and tourism plummeted....

2 min read

Pat McKeough

ETFs

These funds aim for an ethical profit

The ETF world is diverse, with a fund for every kind of investment strategy. That includes ETFs for those Canadians who want to invest in companies committed to protecting the environment and helping social causes. Here are two such funds:

ISHARES MSCI KLD 400 SOCIAL ETF $97 (NYSE symbol DSI; TSINetwork ETF Rating: Aggressive; Market cap: $932.5 million) avoids companies that derive a significant portion of their business from alcohol, tobacco, gambling, civilian firearms, nuclear power, military weapons, adult entertainment, and genetically modified organisms.

The fund invests in large U.S....

2 min read

Pat McKeough

ETFs

Management fees eat your returns

Investors are increasingly concerned about the high fees charged by many mutual fund managers, and rightly so: studies suggest that the average U.S. large-cap mutual fund underperformed the S&P 500 index by about 1.6% per year over the past 20 years. The Canadian market likely mirrors that.

A 1.6% underperformance per year may not sound like much, but fees wear away at investment outcomes....

1 min read

Pat McKeough

ETFs

These minerals will power tomorrow’s cars

Automakers increasingly rely on lithium and rare-earth elements to make batteries for their electric vehicles (EVs). In 2017, share prices for producers of those minerals jumped on speculation EV sales will eventually lead to shortages (see Supplement, page 10)....

2 min read

Pat McKeough

ETFs

Know your ETFs ...

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....

1 min read

Pat McKeough

ETFs

Pass on this ETF

HORIZONS ACTIVE A.I. GLOBAL EQUITY ETF $25 (Toronto symbol MIND; TSINetwork ETF Rating: Aggressive; Market cap: $5.0 million) invests in major global equity indexes primarily available through North American-listed ETFs.

However, the fund’s portfolio manager is, in fact, a computer....

1 min read

Pat McKeough

ETFs

Two ETFs for the robotics revolution

The growing commercial use of robots and computers with sophisticated learning and problem-solving skills will change manufacturing and service sectors over the next decade (see supplement page 9). Here is a look at two exchange-traded funds that provide easy access to those companies now leading the development of robotics, artificial intelligence and automation.

ROBO GLOBAL ROBOTICS AND AUTOMATION INDEX ETF $40 (Nasdaq symbol ROBO; TSINetwork ETF Rating: Aggressive; Market cap: $1.9 billion) invests in companies that use extensive robotic and automation technologies in their manufacturing processes or are directly involved in making and distributing those robotics as well as artificial intelligence and automation systems....

3 min read

Pat McKeough

ETFs

Outlook brightens for India

ISHARES INDIA 50 ETF $36.07 (Nasdaq symbol INDY; buy or sell through brokers; us.ishares.com) is an ETF that tracks the Nifty 50 index—the 50 largest, most liquid Indian securities. It began trading in November 2009.

The fund’s top holdings are HDFC Bank, 9.4%; Reliance Industries (conglomerate), 7.8%; Housing Development Finance, 6.7%; ITC (conglomerate), 5.5%; ICICI Bank, 5.0%; Infosys (information technology), 5.0%; Larsen & Toubro (conglomerate), 3.7%; and Tata Consultancy (information technology), 3.3%....

1 min read

Pat McKeough

ETFs

Tap the best of Vietnam

VANECK VECTORS VIETNAM ETF $16.98 (New York symbol VNM; buy or sell through brokers) holds Vietnamese companies and foreign firms that get a significant share of their revenue from the Southeast Asian nation.

The ETF’s top holdings are FLC Faros Construction, 11.2%; Vingroup (conglomerate), 8.7%; Vietnam Dairy Products, 7.4%; Masan Group (a food, resources and banking conglomerate), 6.9%; and No Va Land Investment Group (real estate), 6.1%.

Investing in Vietnam still comes with aboveaverage political risk....

1 min read

Pat McKeough

ETFs

Six top international ETFs: 4 buys, 2 holds

We think conservative investors can hold up to 10% of their portfolios in foreign stocks. One way to do that is by choosing exchange-traded funds (ETFs) with an overseas focus.

The best ETFs continue to offer very low management fees and well-diversified, tax-efficient portfolios of high quality stocks....

6 min read

Pat McKeough

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Investors Association of Canada
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Financial Post Columnist
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Subscriber since 1996. Inner Circle Member Since 2006
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Inner Circle Pro subscriber

Browse Premium Topics

Cannabis

Spinoffs

One of the ways a company can try to unlock its own hidden value is by creating a separate company out of a corporate subsidiary. The parent company can either sell stock in the new company to the public, or spin it off—hand the stock out to its own investors.

Dividend Stocks

Dividend stocks make cash payouts that serve as a way for companies to share the wealth they’ve accumulated. These payouts are drawn from earnings and cash flow and paid to the shareholders of the company. Typically, these dividends are paid quarterly, although they may be paid annually or even monthly as well.

ETFs

What are ETFs?

ETF is an acronym for exchange traded fund. These exchange traded funds are used to track indexes as closely as possible, since investors cannot actually buy an index outright.

Value Stocks

What are value stocks?

One of the sweetest and most profitable pleasures of successful investing is to buy high-quality “value stocks” (or stocks that are reasonably priced, if not cheap, in relation to its sales, earnings or assets), then hold on to them as mainstream investors recognize the value and push up the share price.

Blue Chip Stocks

Blue chip stocks are big, well-established, dividend-paying corporations with strong business prospects. These are companies that also have sound management that should be able to make the right moves to keep competing successfully in a changing marketplace.

Penny Stocks

A penny stock in general trades for under five dollars a share, and as the name implies, sometimes for pennies. Most of the time they’re young companies, or start-ups in speculative markets like mining or technology.

Growth Stocks

Growth stocks are companies that are likely to have sales and earnings growth well above market average. Frequently they pay few, if any, dividends. Instead they typically reinvest any extra cash flow to promote further growth. Chosen wisely—according to Pat McKeough’s advice—high-quality growth-oriented stocks can be worthwhile additions to most well-diversified portfolios.

Wealth Management

Wealth management is the practice of putting your savings to work so that it continues to grow over your lifetime and will also benefit your heirs. Wealth management encompasses many different areas of investing like long term investment planning and retirement planning.

Mining Stocks

Mining stocks are investments in companies that produce or explore for minerals. Some of these minerals include uranium, coal, molybdenum (which is used in steelmaking), copper, silver and gold. They are affected by fluctuating commodity prices in addition to their own business and operating risks.

How To Invest

Pat McKeough has been making investing for beginners simple—and profitable—by helping investors make big gains for more than 25 years. His advice to beginning investors is the same as it is for all investors: buy high-quality, mostly dividend paying stocks (or ETFs that hold these stocks) and evenly spread your investments over the five main economic sectors (Resources, Manufacturing, Finance, Utilities and Consumer). Pat also believes investors should avoid stocks in the broker/media limelight and focus on those with hidden or little-noticed assets.

Energy Stocks

What are energy stocks?

Businesses that work in the extraction, refining and delivery of energy sources such as natural gas, oil, uranium and coal, are considered energy stocks.