When to Use an ETF

Investors have poured billions into low-cost ETFs in recent years, but does it always make sense to go passive? Consider this first

Jocelyn Jovene 10 December, 2020 | 1:47AM
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As fees have come down, investors have poured billions of dollars into exchange traded funds (ETFs) in recent years. Passive investing is now a massive and powerful driver of change in the asset management industry.

Not only has this led to incredible growth in the number of funds on offer to investors, but the increase in competition has helped force fees down. Canadian investors can now hold a fund that tracks the TSX 100 for as little as 0.06% - equivalent of 60 cents for every $1,000 invested.

It's no surprise then that in Canada, passive funds have attracted flows at a faster pace than active funds, even in the recent pandemic.

Does that mean you should always choose a passive fund? No. There is a time and place in an investment portfolio for active fund managers to shine, but passive funds can be an effective way to generate returns while keeping costs down. Here we look at when you should use one: 

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Jocelyn Jovene

Jocelyn Jovene  Senior Editor, Morningstar France

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