Rob Carrick spoke in a Saturday, September 21, 2019 morning session. His talk was called “10 Things You Absolutely Must Know if You’re Going to Invest in ETFs”. He is a columnist with the Globe and Mail. His company’s site is here.
Rob Carrick says he is a huge believer in ETFs. There are new ETFs being introduced each day. There are things you need to know about ETS.
Most products are just noise (and not for long term investing.) Core ETFs are recognized indexes like the S&P 500 and lesser known ones like FTSE. Invest in the broad market index ETS. Look at how the index ETFs did in the last bear market. Do not make bets on sectors or type.
ETFs free of cost investing is a gimmick. ETFs are cheap so we do not need them to go there. With fundamental ETFs, some are sensible but not all are. He is pro ROBO advisors. However, you do not need many ETFs.
With ETFs you should cover assets (Bonds, US Stocks, CDN Stocks, International Stocks). Some of the International Stock Index ETFs are rest of the world outside N.A. You can have a portfolio of 2 to 3 ETFs using asset allocation ETFs. Vanguard was the first to have these ETFs. These are like Balanced Funds and they are cheap. They mix stocks and bonds. These balance ETFs are rebalanced. They could be a simply solution with 1 ETF.
Look at the track record for your ETF. Only look at ETFs that have been around for 5 years. It might be reasonable to look at ones that have been around for 12 years because of the last crash. Buy only an established product. It must be clear what is in the product. Go for the ETFs with websites. If the ETF has an income, see how it is taxes. Look at the Management Report of Fund Performance (MRFP) to see how a fund is doing. Globe and Mail is building a website for ETFs.
Look at a fund’s stats. The TER is cost of brokerage fees. Some new ETFs are doing a lot of trading and that is a cost to you. The TER and MER is all you pay in fees. Some ETFs are more transparent than others. The Management Fee is not all the fees you pay.
Some advisors hate ETFs for no good reason. ETFs are changing investing. ETFs have 10% of what Mutual Funds have. If an advisor sells ETFs, they will have to charge the client a fee. The investment industry makes negative remarks about ETFs.
He thinks that ETFs will not crash in a bear market, but will just reflect the down market and the up market. The downs will be overwhelmed by the ups. ETFs are not going to crash the market. This is not going to happen. ETFs were tested in 2008/9 and people who bought ETFs took comfort in them.
Most people should stay away from leveraged ETFs. Few people can use them. They can be used for managing Pensions etc. The index funds do not drive the market. No product will work well in all markets. Balanced ETFs are built properly and are currently good ETFs. The government does not like the Total Return ETFs because of tax efficiency and they are changing the law.
If you have a 5% weighting on a sector or country you have faith in, that is fine, but no more. How much to have in stocks and bonds have changed. Now use 110 year minus your age or 120 years minus your age because we are living longer. In stocks, you need US, Canadian and International stocks.
If you want income, dividends are the way to go. Do not do covered call ETFs. Go with what you understand only.
Here are some trading tips. Use only limited orders. This is a good idea because market may be off 5 to 6%. Stop losses are a good idea. Stay away from trading at the beginning (9:30 to 9:45 am) and the end of the day (3:45 to 4:00 pm). Look at the market depth and the size of the ETF. Determine when there is a sizable bid or offer and that is when you should do your transaction.
On my other blog I wrote yesterday about Methanex Corp (TSX-MX, NASDAQ-MEOH) ... learn more. Next, I will write about Magna International Inc. (TSX-MG, NYSE-MGA) ... learn more on Wednesday, December 20, 2019 around 5 pm
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