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Are sector specific ETFs in Canada really worth it?

There aren't a whole lot of options for these ETFs so you could easily replicate them by buying the individual stocks.

Take XFN for example. Management fee is 0.55% but 4 companies make up over 60% of the etf and if you go a bit further 7 companies make up over 80%. I don't think you'll find its worthwhile to pay the yearly management fee.
 

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I bought 70 XFN on 2/24/09, seeing this post got me to thinking what if
I used the 833 to buy the top 6 of XFN using 2/24/09 close....

Code:
				Close	Apr 03	
Stock	#	Price	Total	Apr 03	Amount	"+/-"
XFN	70.00	$11.90	$833.00	$15.72	$1,100.40	$267.40
						
ry	4.9	$28.48	$139.55	$38.47	$188.50	$48.95
td	3.93	$35.25	$138.53	$46.18	$181.49	$42.95
bns	5.3	$26.24	$139.07	$32.13	$170.29	$31.22
mfc	10.3	$13.50	$139.05	$16.40	$168.92	$29.87
bmo	5.33	$26.00	$138.58	$34.92	$186.12	$47.54
cm	3.33	$41.56	$138.39	$48.87	$162.74	$24.34
			$833.18		$1,058.06	$224.88
no commissions here or the 224 would have been about $60 less.


Try your calculations using $10k and a 10 year horizon. Your management fees come out to $550 for the etf over 10 years. Your stocks will still be 60 dollars.

Lets say banks rally and in 10 years your $10k is now worth a $100k in the etf....your management fees are now $550 dollars a year not including all of the additional fees over the last 9 years. Your stock only cost you the original $60.

Better yet maybe iShares decides to shutdown the etf at a low point in the market. They'll cash you out at a loss even though the etf represents perfectly strong companies that will eventually rebound.

I'm not against etf's. I own a bunch myself. People just need to be aware of of some of the issues with sector specific/ exotic etfs. When 7 stocks make up 81% of the etf then you need to wonder if its worth it.
 
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