BMO Asset Management Inc.: Making ETFs Make Sense
- Universe of Exchange Traded Funds has continued to grow
- Education key to selecting appropriate ETFs that match investment
- BMO AM currently offers 48 ETFs, including many industry firsts
- BMO AM provides tips to help Canadians choose wisely
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
Get the latest BMO press releases via Twitter by following @BMOmedia
Amanda Robinson, Toronto
Valerie Doucet, Montreal
Laurie Grant, Vancouver
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