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As sure as night follows day, outrageously strong stock markets eventually run out of fuel.

That’s your scene-setter for the first installment of the 2023 Globe and Mail ETF Buyer’s Guide, covering Canadian equity funds. One-year returns in this category in last year’s guide were almost comically high at an average 26 per cent. This year, the average for the 12 months to Jan. 31 was a mere 2.3 per cent.

As disappointing as this slowdown was for investors, it provides an opportunity to compare how exchange-traded funds of all types handled a challenging market.

You’ll see in the data below that low-cost index trackers had the lowest 12-month returns, while more expensive funds that try to shield investors from market excesses did better. Be mindful of longer-term numbers as well as the recent past when interpreting these returns. Funds that hold their own in a down market may lag when stocks heat up again.

Five more instalments of the ETF guide will appear on alternating weeks over the next couple of months – they’ll cover funds holding Canadian bonds, U.S. stocks, global/international stocks, dividend stocks and asset-allocation funds, which are a fully diversified portfolio packaged into a single fund. Generally, ETFs must have at least five years of history to be considered for inclusion in the Buyer’s Guide.

To invest in ETFs, you need a brokerage account. For help on that, consult the 2023 Globe and Mail digital brokerage ranking. Also consider robo-advisers, which can build and manage a portfolio of ETFs for you at a reasonable cost.

Click here to download an Excel version of the guide.

Notes: Market data as of Feb. 13, 2023. Returns to Jan. 31, 2023. Source: Rob Carrick;, TMX Money, ETF company websites and Fund Facts documents

Here’s an explanation of investing terms used in the ETF Buyer’s Guide:

Assets: Shown to indicate how popular a fund is. A $1-billion fund is a whale, while $100-million is a decent size.

Management expense ratio (MER): The main cost of owning an ETF on a continuing basis; returns are shown on an after-fee basis both here and on ETF company websites.

Trading expense ratio (TER): The cost of stock-trading commissions incurred by the managers of an ETF as they maintain the portfolio. Add the TER to the MER for a complete picture of a fund’s cost. Funds with more elaborate strategies can have significant TERs, while simple index-trackers should have a TER of zero.

Yield: Based in most cases on distributions paid over the previous 12 months. Distributions are primarily dividend income, but a return of capital may also be present.

50-day trading volume: Average number of shares traded daily over the previous 50 days; it’s easier to buy and sell at competitive prices if an ETF is heavily traded.

Number of holdings: Offers some perspective on the level of diversification.

Sector weightings: A key differentiator between Canadian equity ETFs. Financial stocks dominate our stock market, but some funds are deeper into the sector than others.

Returns: The ETF guide shows total returns, which reflect price changes in the stocks that a fund holds as well as dividends paid by those stocks.

Beta: A measure of volatility that compares funds with the benchmark index (in this case, the S&P/TSX Composite), which always has a beta of one. A lower beta means less volatility on both the up and down side.

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Tickers mentioned in this story

Study and track financial data on any traded entity: click to open the full quote page. Data updated as of 24/04/24 3:40pm EDT.

SymbolName% changeLast
BMO S&P TSX Capped Comp ETF
BMO Low Volatility CAD Equity ETF
CI Morningstar Cda Momentum Idx ETF
Horizons S&P Tsx60 Index ETF
Ishares Core S&P TSX Capped Comp ETF
Ishares S&P TSX 60 Index ETF
TD S&P TSX Capped Comp Index ETF
Vanguard FTSE Canada Index ETF
Vanguard FTSE Canada All Cap ETF
Manulife Mltfactor CDN Large Cap Uh ETF

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