Exchange Traded Funds (ETFs) are investment products that are traded like stocks and that allows you to buy the equivalent of a basket of securities (stocks, bonds, ...) in a single transaction. The continuing growth of ETFs offered in Canada helps to create diversified portfolios in several asset classes that meet the investment objectives and risk tolerance of each investor. Given their unique structure, management fees of ETFs compare very favorably with the costs of other financial products.
At first glance, ETFs seem simple products but here are some important elements to consider.
- What is the liquidity of an ETF? What is the underlying index and do I understand it?
- Can I place a market order without any surprises? When should I trade during the day?
- What is the structure of an ETF? Does it use derivatives and, if so, is it safe?
- Should I reinvest dividends paid by ETFs? Is DRIP allowed by each provider and broker?
- Why not buy the underlying company stocks instead of the ETF?
- Should I buy only Canadian-listed ETFs? Are there any tax issues to consider?
- What are the management fees of ETFs? What are the total costs involved in trading an ETF?
Building a customized ETF portfolio is not as simple as it seems. There are several pitfalls you need to avoid to make sure that these products are well suited to your investor profile. Idema Investments constantly monitors the ETF universe in Canada and takes into account all these factors before recommending ETFs to its clients. To discover how we can help you benefit from ETFs, visit Our Services - Overview page or Contact Us directly.