ETFs
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
Market data and academic studies have consistently shown that high-quality companies tend to outperform the overall market over extended periods. The risk involved in these investments is also lower than the broad market.
Investors have different descriptions of high-quality companies. For some, it is the quality of management, products, and customer service; for others, it is high levels of profitability or financial strength. Still, there are overlaps in these definitions, including characteristics such as consistent profitability, high returns on capital, strong cash flows, and pristine balance sheets.
MSCI is one of the main providers of indexes that track the performance of high-quality companies. MSCI identifies three characteristics of these companie
Defining quality has common threads
Investors have different descriptions of high-quality companies. For some, it is the quality of management, products, and customer service; for others, it is high levels of profitability or financial strength. Still, there are overlaps in these definitions, including characteristics such as consistent profitability, high returns on capital, strong cash flows, and pristine balance sheets.
MSCI is one of the main providers of indexes that track the performance of high-quality companies. MSCI identifies three characteristics of these companie
Medium-sized companies are often overlooked as investors tend to focus their attention on large, stable companies or high-growth smaller companies. However, market research suggests that mid-cap stocks offer an attractive combination of stability and growth, providing interesting opportunities for investors who are prepared to do their homework.
Mid-cap stocks fall between large-cap stocks and small-cap stocks, but the size of mid-cap companies varies from country to country.
The index provider, S&P, ranks all U.S. listed stocks by market capitalization and then considers the top 500 to be large-cap, the next 400 as mid-cap, and the rest as small-cap. In the U.S., mid-cap stocks generally have market capitalizations between $2 billion and $20 billion. In the smaller Canadian market, mid-cap stocks mostly have market values between $1 billion U.S. and $6 billion U.S.
What are mid-cap stocks?
Mid-cap stocks fall between large-cap stocks and small-cap stocks, but the size of mid-cap companies varies from country to country.
The index provider, S&P, ranks all U.S. listed stocks by market capitalization and then considers the top 500 to be large-cap, the next 400 as mid-cap, and the rest as small-cap. In the U.S., mid-cap stocks generally have market capitalizations between $2 billion and $20 billion. In the smaller Canadian market, mid-cap stocks mostly have market values between $1 billion U.S. and $6 billion U.S.
This month, we highlight a new ETF from BMO that invests in collateralized corporate loans. Our second ETF relies on a mix of stocks and fixed-income investments.
BMO BBB CLO ETF $30.05 (CBOE symbol ZBBZ) invests in the BBB-rated, collateralized loan obligations of issuers based outside of Canada, mainly in the U.S.
Collateralized loan obligations (CLOs) are financial products that pool together corporate loans for sale to investors in different risk and return categories called tranches.
BMO BBB CLO ETF $30.05 (CBOE symbol ZBBZ) invests in the BBB-rated, collateralized loan obligations of issuers based outside of Canada, mainly in the U.S.
Collateralized loan obligations (CLOs) are financial products that pool together corporate loans for sale to investors in different risk and return categories called tranches.
Despite the occasional political challenges, the trade relationship between China and Australia has grown considerably over the years as both countries have found it mutually beneficial.
As China’s economy developed rapidly, it needed large quantities of natural resources for its infrastructure development and manufacturing expansion. Australia was a ready supplier. The relationship got a further boost when the two countries signed a free trade agreement that came into effect in December 2015.
As China’s economy developed rapidly, it needed large quantities of natural resources for its infrastructure development and manufacturing expansion. Australia was a ready supplier. The relationship got a further boost when the two countries signed a free trade agreement that came into effect in December 2015.
The Australian economy has rebounded strongly in the wake of the pandemic. In fact, it’s now hitting all-time highs. In the near term, though, it faces challenges from still-high inflation, which is hurting consumer spending; as well, it must contend with uncertain global growth amid still-elevated interest rates. Still, global demand for commodities will boost exports. That should help to offset risks such as the ongoing tension between the U.S. and China, as well as a shortage of skilled workers and the service industry’s generally high labour costs.
ISHARES MSCI AUSTRALIA ETF $27.23 (New York symbol EWA; TSINetwork ETF Rating: Conservative; Market cap: $1.5 billion) tracks the performance of a basket of Australian listed companies.
Financial Services account for 41% of its assets, while Basic Materials (20%), Healthcare (8%), and Consumer Cyclicals (8%) are other key segments.
ISHARES MSCI AUSTRALIA ETF $27.23 (New York symbol EWA; TSINetwork ETF Rating: Conservative; Market cap: $1.5 billion) tracks the performance of a basket of Australian listed companies.
Financial Services account for 41% of its assets, while Basic Materials (20%), Healthcare (8%), and Consumer Cyclicals (8%) are other key segments.
FIDELITY CANADIAN HIGH QUALITY ETF $45.93 (Toronto symbol FCCQ; TSINetwork ETF Rating: Conservative; Market cap: $483.9 million) tracks the Fidelity Canada High Quality Index. That index includes stocks that rank highly based on criteria such as stability of profits and cash flow, and return on invested capital.
Holdings are classified as Financials (26%), followed by Energy (20%), Basic Materials (20%), Information Technology (14%), Consumer Staples (7%), and Industrials (5%).
The ETF holds 58 companies, with 40% of the assets allocated to the top 10 stocks. Those top holdings include Shopify (6.7%), Royal Bank (5.7%), Enbridge (4.4%), Agnico Eagle (4.0%), TD (3.8%), Barrick Mining (3.3%), Canadian Natural Resources (3.1%), Wheaton Precious Metals (2.9%), Alimentation Couche-Tard (2.9%), and Dollarama (2.8%).
Holdings are classified as Financials (26%), followed by Energy (20%), Basic Materials (20%), Information Technology (14%), Consumer Staples (7%), and Industrials (5%).
The ETF holds 58 companies, with 40% of the assets allocated to the top 10 stocks. Those top holdings include Shopify (6.7%), Royal Bank (5.7%), Enbridge (4.4%), Agnico Eagle (4.0%), TD (3.8%), Barrick Mining (3.3%), Canadian Natural Resources (3.1%), Wheaton Precious Metals (2.9%), Alimentation Couche-Tard (2.9%), and Dollarama (2.8%).
Vanguard FTSE Developed Asia Pacific All Cap Index ETF $47.29 (Toronto symbol VA; TSINetwork ETF Rating: Aggressive; Market cap: $132.5 million) tracks the FTSE Developed Asia Pacific Index. Stocks are weighted based on their market caps.
The fund’s geographical distributions favour Japan (60% of assets), above Australia (18%), South Korea (12%), Hong Kong (5%), and Singapore (4%).
Financial Services make up 21% of the portfolio, followed by Industrials (20%), Consumer Discretionary (17%), Technology (9%), Basic Materials (7%), and Healthcare (6%).
The fund’s geographical distributions favour Japan (60% of assets), above Australia (18%), South Korea (12%), Hong Kong (5%), and Singapore (4%).
Financial Services make up 21% of the portfolio, followed by Industrials (20%), Consumer Discretionary (17%), Technology (9%), Basic Materials (7%), and Healthcare (6%).
GLOBAL X Gold Producer EQUITY COVERED CALL ETF $52.00 (Toronto symbol GLCC) invests in an equal-weighted portfolio of North American-listed gold mining companies. The portfolio currently holds 10 stocks with all the top producers such as Barrick Mining and Newmont Corp. represented.
The ETF yields a high 6.8%. However, the dividend income that the fund receives from its own portfolio is insufficient to cover its distribution to its unitholders. To make up the difference, it has to make a profit on trading its portfolio. The ETF also aims to raise its returns by writing call options on the portfolio’s securities.
The ETF yields a high 6.8%. However, the dividend income that the fund receives from its own portfolio is insufficient to cover its distribution to its unitholders. To make up the difference, it has to make a profit on trading its portfolio. The ETF also aims to raise its returns by writing call options on the portfolio’s securities.
MANULIFE MULTIFACTOR CANADIAN SMID CAP ETF $58.06 (Toronto symbol MCSM; TSINetwork ETF Rating: Aggressive; Market cap: $390.8 million) tracks the John Hancock Dimensional Canadian SMID Cap Equity Index. That index is made up of companies that fall outside the 74 largest publicly listed companies in Canada. Stocks are weighted according to their market capitalizations, although the manager also favours stocks with lower valuations and higher levels of profitability.
The fund’s main segment allocations are Basic Materials (35%), Energy (18%), Consumer Discretionary (9%), Utilities (9%), Financial Services (8%), Industrials (8%), and Real Estate (6%). The large weights in materials and energy increase the risk profile of the fund.
The fund’s main segment allocations are Basic Materials (35%), Energy (18%), Consumer Discretionary (9%), Utilities (9%), Financial Services (8%), Industrials (8%), and Real Estate (6%). The large weights in materials and energy increase the risk profile of the fund.
VANECK VECTORS VIETNAM ETF, $18.04, is a buy for aggressive investors. This emerging-markets ETF (New York symbol VNM) taps the country’s leading firms as well as foreign firms that get a significant share of their revenue from this Southeast Asian nation. The fund started up in August 2009. Its MER is 0.68%.
Your top holdings include Vingroup (conglomerate), 9.0%; Vinhomes (real estate), 7.6%; Masan Group (food), 7.1%; Hoa Phat Group (iron and steel), 6.5%; Vix Securities, 5.6%; and SSI Securities, 5.5%. Other holdings include Vietnam Dairy at 5.1%.
Your top holdings include Vingroup (conglomerate), 9.0%; Vinhomes (real estate), 7.6%; Masan Group (food), 7.1%; Hoa Phat Group (iron and steel), 6.5%; Vix Securities, 5.6%; and SSI Securities, 5.5%. Other holdings include Vietnam Dairy at 5.1%.