Exchange Traded Funds

Everything you need to know about ETFs

What is an ETF ?

An ETF (Exchange-Traded Fund) is a type of investment product that owns and manages an underlying basket of assets (equities, bonds, commodities, derivatives, etc.) and divides the ownership of those assets into individual shares.

Benefits of an ETF

  • Lower fees

    ETFs strip away the unnecessary layers of fees that typically plague other investments, such as mutual funds. Because they trade directly on a stock exchange, you do not have to pay added costs such as trailer fees, sales charges, etc.

  • Diversification

    ETFs typically invest in a basket of underlying companies, commodities, etc. So, purchasing an ETF lets you gain exposure to many different companies at once.

  • Dividends

    Because the companies an ETF holds pay a dividend, the ETFs will pass the dividend onto you.

  • Flexible investment options

    Investors can borrow funds (also known as buying on margin) to purchase ETFs. This is convenient for people looking to use leverage to their advantage. Investors can also short ETFs, profiting when the ETF declines in price.

ETFs vs. Mutual funds

ETFs are similar to mutual funds, but with different qualities:

  • Unlike mutual funds that can only be traded once at the end of the trading day, ETFs trade on a stock exchange so you can buy and sell them whenever you want as long as the market is still open.
  • ETFs are known for their lower management fees in comparison to mutual funds.
  • You can start by purchasing one share of an ETF if you wish, where most mutual funds have a minimum amount you must initially purchase.
  • ETFs are also more tax efficient. ETFs are simply traded between investors and no underlying assets must be sold just because shares of the ETF are sold. Unlike mutual funds, that often must sell securities when shares are redeemed.

Types of ETFs

Index ETFs

Majority of ETFs are index funds and attempt to replicate a specific index of securities such as stocks, bonds, currencies, and commodities, etc.

Stock ETFs

Track certain indexes or sectors and typically consist of 100% stocks.

Bond ETFs

Invest in different kind of bonds (corporate, federal, and provincial) based on the funds objective.

Commodity ETFs

Invest in commodities such as precious metals and agricultural products.

Cryptocurrency ETFs

Invest in funds that track the price of cryptocurrencies, like Bitcoin and other blockchain technologies.

Currency ETFs

Constructed to track the performance of currencies.

Actively managed ETFs

ETFs where the fund manager is able to make changes based on current market conditions.

Inverse ETFs

Designed with the use of derivatives to earn profit from declining markets.

Leveraged ETF

Use debt and derivatives to increase the performance of a certain index, sector or asset class.

Asset allocation ETFs

An ETF of ETFs, made up of several "sub-ETFs." This provides a whole portfolio's worth of assets—global equities and fixed-income—in a single ETF.

Alternative ETFs

Offer exposure to the alternatives asset class. There are various alternative classifications, including hedge fund, long/short, managed futures and a few others.

Build your own portfolio

Self-directed Investing

With a self-directed account, you can buy any North American-listed ETF commission free at Questrade.

Get a pre-built portfolio

Questwealth Portfolios

With Questwealth Portfolios, you receive your own pre-built portfolio of ETFs designed by experts to help you achieve your financial goals faster.

Get answers to frequently asked questions

You can purchase ETFs yourself with a self-directed account. Or you can get a pre-built portfolio of ETFs with a Questwealth Portfolios account.

You can buy ETFs in any type of account. RRSP, TFSA, RESP, margin. You can hold an ETF in any of them.

No, ETFs require no minimum to invest. You can buy as little as one share of any ETF available.