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Exchange-Traded Funds (ETFs)

An Easy Way to Diversify Your Portfolio

Exchange-traded funds (ETFs) are like a “variety pack” of investments that can help diversify your portfolio without purchasing individual securities.

What are ETFs?

Think of ETFs as a variety pack of stocks, bonds and other investments that can add diversification to your portfolio without the same price tag as purchasing the investments individually. ETFs trade on major stock exchanges throughout the day, and the investments in them track specific market , or commodities (such as oil).

Benefits of Investing in ETFs:

Get Instant Diversification

ETFs provide access to a wide variety of sectors and indices, as well as investment types (stocks, bonds and cash).

Typically Lower Fees

ETF fees are usually represented as a Management Expense Ratio (MER), which is often lower than the fees on other investment types.

They’re Easy to Buy and Sell

ETFs have the same liquidity as other securities that trade on major exchanges.

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Frequently Asked Questions

ETF shares, or units, can be bought and sold on a stock exchange throughout the trading day, just like stocks. They are a one-stop shop for purchasing an underlying asset or asset class.

An ETF's underlying securities are largely determined by the investment objective of the ETF. Some common underlying assets include stocks, bonds, commodities and currencies.

ETFs are open-ended, meaning units can be created or redeemed based on investor demand. This process is managed by market makers. A market maker is a trader at a bank or brokerage tasked with making firm bids or offers to ensure liquidity is maintained in the market.

An ETF listed for trading on a Designated Stock Exchange (DSE) is a qualified investment for registered plans. A DSE includes the TSX and other Canadian and U.S. exchanges. You can find a list of DSEs by visiting www.canada.ca and searching "designated stock exchanges."

Exchange-traded funds (ETFs) provide the risks and rewards of the underlying market:

  • ETFs can give you access to a wide variety of sectors and indices, helping you achieve diversification
  • ETFs offer the same liquidity (ability to easily buy and sell) as other securities that trade on major exchanges
  • Most ETFs have low fees, making them a cost-effective way to diversify a portfolio

Like stocks, exchange-traded funds are bought and sold on major stock exchanges throughout the trading day, so there is a cost to trade them. At RBC Direct Investing, you’ll pay just $9.95 flat CDN or US per online and mobile tradeDisclaimer 2 with no minimum balance or trading activity required. When you make 150+ trades per quarter, you’ll pay only $6.95 flat CDN or US per online and mobile equity trade.

ETFs 101: From the Basics to the Benefits

Learn what makes ETFs a popular choice for investors and get inspiration for your portfolio with our guide to ETFs.

Read More about ETFs

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There may be commissions, trailing commissions, investment fund management fees and expenses associated with investment fund and exchange-traded fund (ETF) investments. On or after June 1, 2022, any trailing commissions paid to RBC Direct Investing Inc. will be rebated to clients pursuant to applicable regulatory exemptions. Before investing, please review the applicable fees, expenses and charges relating to the fund as disclosed in the prospectus, fund facts or ETF facts. Mutual funds and ETFs are not guaranteed, their values change frequently and past performance may not be repeated. For money market funds there can be no assurances that the fund will be able to maintain its net asset value per security at a constant amount or that the full amount of your investment in the fund will be returned to you.
Legal Disclaimer
Information provided on this page is for your general information and is not intended to provide legal, investment, financial, accounting or tax advice. If you require any such advice, you should retain the services of a competent professional.