Rob Carrick's ETF Buyer's Guide: Vol. 1: Canadian Equity ETFs
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Exchange-traded funds are a good idea gone crazy.
There are more than 360 ETFs listed on the Toronto Stock Exchange. Three to six are all you need for a nicely diversified portfolio.
Recognizing that investors need help finding the right ETFs for their portfolios, we’re creating The Globe and Mail ETF Buyer’s Guide. In this first instalment, we look at 18 different ETFs offering core exposure to the Canadian stock market.
Here are some explanation of the terms you’ll find in this ETF Buyer’s Guide:
Assets: Shown to give you a sense of how interested other investors are in a fund; the smallest funds may be candidates for delisting.
Management expense ratio (MER): The main cost of owning an ETF; on an ongoing basis; as with virtually all funds, published returns are shown on an after-fee basis.
Trading expense ratio (TER): The cost of trading commissions racked up by the managers of an ETF as they shuffle the portfolio to keep it in line with a target index; add the TER to the MER for a fuller picture of a fund’s cost. Note many ETFs do so little trading that their TERs round down to zero.
Dividend yield: Mainstream indexes can be a good source of dividend income.
Average daily trading volume: Trading of less than 10,000 shares per day on average tells you an ETF isn’t generating much interest from investors.
Top three sector weightings: Most Canadian market ETFs reflect the fact that financials, energy and materials account for about 70 per cent of the market; a few ETFs attack the market differently.
Top three stocks: Another view on which ETFs take a different approach to tracking the Canadian market.
Click here for a printable excel table.
There are more than 360 ETFs listed on the Toronto Stock Exchange. Three to six are all you need for a nicely diversified portfolio.
Recognizing that investors need help finding the right ETFs for their portfolios, we’re creating The Globe and Mail ETF Buyer’s Guide. In this first instalment, we look at 18 different ETFs offering core exposure to the Canadian stock market.
Here are some explanation of the terms you’ll find in this ETF Buyer’s Guide:
Assets: Shown to give you a sense of how interested other investors are in a fund; the smallest funds may be candidates for delisting.
Management expense ratio (MER): The main cost of owning an ETF; on an ongoing basis; as with virtually all funds, published returns are shown on an after-fee basis.
Trading expense ratio (TER): The cost of trading commissions racked up by the managers of an ETF as they shuffle the portfolio to keep it in line with a target index; add the TER to the MER for a fuller picture of a fund’s cost. Note many ETFs do so little trading that their TERs round down to zero.
Dividend yield: Mainstream indexes can be a good source of dividend income.
Average daily trading volume: Trading of less than 10,000 shares per day on average tells you an ETF isn’t generating much interest from investors.
Top three sector weightings: Most Canadian market ETFs reflect the fact that financials, energy and materials account for about 70 per cent of the market; a few ETFs attack the market differently.
Top three stocks: Another view on which ETFs take a different approach to tracking the Canadian market.
Click here for a printable excel table.
Fund and ticker
|
Assets ($ million)
|
MER (%)
|
TER (%)
|
Price ($)
|
Dividend Yield (%)
|
Average daily trading volume over past 30 days
|
Top Three Sector Weightings
|
Top Three Stock Holdings
|
Returns (%) One-Year
|
Returns (%) Three-Year
|
Returns (%) Five-Year
|
Comments
|
|---|---|---|---|---|---|---|---|---|---|---|---|---|
BMO Low Volatility Canadian Equity ETF (ZLB)
|
143
|
.4
|
0
|
20.13
|
2.2
|
12,335
|
Financials: 18.9%
Cons Staples: 17% Cons Discr: 14% |
FFH: 4.6%
DOL: 4.4% MRU: 3.8% |
21.3
|
n/a
|
n/a
|
A
much tamer mix of stocks than in most Canadian equity ETFs, but check
out the top holdings. Not your usual mix of Canadian blue chips. Perhaps
this is more of a complementary fund than a core position.
|
BMO S&P/TSX Capped Composite Index ETF (ZCN)
|
1,020
|
0.17
|
0
|
17.97
|
2.8
|
41,618
|
Financials: 35.4%
Energy: 24.7% Materials: 12.3% |
RBC: 6.3%
TD: 5.5% BNS: 4.7% |
8.7
|
0.6
|
n/a
|
A top contender as a go-to ETF for core Canadian exposure. A fair bit cheaper than its main competitor, XIC.
|
First Asset Morningstar Cda Momentum Index (WXM)
|
51.3
|
0.67
|
0.12
|
13.07
|
1.1
|
33,183
|
Materials: 13.4%
Energy: 13.4% Industrials: 13.3% |
STN: 3.9%
HCG: 3.7% WJA: 3.6% |
23.2
|
n/a
|
n/a
|
Pricey,
when you add the TER and MER together, and too new to really judge
despite strong early returns. Trading volume suggests there's some
interest from investors.
|
First Asset Morningstar Cda Value Index ETF (FXM)
|
66.4
|
0.68
|
0.21
|
13.84
|
1.6
|
40,193
|
Industrials: 17.2%
Cons Staples: 16.5% Financials: 13.2% |
WJA: 3.7%
TCL.A: 3.7% GNV:3.7% |
28.5
|
n/a
|
n/a
|
Like
WXM, this fund offers a superior level of diversification than
mainstream indexes and impressive early results. What we don't know is
how it will perform over a full market cycle.
|
Horizons S&P/TSX 60 Equal Weight Index ETF (HEW)
|
11.0
|
0.53
|
0.14
|
11.55
|
2.3
|
1,340
|
Energy: 24.9%
Materials: 18.4% Financials: 16.8% |
RBC: 1.7%
TD: 1.7% BNS: 1.7% |
5.9
|
0.8
|
n/a
|
Overlooked by investors, and rightly so. Fees on the high side, and no discernible benefits from the equal weighting approach.
|
Horizons S&P/TSX 60 Index ETF (HXT)
|
949.7
|
0.06
|
0
|
23.6
|
n/a
|
195,729
|
Financials: 34.3%
Energy: 26.3% Materials: 11.4% |
RBC: 8.3%
TD: 7.4% BNS: 6.1% |
12.8
|
4.1
|
n/a
|
The
cheapest way for investors to buy Canada, and growing in popularity.
But the use of derivatives to mimic the performance of the S&P/TSX
index is a turnoff for risk-averse investors. Dividends are built into
the share price return - no cash is paid quarterly.
|
iShares Cdn Fundamental Index Fund (CRQ)
|
222
|
0.72
|
0
|
13.16
|
2.3
|
16,654
|
Financials: 42.3%
Energy: 27.3% Materials: 8.2% |
RBC: 7.3%
TD: 6.2% BNS: 4.9% |
14.7
|
3.1
|
8.5
|
A great long-term performer that remains a niche player. The high financials weighting is cause for caution.
|
iShares Dow Jones Cda Select Growth Index Fund (XCG)
|
22.8
|
0.55
|
0.04
|
23.04
|
1.6
|
2,516
|
Materials: 23.7%
Industrials: 19.9% Energy: 18.4% |
CNR: 11%
ENB: 9.9% POT: 7.5% |
2.7
|
-1.7
|
6.3
|
Has had its moments in the past five years, but doesn't deliver consistently competitive returns.
|
iShares Dow Jones Cda Select Value Index Fund (XCV)
|
56.1
|
0.55
|
0.01
|
22.4
|
3.1
|
2,258
|
Financials: 55.6%
Energy: 19.7% Materials: 7.7% |
RBC: 10.2%
TD: 10.1% BNS: 8.7% |
13.9
|
3.5
|
6.7
|
Good
five-year returns and a nice dividend yield. But the financials
weighting is massive, especially if you also own bank stocks.
|
iShares Jantzi Social Index Fund (XEN)
|
21.6
|
0.55
|
0.01
|
19.53
|
2.4
|
1,213
|
Financials: 41.6%
Energy: 17.1% Materials: 11.2% |
RBC: 10.9%
TD: 9.5% BNS: 8.2% |
13.2
|
3.2
|
6.9
|
A
good option for investors who want a socially responsible version of
the Canadian market in their portfolios. Companies in the fund are
best-in-class in a variety of social measures.
|
iShares MSCI Canada Minimum Volatility Index Fund (XMV)
|
16.2
|
0.34
|
0.02
|
23.25
|
2.5
|
1,694
|
Energy: 20.9%
Financials: 19.1% Cons Staples: 8% |
BMO: 3.3%
TD: 3.3% CM: 3.3% |
9.5
|
n/a
|
n/a
|
Better diversified than the mainstream indexes, but too soon to say if it gels.
|
iShares S&P/TSX 60 Index Fund (XIU)
|
11,813
|
0.18
|
0
|
19.24
|
2.9
|
3,769,581
|
Financials: 37.5%
Energy: 22.8% Materials: 11.3% |
RBC: 8.4%
TD: 7.3% BNS: 6.3% |
9.4
|
1.1
|
5.7
|
Check
the assets - this is Jupiter in Canada's solar system of ETFs. Cheap,
liquid and built on blue chips. You can't really go wrong.
|
iShares S&P/TSX Capped Composite Index Fund (XIC)
|
1,305
|
0.27
|
0
|
20.99
|
2.7
|
82,455
|
Financials: 35.1%
Energy: 23.6% Materials: 12.3% |
RBC: 6.3%
TD: 5.5% BNS: 4.7% |
8.6
|
1.0
|
6.7
|
Hard to see the appeal with ZCN around.
|
PowerShares FTSE RAFI Cdn Fdtml Index ETF (PXC)
|
98.2
|
0.5
|
0
|
22.5
|
2.7
|
3,473
|
Financials: 42.9%
Energy: 28.2% Materials: 7.7% |
RBC: 7.3%
TD: 6.2% BNS: 4.9% |
12.8
|
n/a
|
n/a
|
A cheaper version of CRQ that hasn't yet caught on.
|
PowerShares S&P/TSX Composite High Beta Index ETF (THB)
|
2.9
|
0.34
|
0.59
|
12.88
|
1.0
|
1,245
|
Materials: 91.2%
Energy: 8.8% |
SMF: 3.9%
OGC: 3.1% ASR: 2.8% |
-29.9
|
n/a
|
n/a
|
Stick a fork in this one. No diversification and high costs. No one's buying it.
|
PowerShares S&P/TSX Composite Low Vol Index ETF (TLV)
|
18.4
|
0.34
|
0.04
|
22.22
|
3.7
|
1,476
|
Financials: 59.5%
Energy: 14.7% Cons Disc: 7.4% |
BMO: 2.9%
CM: 2.8% NA: 2.8% |
8.9
|
n/a
|
n/a
|
Another
attempt to lure conservative investors into the stock market by
offering a less volatile mix of stocks. Too heavy on financials to be a
core fund.
|
Vanguard FTSE Canada All Cap Index ETF (VCN)
|
13.4
|
0.12*
|
n/a
|
26.5
|
n/a
|
5,961
|
Financials: 35.1%
Energy: 25.8% Materials: 13.5% |
RBC: 6.4%
TD: 5.8% BNS: 4.8% |
n/a
|
n/a
|
n/a
|
Something
new for the Canadian market - an ETF that wraps small, medium and large
stocks into one fund. In the U.S. market, this approach has worked well
for investors.
|
Vanguard FTSE Canada Index ETF (VCE)
|
185
|
0.11
|
0
|
27.82
|
2.2
|
11,984
|
Financials: 39.5%
Energy: 24.5% Materials: 12.4% |
RBC: 7.9%
TD: 7.1% BNS: 5.8% |
10.1
|
n/a
|
n/a
|
Frugal investors, don't overlook this one.
|
* Management fee only; the fund is too new to have computed a management expense ratio
Source: Globeinvestor.com, company websites and regulatory filings
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