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The fab returns of 2019 send an unhelpful message to ETF investors.

Exchange-traded funds tracking the Canadian stock market routinely clocked in with gains around 20 per cent. Can it really matter which particular ETF you buy if they perform so uniformly well in a given year?

The answer is an emphatic yes. The careful investor asks not just how much a fund made, but also how and why it did so well. That’s where the first installment of The Globe and Mail 2020 ETF Buyer’s Guide comes in. It will help you understand the inner workings of 11 core Canadian equity ETFs in a way that offers insights on what may come in the years ahead.

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The ETF universe is expanding at a rate that outstrips any investor’s ability to meaningfully compare all the options. This is why the ETF Buyer’s Guide focuses only on proven funds – those with a track record of at least five years. Included in the mix are traditional index-tracking funds and those that apply some sort of screening process to stocks listed in the Canadian market.

As in previous years, there will be six installments of the ETF Buyer’s Guide appearing on alternating weekends from late January through early April. For the first time, the guide will include a segment on balanced ETFs, also known as asset allocation funds.

An ETF is a low-fee version of a mutual fund that trades like a stock. To invest in ETFs, you need a brokerage account. For help on that, consult the ranking of online brokers we will publish on Feb. 1. 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.



Assets: Shown to indicate how a fund has resonated with investors. A $1-billion fund is considered huge, while $100-million is serious size.

Management expense ratio (MER): The main cost of owning an ETF on an ongoing 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 full picture of a fund’s cost. Many ETFs do so little trading that their TERs round down to zero.

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Dividend yield: Yields are based on dividends paid over the previous 12 months.

Number of holdings: A higher number suggests you’re buying the entire market, while a smaller number suggests a more selective process is used to build the portfolio. You’ll need to decide whether that process is adding value.

Top three sector weightings: Financial stocks dominate our stock market, but some Canadian equity ETFs 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.

Three-year beta: Beta is 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. Beta offers a chance to see how well low-volatility ETFs deliver.

Launch date: The older an ETF is, the more likely it is that you can look back at a history of returns through good markets and bad.

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Notes: Market data as of Jan. 20, 2020. Returns to Dec. 31, 2019. Sources: Globeinvestor.com, Fundata, Morningstar, ETF company websites

Stay informed about your money. We have a newsletter from personal finance columnist Rob Carrick. Sign up today.

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