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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This month we highlight an ETF that provides short exposure to the highly popular “disruptive growth” ARK Innovation ETF. We also look at a fund that aims to use a quantitative model to pick the top dividend-paying stocks.
TUTTLE CAPITAL SHORT INNOVATION ETF $43.66 (Nasdaq symbol SARK) provides an inverse (short) exposure to the stocks held by the popular ARK Innovation ETF (New York symbol ARKK).
This fund uses derivatives to let investors profit from a decline in the potentially overvalued and unprofitable “transformational” companies held by the ARK Innovation ETF in the electric vehicle, genomics, next-gen Internet and fintech segments.
This ETF effectively holds short positions in companies such as Tesla, Roku, Teladoc, Zoom, Coinbase and Spotify.
The fund launched on November 9, 2021; it charges a management fee of 0.75%....
In 2021, seven Indian companies made the list, of which six are also held in the iShares India Index ETF. Top conglomerate Reliance Industries as well as several major Indian banks, were included on the list.
But India is also home to a number of highly ranked global information technology services companies—Infosys, Wipro, HCL Technologies, and Tata Consultancy—to name but a few of the largest firms included in the ETF portfolio.
These companies have been highly successful in reaching a global market.
Infosys, for example, now derives 60% of its revenue from North America, and Tata Consultancy, 50%.
The offshore outsourcing model (whereby well-qualified, but less expensive Indian workers deliver services to higher-priced developed markets) provides an attractive business model....
Still, the country is home to a number of top global companies with bright futures....
The long-term growth in the industry continues to accelerate. Ten years ago there were only 236 ETFs listed in Canada, with a total asset base of $44 billion....
The fund started up in January 2011....
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The MER (Management Expense Ratio) is generally much lower on ETFs than on conventional mutual funds....