TORONTO, ONTARIO -- (Marketwire) -- 01/07/13 -- With more than 250 Canadian Exchange Traded Funds (ETFs) currently available, BMO Asset Management Inc. (BMO AM) reminds Canadian investors about the importance of carefully evaluating the wide variety of funds to understand better how they might fit into their financial portfolios.
ETFs are securities that generally track indexes but are traded like stocks. Since its inception in June 2009, BMO AM's ETF product suite has grown to 48 funds. Each ETF offers numerous benefits to investors - including lower costs and tax efficiencies - while covering a number of diverse asset classes, sectors and regions.
"In the last five years, the number of new ETF products and investment niches has increased significantly, plus additional products have been launched that offer competing exposure to existing market segments," said Kevin Gopaul, Senior Vice President and Chief Investment Officer, BMO Asset Management Inc. "With the growing number of ETFs, it's critical that investors educate themselves on a fund's structure, objective, risks and provider to ensure that the ETF is a good match to help them reach their investment goals."
BMO AM offers tips for Canadians considering investing in ETFs:
Choose Your Exposure: Consider the merits of diversification available through a wider exposure ETF against an industry-focused ETF. For example, an investor looking to invest in Canadian banks could use broad market equity ETFs, dividend ETFs, financial sector ETFs or a bank specific ETF.
Choose How the Portfolio is Weighted: Multiple ETFs may target the same market segment or industry, but each could use different weighting schemes such as market capitalization, equal weighting or factor weighting. Choosing any of these could affect returns, costs, tax efficiencies and/or exposure to small- and large-cap companies.
Choose How to Access Exposure: The majority of Canadian ETFs attain exposure by holding securities. A subset of ETFs invest in derivatives. These ETFs receive the return of an index from a financial institution. An investor should weigh the added risk and additional fees against the advantages offered by derivatives.
Choose a Trusted Provider: Look at the track record, product shelf and financial soundness of a provider. A responsive, locally-based team can help with research and provide support documents.
Understand the Returns: The performance of an index ETF is best measured by how closely it tracks its index. Tracking error can be both positive and negative; however, even positive tracking may not be favourable, as it indicates the possibility of negative tracking in the future. Minimizing fees is critical. The total cost of transacting in an ETF is three-fold. The management expense ratio (MER) includes management fees and taxes. The trading expense ratio (TER) includes portfolio expenses such as commissions paid and withholding tax on foreign income. The trading cost reflects commissions and the bid and ask spread (the buying and selling prices on the exchange); which decreases as the ETF matures and is more heavily traded in the secondary market.
(i)BMO ETFs are managed and administered by BMO Asset Management, a portfolio manager and investment fund manager and separate legal entity from Bank of Montreal.
Commissions, management fees and expenses all may be associated with investments in exchange traded funds. Please read the prospectus before investing. Exchange traded funds are not guaranteed, their values change frequently and past performance may not be repeated.
Further information about BMO ETFs can be found at www.bmo.com/etfs.
About BMO Exchange Traded Funds (ETFs)
Established in June 2009, BMO Financial Group's ETF business is a leading ETF provider in Canada. Since its inception, the lineup of BMO ETFs has grown to 48 funds and includes several industry firsts. BMO ETFs provide Canadian investors with broader choices and greater access to an innovative portfolio of investment products.
About BMO Financial Group
Established in 1817 as Bank of Montreal, BMO Financial Group is a highly diversified North American financial services organization. With total assets of $525 billion as at October 31, 2012, and more than 46,000 employees, BMO Financial Group provides a broad range of retail banking, wealth management and investment banking products and solutions.
Get the latest BMO press releases via Twitter by following @BMOmedia
Amanda Robinson, Toronto
Valerie Doucet, Montreal
Laurie Grant, Vancouver
Most Popular Stories
- High-Tech Home Theaters Undergoing a Revolution
- Amazon Prime Grabs Classic HBO TV Series
- Wellness Programs Grow More Popular With Employers
- Sales of New Homes Fell 14.5 Percent in March
- Procter & Gamble Income Up on Cost Cutting
- Obama Opens Japan Trip with Sushi Stop
- FedEx Sued Over Deadly California Bus Crash
- #myNYPD Twitter Campaign Backfires for NYPD
- Boeing Flying High With Strong First Quarter
- Google, SunPower Team Up on Solar Power