Best Emerging Market ETF Canada

Emerging Market Etf Canada

Last week, we reported that Fidelity Investments Canada is about to launch a Canadian ETF business, and as I explained in my last blog in the Financial Post this morning, the company’s actively managed balanced ETF portfolio will expand in Canada. ETF shares begin trading on the Toronto Stock Exchange in May last year (TSX: TSE), Canada’s largest stock exchange. At the opening bell ceremony at the exchange, John D’Agostino, F fidelity’s CEO and Chief Investment Officer for Canada, said that the addition of an actively managed balanced ETF complements the first set of ETFs his company is launching, TSPDX (see G & M story “Fidelity to launch CanadianETF business “below). As of May last year, the ETF’s shares would be trading at $1.00 per share, compared with $0.05. Sources: 3, 5, 10

This may not be the case in the future, but the ETF, which holds more than 5,000 shares, aims to track the performance of the MSCI Emerging Markets IMI Index (the “Index”), and focuses on stocks in the index, including those from Brazil, Russia, India, China, South Africa, and the US. The index reflects the returns achieved over the past 12 months for the S & P 500, Dow Jones Industrial Average (Dow), and other major global equity indices, based on the performance of these indices and the growth rates of their respective markets. In the first six months of this year it has returned on an annual basis 6.4% (in Canadian dollars), while the mSCi Emerging markets The IPI index has a yield of 6.2%, according to Fidelity. Sources: 3, 8, 9

The 22% MER is the highest of any Canadian-American index ETF, but still below the 22.5% of the S & P 500 and the 23.3% of the Dow Jones Industrial Average. Canadian investors could buy the EEM, which is traded in US dollars on the US stock exchange and has a yield of 2.2% (in Canadian dollars). Canadian investors may find it more attractive to buy the MSCI Emerging Markets IMI Index Canada (the “index”) instead, which is also traded in Canadian dollars on Canadian exchanges and has an annual return of 6.4%, according to Fidelity data. Sources: 0, 8

Investors could also invest in emerging markets at a slightly lower cost with the MSCI Emerging Markets ETF Canada (MER), which costs $0.23, according to Fidelity data. ETFs (FLBA and TSX) that are actively managed and balanced, but there are investors who find this kind of realignment difficult. The Smart Beta ETF is managed in San Mateo, California by a team of professionals with over 20 years of experience in the investment management industry. Sources: 5, 11

The fund’s only downside is that the cost ratio of $0.65 is higher than the average cost ratios for emerging market ETFs, which is still a fair price for this type of exposure. Canadian equity index ETFs can be developed for those who prefer to build their own ETF portfolio. As Vanguard classifies the volatility of the ETF as low to medium, it is expected to be much more volatile than higher weighted ETFs. Sources: 0, 4, 12

The $0.14 cost ratio is relatively cheap for an emerging market fund and it is lower than the iShares ESG MSCI EM ETF, which offers 43% less base to hold the same shares at a cost point than Vanguard Emerging Market ETF Canada, but you get an ES G overlay. Although returns are trailing dramatically behind the US market, the Vanguard Emerging Markets ETF has managed to reward investors over the long term. Sources: 7, 12

As you may have already summarized, there is no single index that tracks all the major emerging markets in the world, only the Emerging Markets Index (EMI). ETFs track the MSCI Emerging Market Index, an index of more than 1,000 emerging markets around the world. Sources: 8, 12

With the exception of the US, this ETF offers exposure to all major emerging markets in the world, as well as other countries in Europe, Asia and Latin America. Vanguard comprises both US and international emerging market bonds weighted by region and market capitalization. Sources: 2, 6

Emerging markets are used by the Vanguard Emerging Markets ETF (VWO), which has a market capitalisation of $1.5 billion and holds more than 800 stocks. It is linked to the MSCI Emerging Markets Index, which measures the return on investments in the futures contracts that track the index, as well as other global markets. Sources: 1, 11

For those looking for a smaller company, the WisdomTree International SmallCap Dividend ETF does a good job of building a diversified portfolio. Investors can choose an all-in-one asset allocation ETF or a themed ETF. Horizon focuses on physical replication rather than total return swaps, and investors can add a combination of equities, bonds, mutual funds and other assets to the “thematic” ETF. Sources: 0, 3, 7

The difference is even greater when you consider that Vanguard’s FTSE index provider considers developed markets to be more important than emerging markets in terms of market capitalization. It represents the Emerging Markets Index, a weighted index that invests in emerging markets by market capitalization, covering stocks, bonds, commodities, currencies, and other assets such as real estate. ETFs offer a diversified portfolio of equities and bonds from a variety of countries around the world, from the United States, Europe, Asia, Africa and Latin America, to the Middle East and Asia Pacific, and emerging Africa. Sources: 2, 6, 12

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