The rise of the Exchange Traded Fund (ETF) has truly reshaped the world of investing for the vast majority of retail investors.
In this article, I’m going to discuss why investors ought to take a good hard look at ETFs to replace or complement current holdings.
The most obvious, and perhaps most important, reason why investors should certainly consider ETFs as a part of their portfolio is the rock bottom fees these funds provide investors compared to traditional mutual funds or other actively managed funds/products.
Some funds have reduced fees to 0.05% or less, a truly incredible feat considering most actively managed funds Canadian investors have become accustomed to charging 2% to 3% for their services ETFs, in most cases, exceed the returns active managers can provide as a result of no trading feeds and a very low management expense ratio (MER).
The other key reason investors should consider ETFs is diversification. Many, if not most, Canadian portfolios are under-diversified, for a number of reasons. One key reason is home bias, in which some Canadian investors tend to invest in Canada only, missing out on excellent opportunities internationally.
There happen to be a number of excellent global ETFs that can provide all the diversification an investor would ever want. For those looking for domestic or U.S. options as well for broad index-focused ETFs, sector-specific ETFs, or theme-based ETFs, there are thousands of options to choose from.
Invest wisely, my friends.
