Why Exchange Traded Funds?
Exchange Traded Funds (ETFs) are the ingredients we use for the majority of our portfolios and trading models. Why ETFs, you ask? We choose ETFs because we find them to be the most efficient and elegant solution for achieving highly liquid, tradable, and diversified positions.

Exchange Traded Funds (ETFs) are typically baskets of securities that replicate the performance of an index, country, commodity, currency, or other asset. Although they share the same legal structure as mutual funds, we believe ETFs are vastly superior.

Click the links below to learn how and why we use ETFs:

SUPERIOR LIQUIDITY

As their name implies, ETFs are exchange traded - like stocks - so at any point during the day we can buy and sell them with speed and efficiency. Unlike many mutual funds, there are no minimum holding period restrictions or penalties for being invested for relatively short periods of time. This high liquidity (ease and cost efficiency of buying and selling) is critical to our active investing approach, allowing us to make tactical allocation shifts to improve performance and to protect your capital from falling markets.

TRANSPARENCY

ETFs combined with our custom technology keep us in touch with exactly what our dollars are exposed to – in real time. This is something you don’t get with traditional fund-based investing. This way we always know what exposure we have to a given sector, country, asset class, or even to particular companies. That up-to-the-minute knowledge lets us react faster to important market changes.

AVOID “SINGLE STOCK” RISK

Over 85-90% of “stock picking” managers don’t beat their benchmarks, and those who do succeed are not the same people every year. Investing in individual stocks can be risky, particularly when you have a large proportion of your wealth in a relatively small number of holdings. By investing in a group of securities, ETFs mitigate single stock risk and will inherently match the performance of the index they represent, minus a very small MER.

ETFs also do not suffer from “style drift”, which is a common phenomenon where funds managers may stray outside their established mandate to include the latest “flavour-of-the-year” that is performing well.

From time to time, you might read that you need to be careful when investing in ETFs. As a rule of thumb, we believe that you need to be careful when investing in general. When you hire ETF Capital Management, we help you navigate the ETF landscape. All ETFs that we include in our investable universe must meet our strict criteria for the protection of our clients.

LOWER COST

ETFs allow us to pay the lowest possible fees to gain liquid, transparent, and reliable access to market exposure.

• Minimize costs due to portfolio complexity: ETFs often have special design features that would be either impossible or prohibitively expensive to implement in an individual account (currency hedging for example).

• Lower-cost foreign investments: ETFs provide a more liquid and cost-effective way to invest in foreign equities that one would otherwise have to purchase on foreign stock exchanges (for which Canadian broker / advisors often charge usurious fees).

• Low MERs: The Average Canadian balanced and equity mutual fund MERs are about 2.5% (often 3-3.5% for global funds) as compared with a 0.25% average for the core ETFs we use in our portfolios.

DO YOU USE EXCHANGE TRADED FUNDS EXCLUSIVELY?

We don’t exclusively trade ETFs. While ETFs make up the core of our investing strategies, we do have stock and hybrid models that incorporate the best aspects of stocks and ETFs. We are “product agnostic”, which means we use the best investment tool for the job, from any issuer, with no allegiance or bias toward any particular provider. We are 100% independently owned and operated.

Know Your Money is Safe

Your hard earned assets are safe with ETF Capital Management. We employ National Bank Correspondent Network as a fully independent custodian.

Learn more about how we protect your money:
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If you would like to become a Client of ETF Capital Management, please complete this form or contact us at:

416.223.ETFS [3837]
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ETF.WRLD [383.9753]
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© ETF Capital Management 2012