In the past there was a practice amongst investors to purchase mutual funds with contributions to their retirement accounts. However currently there is a significant shift occurring as savvy and disgruntled investors are turning to exchange traded funds. The reasons are:
- Much lower management expense ratio
- Better tax treatment of gains
- Can be bought and sold like stocks during market hours
- Cost of trading ETFs are far lower at discount brokerage firms (average $10 per trade of any size) than paying high commissions to individual financial planners
- Risk control is easy with exchange traded funds since one can apply Stop loss orders with on-line discount brokerage accounts
- Some of most highly followed ETFs have volumes far higher than many blue chip stocks of NYSE. In fact well known ETFs such as SPY (S&P 500), QQQQ (Nasdaq 100), IWM (Russell 2000), EEM (emerging markets) and EFA (Europe Japan and Australia) represent a good portion of the volume on U.S. exchanges.
- XIU, Barclay’s ishares Canada, is considered the bench mark of Canadian market. It tracks the top 60 large-cap companies that trade on the Toronto Stock Exchange (TSX 60) and trades an average of 9 million shares per day. This kind of volume far surpasses any other ETFs or stocks on the TSX.