Topic: How To Invest

Pat: What is your view on buying the Canadian Vector Equity Fund? I believe it’s tilted towards value stocks and small cap stocks. Its MER is higher than an ETF, but maybe the value and small-company approach over long periods of time will add value. What are your thoughts on going with this mutual fund or a small-cap ETF such as the iShares S&P/TSX SmallCap Index ETF?

Article Excerpt

A: On a broad level, funds that specialize in small-cap stocks are always more volatile. However, some small caps do offer above-average potential—like those we recommend in Stock Pickers Digest. Incidentally, we think it’s a mistake to generalize about small cap stocks. Some small caps are junk. Others are small companies that have a history of sales and earnings, and attractive growth prospects. Others are industry leaders that have small capitalizations only because they serve a small industry. Here’s a look at the Canadian small-cap mutual fund offered by Dimensional Fund Advisors: The Canadian Vector Equity Fund aims to invest primarily in Canadian companies with an increased exposure to what it sees as small issuers and value securities. The fund’s top holdings are all large-cap stocks such as the big-five banks, Suncor Energy, Fairfax Financial and so on, and they make up more than half of its assets. However, it does hold a lot of small-cap shares among the rest of its 392 stocks. The…

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