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Exchange Traded Funds (ETF)
What is it?
An exchange-traded fund (ETF) is a type of investment vehicle that invests into a portfolio of other investments, similar to a mutual fund. Unlike a mutual fund, ETFs can be purchased or sold on a stock exchange just like regular stock can. While mutual funds trade once a day after the market closes, an ETF’s share price fluctuates all day as it’s bought and sold. ETF’s can contain all types of investment products including stocks or bonds. Because there are multiple types of products within an ETF, they can be a popular choice for diversification.
What can I use it for?
ETFs provide an easy way to diversify your investment portfolio because they typically hold a basket of different products like stocks, bonds, and commodities which helps to spread the risk and reduce the impact of poor performance. Plus, ETFs can provide exposure to different geographic regions and countries. You can invest in international ETFs to diversify your portfolio beyond your home country’s borders! It’s also a great way to target specific sectors or industries within the stock market. For example, if you think a technology company will perform well, you can invest in a technology sector ETF.
Why invest in ETFs?
ETFs disclose their investments regularly, allowing you to know exactly which assets are held within the fund. This can help you make informed investment decisions and align your portfolio with your goals.
ETFs are known for their cost-efficiency. They often have lower management fees compared to actively managed mutual funds which can benefit you when looking to maximize your returns.
Align your investment preferences
ETFs come in a wide range of options, covering various investment themes and strategies. Whether you’re interested in broad market exposure, specific sectors of the market, or even strategies tied to the environment or governance, there’s likely an ETF that aligns to you.
How does it work?
An ETF can own hundreds of thousands of stocks across many industries, or it could be isolated into one particular industry or sector. Over the years, ETFs and mutual funds have become increasingly similar, making it challenging to decide which fund type best suits their needs.
As both ETFs and mutual funds hold a basket of assets, offer diversification, and are relatively easy to buy and sell, they can both complement a wide range of investment strategies. However, an ETF is structured differently than a mutual fund.
The difference is in the way each is bought and sold. Like individual stocks, ETFs are listed on a stock exchange and can be traded throughout the day whereas mutual funds are purchased and sold at the end of each trading day. With ETFs, you’d enter the specific number of assets you want to buy or sell and with mutual funds you would enter a set dollar amount and your trade would remain pending until the fund’s net asset value is calculated at the close of trading.
Is this right for you?
✔ Right for you if you:
You want to minimize investment costs. TFs are a good option if you’re looking for cost-efficiency due to things like passive management (less active decision making and trading) and lower trading costs.
You’d like flexibility. ETFs trade on stock exchanges, which provides high liquidity. This means you can buy or sell ETF shares during market hours, offering you flexibility in managing investments.
You have specific investment objectives. ETFs come in a variety of themes and strategies. If you have specific investment goals and preferences like sector exposure or dividend income, there’s likely an ETF that aligns with your goals.
May not be right for you if you:
You want an active investment strategy. If you prefer an active management role in your investments, ETFs may not align with your goals. ETFs are primarily passively managed and aim to replicate the performance of a market index, which won’t provide the same level of active decision making for you.
You want to pick specific stocks. If you have a strong interest in selecting individual stocks and believe in your ability to pick winning investments, you may not find ETFs appealing. ETFs can provide you with exposure to a group of securities, but you won’t achieve individual stock selection. You may want to consider stocks if this aligns with your investment portfolio.
Accounts for your ETFs
You've settled on ETFs, and it aligns perfectly with your financial objectives. It's time to choose the right account to invest your funds in and watch them flourish. Discover the array of options that Conexus in partnership with Credential Securities, provides access to – there's a wealth of opportunities waiting for you!
An RRSP is a government-registered retirement savings plan that offers tax benefits today by reducing your current income tax, and it allows your money to grow tax-free until retirement when you'll likely be in a lower tax bracket. It's a smart step for your financial future.
If you're 18 or older in Saskatchewan and have a valid social insurance number (SIN), the TFSA is your gateway to saving and earning money without the burden of taxes. With a TFSA, your contributions and the income you generate within the account are tax-free, even when you decide to make withdrawals. It's a lifelong opportunity to grow your wealth while keeping more of what you earn.
Mutual funds are offered through Credential Asset Management Inc. Mutual funds and other securities are offered through Credential Securities, a division of Credential Qtrade Securities Inc. Credential Securities is a registered mark owned by Aviso Wealth Inc. Online brokerage services are offered through Qtrade Direct Investing, a division of Credential Qtrade Securities Inc. Qtrade and Qtrade Direct Investing are trade names and/or trademarks of Aviso Wealth Inc. The information contained on this webpage was obtained from sources believed to be reliable; however, we cannot guarantee that it is accurate or complete. This information is provided as a general source of information and should not be considered personal investment advice or a solicitation to buy or sell any mutual funds and other securities. The views expressed are those of the not necessarily those of Credential Asset Management Inc or Credential Securities.