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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The dividends paid by public corporations are normally a portion of net income or cash flow. This formula is generally also followed by dividend-paying exchange-traded funds, but these funds also distribute capital gains and sometimes return investors’ capital as part of the payments.
As an example, ETFs that invest in dividend-paying companies will receive the dividend income from their portfolio companies on a regular (usually quarterly) basis. They may also have other sources of income, such as interest earned on cash holdings and fee income from stock lending. Profits and losses that are generated from trading in the underlying portfolio are also considered income.
As an example, ETFs that invest in dividend-paying companies will receive the dividend income from their portfolio companies on a regular (usually quarterly) basis. They may also have other sources of income, such as interest earned on cash holdings and fee income from stock lending. Profits and losses that are generated from trading in the underlying portfolio are also considered income.
Dividend-paying stocks compete with bonds and other fixed-income instruments for investor interest. However, investors focused on high dividends and share price gains benefit more from holding sustainable dividend payers—as long as they can avoid the risky strategies of some ETF managers looking to boost income for investors (see supplement on page 90).
Here are three ETFs that aim to provide investors with attractive yields.
Here are three ETFs that aim to provide investors with attractive yields.
BMO MSCI Emerging Markets ETF $25.05 (Toronto symbol ZEM; TSINetwork ETF Rating: Aggressive; Market Cap: $1.55 billion) tracks the MSCI Emerging Markets Index. That index includes large and medium-sized companies listed on the public markets of 26 developing countries.
Technology companies form the largest part of the portfolio at 25%, while Financials (24%), Consumer Goods (17%), Communication Services (10%), Industrials (7%), and Materials (6%) are the other key segments.
Chinese companies have the largest weight in the ETF (28%), followed by Taiwan (19%), India (17%), Korea (12%), Brazil (4.3%), Saudi Arabia (3.7%) and South Africa (3.3%).
Technology companies form the largest part of the portfolio at 25%, while Financials (24%), Consumer Goods (17%), Communication Services (10%), Industrials (7%), and Materials (6%) are the other key segments.
Chinese companies have the largest weight in the ETF (28%), followed by Taiwan (19%), India (17%), Korea (12%), Brazil (4.3%), Saudi Arabia (3.7%) and South Africa (3.3%).
AMPLIFY AI Powered Equity ETF $43.89 (New York symbol AIEQ) uses IBM Watson—with its machine learning, sentiment analysis and natural language processing—to select securities for the EquBot index.
The EquBot model aims to use AI to analyze data points across news, social media, industry and analyst reports, and financial statements on thousands of U.S. companies, markets and more.
The fund, launched in October 2017, has an asset base of $113.1 million and charges an MER of 0.75%.
The EquBot model aims to use AI to analyze data points across news, social media, industry and analyst reports, and financial statements on thousands of U.S. companies, markets and more.
The fund, launched in October 2017, has an asset base of $113.1 million and charges an MER of 0.75%.
Utilities typically struggle when interest rates are high or are increasing rapidly. The reverse is also true—they gain when rates fall. So with interest rates falling in Canada, and likely poised to fall in the U.S., the outlook for high-quality utilities is very attractive for investors seeking high dividend yields and growth prospects.
In addition, after a decade of little growth in electricity demand, U.S. power producers—or Canadian utilities with U.S. operations—are getting a huge boost from the rapid development of energy-intensive datacentres that host supercomputers used for artificial intelligence (AI).
Below we discuss two utilities-focused ETFs. The Supplement on page 89 also looks at the key characteristics of quality exchange-traded funds.
In addition, after a decade of little growth in electricity demand, U.S. power producers—or Canadian utilities with U.S. operations—are getting a huge boost from the rapid development of energy-intensive datacentres that host supercomputers used for artificial intelligence (AI).
Below we discuss two utilities-focused ETFs. The Supplement on page 89 also looks at the key characteristics of quality exchange-traded funds.
ISHARES MSCI JAPAN INDEX FUND, $73.98, is a buy. The ETF (New York symbol EWJ; buy or sell through brokers; us.ishares.com) aims to mirror the return of the Morgan Stanley Capital International Japan Index.
Top holdings are Toyota, 4.3%; Mitsubishi UFJ Financial, 4.0%; Sony Corp., 3.7%; Hitachi (conglomerate), 3.5%; Sumitomo Mitsui Financial, 2.4%; Nintendo (video games), 2.3%; Recruit Holdings (human resources), 2.1% and Tokyo Electron (computer chips), 2.0%. The ETF’s MER is reasonable at 0.50%.
Top holdings are Toyota, 4.3%; Mitsubishi UFJ Financial, 4.0%; Sony Corp., 3.7%; Hitachi (conglomerate), 3.5%; Sumitomo Mitsui Financial, 2.4%; Nintendo (video games), 2.3%; Recruit Holdings (human resources), 2.1% and Tokyo Electron (computer chips), 2.0%. The ETF’s MER is reasonable at 0.50%.
We think foreign stocks can safely make up 10% of a conservative investor’s portfolio. One way is through exchange-traded funds (ETFs) with an overseas focus. The best of those ETFs charge you very low management fees yet offer you well-diversified, tax-efficient portfolios of high-quality stocks.
Here’s a look at four international ETFs we see as suitable for new buying and two others we feel you should continue to hold.
Here’s a look at four international ETFs we see as suitable for new buying and two others we feel you should continue to hold.
Exchange-traded funds are set up to mirror the performance of a stock-market index or sub-index. They hold a more or less fixed selection of securities that represent the holdings of that index or sub-index and will allow the fund to “track” its performance.
The MER (Management Expense Ratio) is generally much lower on traditional ETFs than on conventional mutual funds. That’s because most traditional ETFs take a much simpler approach to investing. Instead of actively managing clients’ investments, ETF providers invest so as to mirror the holdings and performance of a particular stock-market index.
The MER (Management Expense Ratio) is generally much lower on traditional ETFs than on conventional mutual funds. That’s because most traditional ETFs take a much simpler approach to investing. Instead of actively managing clients’ investments, ETF providers invest so as to mirror the holdings and performance of a particular stock-market index.
The shares of commodity producers have performed relatively well over time when compared to the market as a whole. Still, returns vary significantly from one commodity subgroup to another.
Commodities have many sub-categories, each with its own dynamic. However, the rise and fall of various commodity stocks follows a similar path in that any top-performing commodity is likely to become a bottom-performing commodity at some point in the future. It’s, therefore, advisable to diversify across a variety of commodity producers.
Commodities have many sub-categories, each with its own dynamic. However, the rise and fall of various commodity stocks follows a similar path in that any top-performing commodity is likely to become a bottom-performing commodity at some point in the future. It’s, therefore, advisable to diversify across a variety of commodity producers.
Artificial intelligence (AI) has moved beyond its early stages and has developed into useful applications for a range of industries. By mimicking human cognition—learning from data, spotting patterns, making decisions—AI systems can unlock new levels of efficiency, insight and creativity. Here are some examples: