What is an ETF

Exchange Traded Funds (ETFs) are an easy-to-use, low cost way to invest your money. An ETF can provide you with access to a diversified portfolio of stocks or bonds in a single investment that trades just like a stock.

 


Comparing ETFs and mutual funds

Many investors are familiar with mutual funds. How are ETFs similar?
And what makes them different?

Hover over the icons to learn more.

Similarities
Differences
Diversification
Professional management
Risk and reward
Cost
Fund performance
Buying and selling
Knowing what you own
Comparing ETFs and mutual funds
Diversification Knowing what you own Buying and selling Fund performance Cost Risk and reward Professional management
Similarities
Diversification
Diversification
You get a diversified collection of stocks and/or bonds, which can potentially help reduce risk compared to individual securities.
Professionally managed
Professionally managed
The funds are overseen by professional managers.
Risk and reward
Risk and reward
The risk profile of an ETF is derived from its underlying holdings, as with mutual funds.
Differences
Cost
Cost
ETFs typically cost less than comparable mutual funds (iShares Core ETFs cost about 1/8th as much as the typical mutual fund)1.
Fund performance
Fund performance
Most ETFs seek to closely match the performance of an established stock or bond index, such as the S&P 500 or the TSX. Actively managed mutual funds try to beat the index, which can be hard to do, especially after fees and taxes.
Buying and selling
Buying and selling
As with stocks, you can buy and sell ETFs at the market price whenever the market is open. Mutual fund shares are purchased directly from the fund at Net Asset Value and priced once a day after the market closes.
Knowing what you own
Knowing what you own
Because ETFs usually aim to track an index, their holdings change relatively little over time – without the “style drift” that may surprise mutual fund investors.

Benefits of using ETFs



Cost Icon Similar to mutual funds, iShares ETFs are diversified mixed of stocks or bonds that are managed by experienced professionals. ETFs typically offer a few extra perks, including lower fees and increased price transparency throughout the day, so you always know what your investment is worth.
Capital Icon On average, iShares ETFs cost 1/3rd the price of mutual fund. The savings an investor can achieve from lower fess can be significant over time2.
Pie Chart Icon iShares ETFs make it easy to invest in a wide array of markets. Whether broad like the S&P TSX, in niche sectors, or targeted to a specific goal


Potential Savings

In this example, you could save $176,331 with iShares ETFs.

Let's assume a 5% return on both choices...
  • $250,000
    Today
  • $289,396
    5 Years Later
  • $314,388
  • $335,001
    10 Years Later
  • $395,359
  • $387,793
    15 Years Later
  • $497,184
  • $448,904
    20 Years Later
  • $625,236
    Over $176K

Traditional Mutual Funds vs iShares ETF

Chart reflects the hypothetical growth of a fictional investment of $250, 000 and assumes the reinvestment of dividends and capital gains. Fund expenses, including management fees and other expenses have been deducted. The graph is for illustrative purposes only and is not indicative of the performance of any actual fund or investment portfolio.