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 market recovery continued in June to cap off the second quarter’s strong performance. In fact, U.S. equities delivered their best quarter since 1998 while Canadian equities saw their best quarter since 2009. This followed one of the worst quarters ever recorded in both the U.S....
On the surface, ETFs that invest in the same universe of stocks may be expected to deliver a similar performance. However, ETF managers use different methods to construct their portfolios—and this can lead to vastly different performance outcomes.
Market cap weighted ETFs
Most ETFs follow pre-defined indexes....
Based on lots of things we’re looking at, we’re still reasonably sure that stock and ETF prices will be higher in a year or two than they are today. But the market rarely goes straight up or down. Instead we should expect a series of abrupt movements in either direction.
That volatility is all the more reason for conservative investors to keep a high proportion of their holdings in dividend-paying stocks—or ETFs that hold those stocks.
The best dividend stocks provide a consistent dividend yield year after year....
Canadian ETF assets under management totalled $211.4 billion by the end of May, 19% more than 12 months earlier. So far this year, stock market ETFs have attracted $12.7 billion followed by fixed-income funds. They attracted $4.0 billion in inflows.
Despite the economic uncertainty associated with COVID-19, Canadian ETFs attracted inflows of $2.4 billion in May....
New Zealand has a small population and ranks outside of the world’s top 50 economies.
Still, this leading democracy and developed nation is ranked among the world’s top 20 most-competitive economies. Meanwhile, its stock market has also performed well over the past decade....
New Zealand has become known worldwide as “Middle Earth” since the release of The Lord of the Rings and The Hobbit movie trilogies. These films grossed an estimated $5.8 billion.
The spectacular scenery that provided the backdrop for these films attracts tourists from across the globe to visit the sites.
While the Lord of the Rings movies have introduced New Zealand to many film buffs, the country not only offers magnificent scenery, but also excellent wines, 29 million sheep, and the tourism draw of its world-beating rugby team, and the players’ famous “Haka” dance.
New Zealand’s 10 wine regions are spread mostly around the eastern coastlines of both the North and South Islands....
National Bank is one of the smaller ETF providers in the Canadian marketplace. Still, the bank continues to launch new funds and its assets under management have grown rapidly this year. Here’s a look at two of those new ETFs.
The NBI GLOBAL PRIVATE EQUITY ETF $26.01 (Toronto symbol NGPE) invests globally in stock-market-listed private equity firms....
Equal weight ETFs have struggled to gain popularity in both the U.S. and Canada. In the U.S. there are 115 equal-weighted funds. Their total assets under management is $45 billion, or just 1.1% of the total for ETFs.
The largest U.S. equal-weighted fund is the $12.3 billion Invesco S&P 500 Equal Weighted ETF (symbol RSP, see above)....
The HORIZONS ENHANCED INCOME GOLD PRODUCERS ETF $37.00 (Toronto symbol HEP) invests in an equal-weighted portfolio of North American-listed gold mining companies. The portfolio currently holds 14 stocks, with all the top producers such as Barrick Gold and Newmont Corp....
When selecting ETFs, you should look at the stocks they hold but also the methods they use to choose them. All funds use strategies aimed at boosting returns and cutting risk. The two ETFs below (and that in the column to the right) use unique strategies that have both pros and cons.
Meanwhile, the supplement starting on page 79 provides more information on how the most-popular ETFs are constructed....