What you should know about ETFs
The popularity of exchange-traded funds (ETFs) has exploded since 2007. Activity quadrupled to seven billion shares traded in 2008 in Canada, and there are now more than 100 ETFs listed on the Toronto Stock Exchange. ETFs can be a cost-effective way to diversify your investment portfolio.
Here’s how they work.
Like mutual funds, ETFs are baskets of stocks. Most of them mimic stock indexes, providing exposure similar to that of index mutual funds.
However, unlike mutual funds, ETFs trade like stocks. While mutual funds are priced at the end of the day, ETF prices change throughout the day and trades may be made any time the stock market is open. With no minimum holding period or redemption fees and real-time trades, flexibility is a key advantage.
The other key advantage is a very low expense ratio. However, be aware that there is a brokerage commission each time you make a trade.
Like stocks, the price of an ETF is determined by the market. That means, depending on demand, you could pay more or less than the net asset value of the ETF.
While ETFs are not for everyone, these popular investment vehicles may be worth investigating. Contact us to discuss whether investing in ETFs is a
suitable investment strategy given your needs and goals