By Harvest ETFs
In the past decade, Exchange Traded Funds (ETFs) have become some of the most popular investment tools for Canadians. That is because ETFs encompass a huge range of investment strategies and styles. ETFs’ offer a number of significant benefits which can help an investor achieve their investment goals.
ETFs are, at a fundamental level, investment funds that are listed and traded on a stock exchange. Investors’ money is pooled with money from other investors and invested in a portfolio of securities according to the ETF’s stated investment objective and strategy.
ETFs can capture virtually every corner of the market, from traditional equity or fixed income portfolios to portfolios of ‘alternative’ assets, or portfolios using highly sophisticated investment strategies that are not available to ordinary retail investors.
ETFs are perhaps most similar to Mutual Funds, but with a number of key differences. Most importantly, ETFs trade on exchanges like the TSX throughout the day. Their price (known as Market Price) changes during the day and closely tracks the calculated Net Asset Value (known as the NAV) of the ETF’s holdings. Mutual Funds, on the other hand, are only priced and traded once per day. The ability to buy and sell on the exchange with real-time pricing is one of the reasons investors like ETFs.
Investors also tend to like the diversity of ETFs available to them. Through ETFs, investors can access assets in virtually every corner of the market. An investor may be able to get exposure to a whole portfolio of securities by purchasing a single unit of an ETF. A unit is effectively a ‘share’ of an ETF and is bought and sold on the market in the same way a stock would be.
This can be far more cost-efficient than assembling such a portfolio yourself. With one ETF unit, an investor can gain exposure to dozens or even hundreds of securities, with a huge range of asset classes and styles as the below graphic illustrates.
How do I buy and sell an ETF?
ETFs, including those from Harvest ETFs, are listed on various exchanges such as the Toronto Stock Exchange (TSX). They have ticker symbols like stocks and are traded like stocks. They have no minimum investment amounts. Investors can buy or sell ETFs through their financial advisor or a brokerage account.
Are there currency risks associated with ETFs?
If you hold international securities in an ETF, you are impacted by the movements of those currencies. Some Harvest ETF’s hold stocks that are bought in a foreign currency. They include U.S. dollars, Euros or pounds sterling. The movement of these currencies against the Canadian dollar can affect total return.
Harvest ETFs uses a hedging strategy for certain Harvest ETFS to reduce the impact of these fluctuations. This gives Canadian investors the return in Canadian dollar terms, or in other words, the return that approximates the return of the local market.
ETF basics to remember
- ETFs can hold assets such as stocks, commodities, REITS, bonds or blends
- ETFs can be domestic or global, broadly diversified or sector specific
- ETFs can trade in US dollars, if offered
- An equity ETF’s can hold hundreds of companies under one fund
- ETFs can track and index (passive) or be actively managed.
- A passive ETF provides investors with a single security that tracks a particular index.
- An active ETF has a manager or team making decisions on the underlying portfolio allocation. There are defined rules and processes, but the manager has the flexibility to make changes to adapt to market conditions, in a way that is potentially more beneficial to the portfolio returns or to meet the performance goals.
The above is for informational purposes only and does not constitute an offer to sell or the solicitation of an offer to purchase any Harvest Portfolios Group Inc. managed investment fund and is not intended to provide specific financial, investment, tax, legal or accounting advice, and should not be relied upon in that regard. Investors should seek the advice of investment professionals, as appropriate, regarding any particular investment and/or trading strategy, which should be evaluated relative to each individual’s circumstances, as these investments may not be suitable for all investors.
Commissions, management fees and expenses all may be associated with investing in Harvest Exchange Traded Funds (managed by Harvest Portfolios Group Inc.). Please read the relevant prospectus before investing. The funds are not guaranteed, their values change frequently and past performance may not be repeated.
To find out how your clients can benefit from this strategy call Harvest ETFs 1-866-998-8298.
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