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.