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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The MER (Management Expense Ratio) is generally much lower on ETFs than on conventional mutual funds....
WISDOMTREE EMERGING MARKETS DIVIDEND INDEX ETF $27 (Toronto symbol EMV.B; Market cap: $2.6 million) invests in dividend payers based in emerging markets....
The relatively small but fast-growing Canadian ETF market is dominated by Blackrock Canada, with 117 ETFs and $57 billion in assets under management....
The ETF’s top holdings are Royal Bank, 8.7%; TD Bank, 8.0%; Bank of Nova Scotia, 5.9%; Enbridge, 5.3%; CN Railway, 4.8%; Suncor Energy, 4.5%; Bank of Montreal, 3.8%; TransCanada Corp., 3.3%; BCE, 3.3%; Manulife Financial, 3.1%, Canadian Natural Resources, 3.0%; CIBC, 3.0%; Brookfield Asset Management, 2.8% and Canadian Pacific Railway, 1.9%.
The industry breakdown is as follows: Financials (41%), Resources (29%), Industrials (9%), Telecommuncations (6%), Consumer discretionary (5%), Consumer staples (4%), Information technology (2%), Utilities (2%) and others (2%).
Still, this ETF’s assets are highly concentrated in the financial and resources sectors.
The fund began trading in September 1999....
ISHARES MSCI INDONESIA ETF $26 (New York symbol EIDO; TSI Network ETF Rating: Aggressive; Market cap: $470.8 million) provides broad exposure to the main publicly listed companies in Indonesia....
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The fund invests in large companies listed in the U.S....