iShares Canadian Fundamental Idx ETF CFYFF

Buy -- Advice for Investors.com

[carswell]

"Canadian to the Core." Contributing Editor Richard Kang considers the outlook for Canadian equities. He writes that it's important to consider the U.S. situation because of our interrelated economies and resulting high correlation in investment returns. He goes on to write, "I believe that the easy money has been made in Canada. However, I still believe that a core position in Canadian equities is required." To get exposure to the broader Canadian equity market with a bias towards non-market-cap-weighted equity funds, Mr. Kang looks at a couple of relatively new offerings, one for investors who lean toward ETFs and one for those who prefer to take the mutual fund route. Mr. Kang recommends the new ClaymorETFs FTSE RAFI Canadian Index Fund as his choice for an ETF covering Canadian equities. But here's the performance twist: instead of a traditional market-cap-weighted index, the fund tracks an index of Canadian companies with the highest fundamental weighting measured by total cash dividends, free cash flow, total sales, and book equity value. This process, called fundamental indexation, "moves ETFs away from pure indexing to something akin to quasi-active management, or enhanced indexing," writes Mr. Kang. The idea is to reduce the relative overweighting exposure to larger-cap stocks that is the primary weakness of traditional market-cap-weighted indexes. He recommends the fund as a buy for investors looking for a way to smooth out the volatility associated with cap-weighted index ETFs.