BMO Financial Group

BMO Financial Group

October 05, 2012 07:00 ET

BMO InvestorLine: ETFs Can Help Diversify a Portfolio

TORONTO, ONTARIO--(Marketwire - Oct. 5, 2012) - BMO InvestorLine encourages investors to consider including Exchange Traded Funds (ETFs) in their portfolios as part of a well-balanced investing strategy.

"Investors looking for investment options that offer diversification and broad exposure to a variety of markets - at a low cost - should consider incorporating ETFs into their portfolio," said Cesar Rainusso, Vice President, BMO InvestorLine. "While ETFs open doors to a variety of markets and can help investors hedge against risk, it's important to evaluate the areas where you are currently invested in order to avoid over-diversification."

While ETFs are relatively new to the Canadian market compared to more traditional investments such as bonds and mutual funds, ETFs in Canada have grown substantially since being introduced, according to a recent report by BMO Global Asset Management. The report, BMO Canadian ETF Outlook Update 2012, notes the industry currently stands at $50 billion CAD in assets under management (AUM); in 2012 the industry as a whole experienced double digit growth (15.9 per cent).

Mr. Rainusso noted that while the industry has made significant gains in Canada, many investors remain unfamiliar with how ETFs work. ETFs consist of a 'basket' of securities that mirror a particular market index. In addition to stocks and bonds, ETFs provide investment opportunities in market sectors that individual investors often cannot access on their own.

BMO InvestorLine offers tips to help investors incorporate ETFs into their portfolio:

Differences Count: ETFs trade on an exchange and can be bought or sold whenever markets are open. ETF investors have access to many of the same strategies available for individual stocks, such as placing market, limit, and/or stop-loss orders or short selling.

Invest for Less: ETFs generally have no minimum investment amount. Investors who are just starting out can begin with a small investment and increase the amount in the future.

Check the Track Record: As actively-managed ETFs are fairly new, they have a limited track record. Check the fund manager's background and past performance to gain insight.

Read the Fine Print: Consider the fund's investment objectives, charges, expenses and risks carefully before investing. Take some time to read the fund's prospectus, which can be obtained from a financial representative and contains this and other information about the fund.

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About BMO InvestorLine

BMO InvestorLine is an online investing service that provides clients with two ways to invest online. Clients can choose from BMO InvestorLine's top ranked Self-Directed service that provides tools to help investors make independent decisions on how to invest. BMO InvestorLine's other service, adviceDirect™ provides investors with online advice and investment recommendations for their portfolios. Clients have access to trading, quotes and account information 24 hours a day through a website or Automated Telephone Trading. BMO InvestorLine also provides users with third party research, along with leading edge tools that are informative and easy to use. As an all-in-one investment source, it is a constantly evolving, cost-efficient platform that is fully compatible with tablets.

BMO InvestorLine Inc. and BMO Ligne D'action Inc. provide this commentary to clients for informational purposes only. The information contained herein is based on sources that we believe to be reliable, but is not guaranteed by us, may be incomplete or may change without notice. The comments included in this document are general in nature, and professional advice regarding an individual's particular position should be obtained.

An adviceDirect account is a non-discretionary fee based account which offers investment recommendations. adviceDirect does not provide portfolio management by a portfolio manager. The client makes their own investment decisions and manages their own investment portfolio. adviceDirect does not offer discretionary, managed accounts.

BMO InvestorLine Inc. is a member of BMO Financial Group.

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