These sites will help you find out more about ETFs|
Rob Carrick • The Globe and Mail • Thursday, January 16, 2003
Some of the initial excitement over exchange-traded funds has died away, but not the appeal of these mutual fund alternatives.|
Appeal? ETFs? Can these two words really be mentioned in the same sentence?
The answer is Yes. So much so, in fact, that you'll find a list later on in this column of places you can go to learn more about ETFs.
But let's first face facts about exchange-traded funds. If you look at their returns over the past few years, you might wonder why anyone would ever consider them. Truth is, even a Brand X Canadian equity fund has probably beaten an ETF tracking one of the major Canadian stock indexes. (U.S. equity funds trail the Standard & Poor's 500-stock index consistently and egregiously, though.)
Some say the major stock indexes will zig and zag in the next year or more, ultimately going nowhere in particular. This is a bad environment for ETFs because these exchange-listed index funds give more or less what their underlying stock index returns.
So why bother with ETFs?
For one thing, aggressive investors can trade in and out of ETFs to capitalize on market surges like we've seen lately. ETFs can also be shorted to make money in a falling market.
More important, if you can hold on to your ETFs for 10 or, better, 20 years, then the cost- and tax-efficiency of these products really shines. ETFs charge much less than traditional funds in management expenses, which means there are more returns left over for investors after a fund pays itself. ETFs also trade less than most equity funds, which means there are fewer taxable distributions for people investing outside registered accounts.
Now, you're probably wondering, where do I go to find out more about ETFs? For the basics on how ETFs work, try these Web sites.
The Toronto Stock Exchange www.tse.com: This site offers a too-brief overview on ETFs, but it's worth visiting for a complete listing of all TSX-listed funds.
The American Stock Exchange www.amex.com: As the home for the vast majority of U.S.-listed ETFs, the Amex offers a good primer on exchange-traded funds on its site, plus quotes, charts and information on performance, holdings and distributions. There are also downloadable prospectuses and a search engine that helps you find various types of ETFs -- broad-based funds, say, or ones focusing on specific sectors or countries.
Indexfunds www.indexfunds.com: This site's ETF Zone includes articles on ETFs and how to use them, plus answers to frequently asked questions about this product.
Bylo Selhi's web site www.bylo.org: Bylo Selhi is the moniker of an anonymous advocate of smart, cost-efficient investing for the do-it-yourselfer. ETFs certainly fit here, so the site has an extensive list of links on all aspects of ETFs.
Globefund.com www.globefund.com: Dozens of articles on ETFs from the pages of The Globe and Mail's Report on Business are available here. Just use the search box well down on the home page to do a search under the term "exchange-traded funds."
iUnits.com www.iunits.com: This site is operated by the Canadian arm of Barclays Global Investors, a huge player in the ETF market worldwide. The site is mostly about Barclays products as opposed to ETFs in general, but there is a management expense ratio (MER) calculator that vividly shows the benefits of investing in funds with low management expenses.
Morningstar.com www.morningstar.com: This respected source of unbiased research on U.S. stocks and mutual funds has a dedicated ETF area with basic background information, as well as tools for selecting funds and news on recent developments in the sector. Example: There's an article on four new Nasdaq-listed ETFs tracking indexes based on the performance of foreign companies listed on U.S. exchanges as American depositary receipts.
Ready to start looking at the various ETFs out there to see which ones might work in your portfolio? For comparative data and charts on all North American ETFs, try Globeinvestor.com http://www.globeinvestor.com. Just go to the site's "filter" area and select "ETF" from the pulldown menu labelled "security." Next, choose which stock exchange you want to look at.
Barclays offers 12 of the 16 TSX-listed ETFs, so you'll probably end up visiting iUnits.com for detailed fund information and downloadable prospectuses. The other four Canadian ETFs are offered by TD Asset Management -- go to http://www.tdam.com for more information.
Picking ETFs for the Canadian market is reasonably easy because of the limited selection. In the U.S. market, it's a much different story because of the incredible range of funds. In some cases, you'll find as many as three different ETF versions of a single index -- a straight version, a version that singles out the index's value stocks and yet another that includes growth stocks.
Indexfunds.com is a useful site here because it allows you to compare the performance of various indexes over time. This site also lists the most popular ETFs as measured by assets, and the best-performing ETFs recently. Also try ETFConnect at http://www.etfconnect.com.
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