ETFs make strides in marketplace
August 8th, 2008 Subscribe To Our Feed
Hybrid product. Offers more freedom than mutual funds
PAUL DELEAN, The Gazette
Published: 10 hours ago
In recent years, exchange-traded funds have made significant inroads in the Canadian investment marketplace, where they’re seen as a way of adding diversification to portfolios at relatively low cost. To explain what they are and how they function, we contacted Heather Pelant, head of business development, exchange-traded products, at Barclays Global Investors Canada Ltd., the company behind the iShares line of ETFs.
Q: What is an exchange-traded fund (ETF)?
A: An ETF is a hybrid product that combines some characteristics of an index (mutual) fund with those of a stock. Most ETFs invest in baskets of securities that track specific market indexes, which make them index funds in that regard. Like stocks, they can be bought and sold, long or short, on an exchange throughout the day.
Q: How does it differ from a mutual fund?
A: In several ways. MERs (management expense ratios) usually are lower than those of comparable mutual funds. Portfolio turnover is lower than mutual funds. Holdings are disclosed on a daily basis, whereas mutual funds disclose total holdings on a quarterly or semi-annual basis. They’re priced throughout the day, whereas mutual funds are priced once a day. Investors can sell them short, which they cannot for mutual funds. Investors can place a limit order (order to buy or sell at a specific price) on ETFs, but they cannot for mutual funds. They can be bought on margin the same way stocks can; mutual funds may or may not be available on margin, depending on the brokerage.
Q: How, and where, are ETFs bought and sold?
A: They’re sold like securities on stock exchanges and occupy brokerage accounts the same way stocks do.
Q: How varied is the selection?
A: According to a Morgan Stanley report from May, there were about 1,300 ETFs worldwide with more than $805 billion U.S. in assets. There are more than 80 in Canada, accounting for $20 billion in assets. There is an ETF on almost any asset class, sector or geography.
Q: Are they appropriate for the portfolio of an average investor, or only for someone who spends a lot of time researching and monitoring?
A: ETFs can be used by anyone from the average investor to the most sophisticated. If you invest in an ETF that tracks a well-known index, you are always certain about what you own. You can see the ETFs’ holdings on the ETF provider’s website or you can alternatively see the index holdings on the index provider’s website. This makes ETFs one of the most transparent investment vehicles. Most people need only follow news on the respective indexes or the markets in general to know how their investments are doing. This, in essence, may reduce the time spent monitoring or researching individual companies.
Q: Are ETFs protected against currency variations?
A: Not all ETFs are protected for currency fluctuations. Investors have to read the prospectus so they can understand the currency hedge that is put in place. iShares, for instance, offers three ETFs that are currency neutral: the iShares Canadian
S & P 500 index fund, the iShares Canadian Russell 2000 index fund and iShares Canadian MSCI EAFE index fund.
Q: What kind of fees do ETFs charge?
A: Fees vary depending on the provider or the asset class. At iShares, they range from 0.17 per cent to 0.55 per cent (annually).
Q: How are distributions paid out and treated for tax purposes?
A: The schedule of distributions varies based on the ETF provider. Some pay on a quarterly basis, some do it semi-annually. IShares doesn’t reinvest cash distributions, but dividend reinvestment programs (DRIPs) may be available at some brokerage firms for some iShares products. Distributions are taxed depending on their nature. Those characterized as Canadian dividends are taxed at the same rate as Canadian stocks. Income paid by fixed-income ETFs is taxed the same way as income paid on individual bonds, and capital gains are taxed at the same rate as capital gains on any security.
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In brief: Study tracks mutual-fund companies’ responses to shareholder proposals
August 7th, 2008 Subscribe To Our Feed
Funds show teeth
Mutual-fund companies voted in favor of nearly 40 percent of shareholder proposals, according to a study by the Investment Company Institute of more than 3.5 million proxy votes made by 160 of the largest fund companies in the 12 months that ended June 30.
At the same time, company boards opposed more than 99 percent of those same proposals, a clear indication that funds are paying more attention to shareholder concerns.
Money in numbers
The average salary of corporate accountants increased 7 percent in 2007 to $101,805, according to a survey by the Institute of Management Accountants.
Also of note: Corporate accountants with a certification such as CPA earned about 25 percent more on average ($108,852) than those without one.
An Olympic record
NBC Universal will devote 3,600 hours of TV coverage to the Summer Olympics in Beijing. That averages out to 212 hours each day to be provided through a number of different channels and the Internet.
The previous 12 Summer Olympics — from the 1960 games in Rome through Athens in 2004 — produced a total of 2,565 hours of TV coverage.
| Star news services
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Mutual Fund Explainer
March 11th, 2008 Subscribe To Our Feed
Listen. This is the mutual fund explainer. With the right research a mutual fund can be one of the best investment vehicles to park you extra cash in. Let’s face it, although, it will probably not make you the next Peter Lynch, but it can be a safe investment for those who understand what they are and how they can help you diversify your investments across many industries and services and grow your nest egg.
Popularity Contest
In the recent past, as people have become more aware of just what is a mutual fund, their popularity has increased. Today, almost every investor worth his salt will have made an investment in a mutual fund. You can also become an investor in mutual funds once you realize that putting your money into a mutual fund is very easy. You also do not need to be a big expert as to what is a mutual fund in order to invest your money wisely.
Advantages of Mutual Funds
Once you have learned about what a mutual fund is, you will become aware that there are in fact four main advantages to investing in mutual funds. Listen carefully. Here are the four main advantages to investing in mutual funds:
· Professional money management
· Liquidity
· Diversification
· Low fees
Thus, you benefit both directly and indirectly by learning about what is a mutual fund especially when you realize that these funds are handled by professionals who will keep your investment at optimum levels and invest wisely on your behalf without your having to pay for such expert handling of your money. What’s more, you can sell off your mutual fund’s shares whenever you like as long as the stock market is open for business. In fact, it is certainly different to investing in real estate, CDs and even low volume shares where your money is tied up for longer durations of time.
People who have become better acquainted with what a mutual fund is are taking to investing in mutual funds in greater numbers and this in turn sees people with low incomes to those with many millions investing their monies in mutual funds and coming out ahead in most instances.
Diversification is one of the main advantages of investing in mutual funds. The low fees that are normally in a range of two to three percent can sometimes be reduced even further. Sometimes under one percent because of large-scale investment across a wide variety of stocks and bonds. Individuals would not be able to invest on their own as efficiently or effectively unless he was billionaire like Warren Buffet. He could invest in the thousands of stocks available to a mutual fund manager.
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Simulation Programs for Mutual Funds and Stocks
March 11th, 2008 Subscribe To Our Feed
The software walks the user through the three “judgment” decisions investors must make to complete a stock evaluation, offering conservative suggestions or even, at the user’s option, making these decisions automatically. (In all cases, we remind the user that the software is just an aid to, not a replacement for, the investor’s judgment.) The software then produces useful summaries of “Reasons to Buy” and “Items to Check,” and enables the user to print a completed SSG.
BetterInvesting Take Stock™ provides the investor with an evaluation of the two critical questions to consider:
1. Is the company of high enough quality to invest?
2. Is its Stock selling for a reasonable price?
AnalyzerXL
Another useful option for you when it concerns stock & mutual fund simulation is using a product known as AnalyzerXL that will technically analyze stocks. It comes with as many as one hundred forty six different functions to conduct technical analysis. It also allows you to automatically build your charts and even make your own macros. Furthermore, with AnalyzerXL, you can download indexes, mutual funds and end-of-day stocks.
MarketBrowser
If you are somebody that would love nothing better than to perform extensive stock & mutual fund simulation on your computer, and then you need to try out another offering that is known as MarketBrowser. It is certainly excellent investment software that will easily help you chart your mutual funds and stock quotes. It will also provide you with instantaneous portfolio performance. In addition, MarketBrowser can track each stock, and mutual fund as well as index and you can also get moving averages, oscillators as well as spreads.
ESQuotes
There are also several options to choose from when it concerns stock & mutual fund simulation software, including ESQuotes. As the name implies, it provides real time quotes for your stocks for free and it is well suited in helping you to keep tabs on as well as research various stocks and options as too mutual funds. You can use it, provided you have an Internet connection, and it will keep you update dynamically with regard to market prices and volume and more.
As you can see, we have just scratched the surface as far as stock and mutual fund simulation goes. Try them all and when you find one that best suits your needs stick with it and simulate your way to profits in the market.
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No Load Mutual Funds Maximizer
March 11th, 2008 Subscribe To Our Feed
The Internet has spawned a lot of dot com companies since it’s heyday in the year 2000. They grew faster than a mushroom in a dark cave. They reached their peak that year and then crashed. If you had all of your investments in one basket of dot com companies you lost your shirt. This catastrophe illustrates why you need to diversify your investments. and not put all your investment assets in one financial basket.
High Growth Sectors
Rather than simply investing your money in diversified no load mutual funds such as Fidelity Magellan Fund or Fidelity Contrafund Fund, you would do well to look to sector funds as a means to create a better and more profitable diversified no load mutual fund portfolio. It means that, by constraining your investments according to particular sectors such as is the case with Fidelity Select Energy no load mutual fund, your investments would then be made in the energy industry, including in oil and gas corporations, integrated oil corporations and even companies providing services to oil fields would give you a better return on investment.
Sectors
How do such investments in sector based no load mutual funds actually increase the effectiveness of your money? The answer is that you need to select a sector with high growth potential, such as is the case with software and electronics. Such ‘core and satellite’ sectors will prove to be productive for you. So you can easily invest in Fidelity Select Software and Computer Services or Fidelity Select Electronics that will allow you to put your money in high growth industries and thus grow your money the most in the process.
Sector Rotation
However, there is more to this kind of no load mutual fund investing. Besides identifying the high growth sectors, you will also need to be proactively involved in your investments that means need to rotate between sectors. The best way by which an investor can maximize their potential is by switching every once in a while to sectors with highest growth potential.
You need to be tactically sound because you will then be able to see a hundred thousand dollar investment made in diversified no load mutual funds grow at approximately ten percent each year which would give you back about two and a half times the initial investment in just ten years. And, by also taking a small portion of your initial investment and apportioning it to no load sector mutual fund, you stand to gain dramatically more.
Fidelity Magellan Fund
At one time Fidelity Magellan Fund managed by Peter Lynch grew at eighteen percent a year. The fund grew so large that it became impossible for it to keep growing at that pace. So size matters. Look at some of the sector funds that are enjoying some good returns like Select Software, Select Software and Computer Services, and Select Electronics. Don’t forget to compare them to other funds in the no load select mutual fund groups.
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Mutual Fund Nitty Gritty
March 11th, 2008 Subscribe To Our Feed
Listen. Many individual investors put their money together with a professional manager who invests that money in securities, such as short-term money market instruments, bond, and/or stocks. The manager is also called the portfolio manger and trades the fund’s securities hoping to make a profit. A profit is a capital gain and is taxable. A capital loss may occur as well. Some of the stocks may pay interest income or dividends. By investing in many different kinds of securities, the theory is that there is less risk involved. You’ve probably heard the expression “Don’t put all your eggs in one basket”.
The first mutual fund was invented in 1924 by the Massachusetts investors Trust (now MFS Investment Management) and after a year in business had 200 investors or shareholders and $392,000 in assets. The mutual fund industry has grown to ten of millions of dollars today.
Diversification
Among share mutual funds, there is a great deal of diversity in various funds:
International mutual funds contain shares of companies that trade on the foreign markets
Domestic mutual funds contain shares of companies that trade only in the United States
Small cap funds contain shares of companies with capitalization under a certain dollar amount
Large cap funds contain shares of companies with capitalization over a certain dollar amount
Sector funds contain shares of companies in a certain line of business
For example, some investors prefer investing in mutual funds in the health care industry, with a portfolio of shares in pharmaceutical and managed care companies. The hottest trend in sector funds is green funds: mutual fund portfolios based on companies that are involved in the environmental industry. These funds include shares of companies operating in the fields of wind power, solar power, hybrid vehicle development, geothermal energy harvesting, earth-friendly construction materials, recycling and waste management.
A Variety of Investment Vehicles
What follows is a list of just a few of the different blends of individual investments that you will find in mutual funds. The makeup of mutual funds varies because each fund manager is a unique individual:
Bond Funds
Share Funds
Mixed Funds
Bond funds – the mutual fund contains bonds only. Experts in mutual fund investing generally advise that bonds are lower risk than other kinds of mutual funds.
Share Funds – the mutual fund contains shares of stock in publicly traded companies only. The risk is much higher than mutual fund investing in bond funds, but the rewards can be much greater in the form of high profits.
Mixed Funds – most investors prefer investing in mutual funds that contain a blend of bonds and shares of stocks.
Mutual funds with the highest volatility (large increases in the price of the stock) tend to have the highest risk while bond funds have the lowest risk.
Building A Successful Portfolio
Investing is a lot like building a house. If you use good materials and put in a solid foundation of the fundamentals, the fund will increase in value, just like a finely crafted house. If it invests in dubious securities, the fund will fall in value so it’s important to pick a fund with a winning portfolios manager that has a good track record.
Tracking Performance
All mutual funds track their performance so the investors can measure how well the mutual fund is handling their investments when compared to the plethoras of available mutual funds. If the mutual fund does not grow, then the portfolio manager probably used poor judgment in stock selection. A good manager will recognize his mistakes and take action to select better securities.
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