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section header ETF fundamentals

subsection header Basics

How ETFs can be used

ETFs can be used to implement a variety of short- and long-term portfolio strategies.

Some of the uses for ETFs are strategic—for example, asset allocation—while others are tactical. Whether it makes sense to use ETFs in a particular strategy depends on a number of factors, including the dollar amount invested, holding period, trading costs, appetite for risk and more.

Here are some of the most common ways investors put ETFs to work in their portfolios:

Core allocation

Gain fast, precise, and cost-effective access to a broad variety of assets and sub-asset classes to build a strategic core allocation.

Portfolio completion

Complete portfolio diversification by minimizing benchmark risk with pure exposure to specific areas of the market such as factor or styles.

Active and passive combinations

Combine index ETFs and low-cost actively managed funds for diversification and the opportunity for outperformance.

Liquidity management

Invest short term in the market while refining a longer-term investment view.

Transition management

Quickly gain market exposure while searching for a new investment manager.

Rebalancing

Manage portfolio risk/beta tilts in between rebalancing cycles.

Tactical adjustments

Over- or underweight certain asset classes, regions, and/or countries.

 

Overlay management

(sometimes known as liquidity sleeve)

Use a portfolio of ETFs to provide similar exposure to the strategic asset allocation but with additional liquidity.

Learn more about ETF strategies

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.