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ETFs: How to Diversify Your Portfolio

Jon Brown Jon Brown, Stockhouse
0 Comments| November 13, 2019

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When dedicating your investment dollars, a “safer” bet is one that is often corroborated by a group of like-minded people. If you want to tap into a pool of investor money, an Exchange-Traded Fund (ETF) could be a good way to go.

Purchasing an ETF can be means to gain exposure to the Canadian, American and international markets. ETFs can also serve as an easy way to passively invest in low-fee index investments.

What is an ETF?

Rather than holding just one asset, ETFs are collections of securities that often track an index and are listed on exchanges and traded like any other stock. In addition to company stocks, ETFs can also contain , industries, bonds and commodities, as well as a mix of investment types.

Investors often gravitate toward keeping ETFs in their portfolio since they can offer low expense ratios and fewer broker commissions than buying the same stocks individually.

For something that does a bit more legwork, an ETF can also be a useful way to both gain exposure to “expensive” shares like Google (NASDAQ: GOOGL) or Amazon (NASDAQ: AMZN), coupled with some hidden treasures, without shelling out the actual cash for those shares. There are also a few differences between Canadian ETFs and those from the US. These differences usually involve fluctuations in the value of the Canadian and US dollars.

An investor can get into trading ETFs through online brokers and traditional broker-dealers. American brokerages are currently clawing for clients as many major firms recently eliminated commissions for certain securities.

For a deeper look into Exchange-Traded Funds, check out the infographic below via Visual Capitalist.

(Click to expand.)

Getting Started - The cheapest ETFs on the Canadian market:
  • BMO (ZSP)
  • iShares (XUS)
  • Vanguard Canada (VFV)

(Canadian) Oil ETFs:
  • Horizons Crude Oil ETF (HUC)
  • Canadian Crude Oil Index ETF (CCX)
  • BMO S&P/TSX Equal Weight Oil & Gas ETF (ZEO)

Cannabis ETFs:
  • The Cannabis ETF (THCX)
  • ETFMG Alternative Harvest ETF (MJ)
  • Horizons Marijuana Life Sciences Index ETF (HMMJ.TO)

Precious Metals ETFs:
  • US Global Go Gold and Precious Metal Miners ETF (NYSE: GOAU)
  • SPDR Gold Trust (GLD)
  • iShares Gold Trust (IAU)

Tech ETFs:
  • Fidelity MSCI Information Technology Index (FTEC)
  • Global X FinTech Thematic (FINX)
  • The Communication Services Select Sector (XLC)

See also:

  • Questrade - This app offers dual-currency TFSA, as well as free ETF purchases, which can be a bonus for those just getting into investing.

This is just the tip of the ETF iceberg and there are many more varieties located within each fund. What are some of your choice ETFs and what sectors do you focus on? Let us know in the comments below.

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