section header ETF fundamentals
subsection header Basics
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Benefits of ETFs
ETFs offer several potential benefits, including low costs, liquidity, diversification and more.
Low costs
ETFs generally have lower management expense ratios (MERs) than mutual funds, and index ETFs generally cost less than active mutual funds and active ETFs. Lower costs mean more of a fund's returns go to the investor. However, investors do incur transaction costs such as broker commissions when buying and selling ETFs and should weigh these costs before investing.
Liquidity
ETFs are traded on stock exchanges, so they can be bought and sold any time the exchange is open even if the underlying market is closed. For example, a Canadian investor can buy an Asia equity ETF during Canadian trading hours when the Asian markets are closed.
Diversification
An ETF might contain hundreds or thousands of securities—more than many actively managed funds and far more than a typical portfolio of individual securities. Broad diversification can help offset the risks associated with any one security or market segment.
Transparency
ETFs provide transparency on a regular basis, including information on constituents, performance versus the benchmark and costs.
Management
Learn about the different types of exchange-traded products, how index and active ETFs are managed and more.
Trading
Learn about ETF trading, common order types, premiums and discounts, liquidity considerations and more.
Strategies
Learn about strategic and tactical uses for ETFs, including asset and sub-asset allocation, portfolio completion, cash equitization and more.
Commissions, management fees, and expenses all may be associated with investment funds. Investment objectives, risks, fees, expenses, and other important information are contained in the prospectus; please read it before investing. Investment funds are not guaranteed, their values change frequently, and past performance may not be repeated. Vanguard funds are managed by Vanguard Investments Canada Inc. and are available across Canada through registered dealers.
This material is for informational purposes only. This material is not intended to be relied upon as research, investment, or tax advice and is not an implied or express recommendation, offer or solicitation to buy or sell any security or to adopt any particular investment or portfolio strategy. Any views and opinions expressed do not take into account the particular investment objectives, needs, restrictions and circumstances of a specific investor and, thus, should not be used as the basis of any specific investment recommendation. Investors should consult a financial and/or tax advisor for financial and/or tax information applicable to their specific situation.
All investment funds, including those that seek to track an index are subject to risk, including the possible loss of principal. Diversification does not ensure a profit or protect against a loss in a declining market. While the Vanguard ETFs are designed to be as diversified as the original indices they seek to track and can provide greater diversification than an individual investor may achieve independently, any given ETF may not be a diversified investment.
All monetary figures are expressed in Canadian dollars unless otherwise noted.