Comments on: Can You Invest Solely in ETF’s?

By: Chief Raymond

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By: Stan

Stan — Mon, 09 Feb 2009 05:31:54 +0000

CMR/Frank, there is no Canadian index fund with a lower MER than XIU at .17. The index mutual funds offered by the big banks and other providers range in the .65/.70 MERs, and more in many cases. The closest is TD e-Series Canadian Index, at .31, which is ideal for pre-authorized purchases since it can be bought in small amounts (which is the main advantage of the index mutual funds). When enough money is amassed to justify the trading expenses, it would be better to sell the index mutual fund and purchase the equivalent ETF. This is what I do with RBC Canadian Index/XIU. Very practical and it avoids the long-term drag of a higher MER on the index fund. If you’re going the passive investment route, why pay higher fees than absolutely necessary?

By: Canadian Money Review

Canadian Money Review — Sun, 08 Feb 2009 15:09:32 +0000

Frank:

The MER for the iShares ETF “XIU” is 0.17%. I’d be curious to see which index mutual funds are lower than that (maybe those exist, but I simply don’t know them).
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By: thomas

thomas — Sat, 07 Feb 2009 06:52:35 +0000

I really like ETFs as investment vehicles. The diversification abilities and ease of purchase make them a viable option for investing.

By: Future Generali

Future Generali — Fri, 06 Feb 2009 09:36:20 +0000

Thanks for this very informative post. This is a nice blog and will be looking forward to read more from you.

By: Mark

Mark — Fri, 06 Feb 2009 03:07:01 +0000

I’m thinking of using a ETF spread portfolio within my TFSA (mainly to support my RRSP), is this a wise thing todo or am i better using something else?

By: CanadianFinance

CanadianFinance — Thu, 05 Feb 2009 20:24:01 +0000

I’m a huge fan of ETFs and the TD eFunds. That said there are two places where I would stay from index investing…

Once I get a new house and mortgage, I will begin a Smith Manoeuvre and buy Canadian stocks directly so that I can specifically go after strong, dividend paying companies without the drag of any fees.

The second is Canadian REITs. The MER is a little high on these, a better return could likely be achieved by buying the largest REITs in the index.

By: Dividend Growth Investor

Dividend Growth Investor — Thu, 05 Feb 2009 19:19:52 +0000

The most important think when selecting ETF’s is to understand the strategy behind the fund. There have been a lot of developments recently including currency harvest funds, as well as other “acive strategy” based ETF’s which capitalized on short-term trends.

By: Frank

Frank — Thu, 05 Feb 2009 19:17:58 +0000

Surely, you must know that ETFs charge annual management fees just like other mutual funds. You didn’t think that they were operated as charities did you? And it cannot surprise anybody that the huge growth in them over the past decade was fuelled by the fact that those fees are higher than equivalent open-end index mutual funds. Can it?

ETFs have several advantages over open-end mutual funds. They trade like stocks, so you can short them, buy them on margin, and day-trade them. And in some cases you can get small-scale access to exotic asset classes not available elsewhere.

But most of the time, most people are better off in an open-end no-load mutual fund that follows the same index as the ETF. The management fees will be lower and transactions in and out will be free.

By: amit

amit — Thu, 05 Feb 2009 19:01:10 +0000

I have over 90% of my portfolio in ETFs, well diversified amongst Real Estate ETFs, Dividend paying ETFs, Currency ETFs, Developed/Emerging market ETFs, sector ETFs, Canadian ETFs.

Everything that I can think of there is one or other ETF available. I like them, and yes, I don’t have a million dollars (yet) so they are okay for my couch potato portfolio too. I just Dollar-Cost Average once in a while (buying once every 3 months or once every 6 months (sometimes once every year)) and never sell them. I am investing in ETF, not day-trading these.

I keep a chart by comparing my portfolio with SPY every time I purchase something, just to see whether my portfolio is doing better than the market or not.

For the 10% portfolio that`s not in ETFs, I own MLPs and REIT stocks such as XTEX, SPH, SJT, TPP, HCN, O, RYN, KMP, and also WFC and ASBC.

By: Guy Davis

Guy Davis — Thu, 05 Feb 2009 18:50:57 +0000

Hi, I’m in a mix of stock and bond ETFs (basically Couch Potato). My only concern is that I hold only iShares, so while the asset allocation is spread across Canadian and international equity plus bonds, it’s all through Barclay’s bank (iShares). So am I really diversified?

What if iShares (Barclay’s) collapsed? I know it seems unlikely, but never say never. Should I also be trying to spread my diversification across various ETF providers to avoid disaster if one were to collapse?

By: Sebastian

Sebastian — Thu, 05 Feb 2009 17:12:44 +0000

I’ve just finished reading A random walk down Wall Street which pretty much backs up the topic of this post with decades of data and research into the area.

When I get to the point that I can invest, the bulk will be through ETFs and potentially doing what Mark suggests. Using options as an income method through covered calls and dabbling in collars for protection.

I would diversify the rest of my portfolio with REITs, money markets and bonds.

By: FrugalTrader

FrugalTrader — Thu, 05 Feb 2009 17:00:48 +0000

That’s an interesting point Mark. For those of you looking to learn more about options, we have a beginners series starting here:
http://www.milliondollarjourney.com/how-call-options-work-i-the-basics.htm

In addition, we have an article explaining the equity collar:
http://www.milliondollarjourney.com/the-equity-collar-a-risk-reduction-strategy.htm

By: Mark Wolfinger

Mark Wolfinger — Thu, 05 Feb 2009 16:58:08 +0000

One way to invest in ETFs with additional safety to to trade only those ETFs that have listed options. Next, you adopt coservative, risk-reducing option strategies on thsoe ETFs.

For option newbies, the two best strategies are covered call writing and collars.

Mark
http://blog.mdwoptions.com/options_for_rookies/2008/07/collars-the-ult.html

By: Kathryn

Kathryn — Thu, 05 Feb 2009 14:47:43 +0000

We do. We have a Couch Potato portfolio described well here http://www.canadianbusiness.com/my_money/investing/article.jsp?content=20060405_144810_2764

We like the low fees, the balanced risk and the automatic annual rebalancing.