Globe2Go, the digital newspaper replica of The Globe and Mail

ETF Facts is a treasure trove of data for investors

ROB CARRICK PERSONAL FINANCE COLUMNIST

One of the many great things about investing in exchangetraded funds is how easy it is to find out what they cost, what they hold, how they’ve performed, and how much income they pay. ETF companies offer this information in their online product profiles, but the level of disclosure and presentation of data varies from company to company. That’s why it’s vital to check the ETF Facts document for any fund you’re considering.

ETF Facts is a standardized four-page document that regulators require investment firms to provide clients who buy ETFs. To find ETF Facts for a particular fund you’re researching, find its online profile and click on the tab that says “documents” or “literature.” A quick and easy way to find an online fund profile is to google the ETF company’s name along with the relevant stock symbol. Example: BMO ZCN for the BMO S&P/TSX Capped Composite Index ETF, which has the symbol ZCN.

Here are some key bits of information to focus on in an ETF Facts document that go beyond the data that ETF companies typically offer on their websites.

AVERAGE DAILY TRADING VOLUME

Gives you a sense of the level of investor interest in a particular fund. Popular ETFs often trade in the hundreds of thousands of shares a day on average, or more. A thin trading volume would be in the hundreds of shares a day on average, or the low thousands.

NUMBER OF DAYS TRADED

Lets you know if there are days when an ETF doesn’t trade at all, which is an indication that it hasn’t caught on.

AVERAGE BID-ASK SPREAD

Average daily trading volume and number of days traded all play a role in the bid-ask spread for an ETF, which is the gap between the highest amount buyers will pay for shares and the minimum sellers will accept. The smaller the spread, the better. It suggests an ETF is highly liquid, and that you’ll be able to buy or sell easily at very close to the going market price. A bigger spread suggests it could be difficult to buy and sell at an advantageous price. A big ETF that trades hundreds of thousands of shares a day might have an average bidask spread of 0.05 to 0.1 per cent or less.

TRADING EXPENSE RATIO

A fund’s management expense ratio, or MER, shows all the costs of owning a fund except commissions for trading stocks in the portfolio. For that, you need to look at the trading expense ratio, or TER. ETF Facts documents show you both the MER and TER, which can be as low as zero or 0.01 per cent for big index-tracking ETFs. Actively managed ETFs often have higher TERs.

REPORT ON BUSINESS

en-ca

2023-02-02T08:00:00.0000000Z

2023-02-02T08:00:00.0000000Z

https://globe2go.pressreader.com/article/282059101145728

Globe and Mail