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Portfolio Strategy

Everything you ever wanted to know about ETFs Add to ...

For a complete list of links to the websites mentioned below, click here.

1. What the heck is an ETF, anyway?

Basic, unbiased information about ETFs is available on the GetSmarterAboutMoney.ca website, which was established by the Ontario Securities Commission and, unlike many other financial sites, accepts no advertising from financial firms. Note: The Investor Education Fund, the group behind the website, is a co-sponsor of The Globe’s Let’s Talk Investing online video series.

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Morningstar, an independent analysis firm, offers ETF basics in slide show form on its website. Newbies should check out the presentations titled “Are ETFs Right for You?” and “Mutual Funds or ETFs – Which to Choose?”

2. Who are the ETF companies in the Canadian market?

TMX Money, an investor website run by the company that owns and operates the Toronto Stock Exchange, has an ETF section that includes profiles of the nine companies offering exchange-traded products in the Canadian market. Included is the newest entrant, First Trust Portfolios Canada.

3. Where can I find a master list of all ETFs listed on Canadian and U.S. exchanges?

Use the stock filter on Globeinvestor.com. Choose your exchange from the drop-down menu, then select ETFs from the menu labelled Security. A total of 343 TSX-listed ETFs were listed as of mid-week, along with 1,132 on the New York Stock Exchange.

4. How can I narrow my search?

TMX Money has a basic screener that lets you isolate funds by asset class, region, style, size, sector and issuer. The results are displayed in a way that lets you instantly see which funds are the cheapest, most diversified, most liquid, most tax efficient and have the least tracking error (that’s where an ETF’s returns deviate from its underlying index). There’s a lack of precision in this screener that will give you oddball results at times, but it’s still worth trying.

ETF Insight’s screener lets you search using such criteria as asset class, strategy (examples: dividend income, covered call, equal weight, fundamental), management expense ratio, performance, distribution frequency and yield. For bond ETFs, you can search by yield to maturity and duration. Yield to maturity is the best indicator of your future returns from a bond ETF (remember to subtract a fund’s MER for a net number), while duration is a key measure of sensitivity to moves in interest rates.

5. How can I quickly compare the particulars of a few ETFs at once?

The Vanguard family of ETFs offers a comparison tool that lets you compare up to four funds from Vanguard and most other Canadian mutual fund and ETF companies. For ETFs tracking stock market indexes, you’ll find such data as MER, Price-Earnings Ratio, Price-Book Ratio, dividend yield, portfolio turnover, sector breakdowns and Top 10 holdings. The data for bond ETFs are spotty, however.

6. What’s the best source of information on individual ETFs?

Transparency, along with low costs and incredible utility as portfolio-building tools, are the main attributes of ETFs. So don’t be surprised that ETF companies offer detailed online profiles of their funds with data on fees, yields, distribution history, top holdings in both stock and sectors and performance of both funds and their underlying indexes. Some firms are better at disclosure than others – maybe I’ll write a column on that some day.

The ETF profiles on Google Finance include one of the best charting tools around. Just type the ETF ticker into the search box, which seems to recognize TSX-listed ETFs. If you run into trouble, try typing “TSE:” in front of the symbol, as in TSE:XIU.

7. Where can I find ETF prospectuses?

A central clearing house for all ETF prospectuses and other regulatory documents is the online System for Electronic Document Analysis and Retrieval, or Sedar (check here for documents issued by mutual funds, closed end funds and publicly traded companies as well).

8. How can I keep track of new or upcoming ETFs?

The ETF News area on the Morningstar.ca website lists new ETFs on the Canadian market.

9. What’s a good source of Canadian ETF investing ideas?

Globeinvestor.com’s ETFs page packages our extensive ongoing coverage of exchange-traded funds. Recent articles you’ll find here cover such topics as ETFs for exploiting a turnaround in gold prices, how ETFs would be affected by the Loblaw-Shoppers Drug Mart deal and assessing the risk of rising interest rates in bond ETFs. Also try Morningstar.ca’s webpage and ETF Insight.

10. What about U.S. ETFs?

A basic but effective screener for ETFs listed on exchanges in the United States and elsewhere is offered by the Bloomberg business news service. You’ll find a more advanced screener on the ETF Database website. Worried you’ll miss out on good ETFs because the U.S. market is so vast? If you call up a profile of a fund on the Wikinvest website, you’ll find a list of all comparable products listed on U.S. exchanges. For investing ideas, try IndexUniverse and ETF Trends. The ETF page on Yahoo Finance is worth looking at because it aggregates content from a variety of other sites.

11. Where can I find model ETF portfolios?

ETF Insight offers a variety of model portfolios under the following categories: Traditional, low cost, fundamental and alternative (the latter includes a rising interest rate portfolio). Data on portfolio fees, yield and, where applicable, duration, are included. The ETF Trends website offers a U.S. perspective on model ETF portfolios.

12. Which online brokers are best for ETFs?

The Globe and Mail’s annual review of online broker puts a big emphasis on costs, including the availability of low- or zero-cost ETF trading.

13. Which investing bloggers cover ETFs?

The Canadian Couch Potato blog is all index investing, and ETFs get a lot of coverage because they’re an ideal way to invest in the world’s major stock and bond indexes. The Canadian Capitalist blog maintains a “Sleepy Portfolio” of ETFs that is designed to be easy to run and ultra cheap.

Read more from Portfolio Strategy.

For more personal finance coverage, follow Rob Carrick on Twitter (@rcarrick) and Facebook (robcarrickfinance).

Follow on Twitter: @rcarrick

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