[Tusko]

I would appreciate some basic links on how to evaluate ETFs please.

For example: take CLAYMORE GLOBAL AGRICULTURE, COW.TO: (My life has cow themes as a farmer)
The management fees are 0.65% which seem reasonable.

What else should I consider when looking at these ETF type equities?

Thank you!

 

[Sampson]

I don't know much about the COW.TO product specifically, but some things I look for when comparing ETF's are:

1. Expenses (you've already mentioned this).
2. Holdings, and the % made up by the top 10 holdings - you may or may not want an ETF which is made up of only 5 holdings (see XIT - Canadian Tech) if you are looking for diversification.
3. How the index is constructed - market cap vs. fundamental weighting vs. other.
4. Average volume traded - if liquidity is important to you - e.g. the iShares EAFE index - the CAD$ ETF traded on the TSX has a MUCH lower volume of trading than the US$ NYSE equivalent.
5. Active vs. passive management
6. if investing in an index tracking ETF - what is the tracking error

Just a few things I could come up with on the top of my head. YMMV.

 

[dogcom]

This ETF is one way to play the agriculture sector in Canada. From what I understand fertilizer stocks should do well this year because farmers didn't buy much last year. They can only do this for one year from what I hear so they will need it this year so it should be a good season unless the equity markets bring all stocks down like last year.

 

[Preet]

4. Average volume traded - if liquidity is important to you - e.g. the iShares EAFE index - the CAD$ ETF traded on the TSX has a MUCH lower volume of trading than the US$ NYSE equivalent.

Note that when trying to ascertain the liquidity of the ETF, the ETF trading volume is not as important. Rather the underlying holdings' collective liquidity is more important as the designated broker will endeavour to keep the spread between the price and NAV low so they will make the market as necessary to avoid arbitrageurs from profiting from the spreads.

In other words, if your ETF holds 20 really big stocks, the liquidity of the ETF will be more in line with the liquidity of the 20 really big stocks, even though the ETF itself may only have a daily trading volume in the thousands of shares.

Of course, designated brokers are not infallible. And if an ETF has low trading volume, perhaps it is not widely held, and hence not profitable, and hence on the chopping block.

Just an addition to the good comment from Sampson.

 

[leslie]

http://www.indexinvestor.com/Free/ETFMarketOverview.php
http://www.theglobeandmail.com/partners/free/globeinvestor/funds/sept08/online/six-etfs.html
http://www.canadianfundwatch.com/files/anotherkind.pdf
http://www.bylo.org/ipus.html