Thinking of investing in exchange-traded funds (ETFs)? Read the ETF Facts first!

Take the time to read the ETF Facts to find out more about the ETF before you invest.

Starting December 10, 2018, your dealer (the firm) will be required to deliver the ETF Facts to you no later than midnight on the second business day following the purchase of ETF securities. You can also consult the ETF Facts on the website of the company offering the fund, or simply ask your adviser for a copy.

What is the ETF Facts?


The ETF Facts is a two-page document that summarizes key information about an ETF in a simple, accessible and easily comparable format. It is designed to help you make an informed decision about your investment by including information such as a fund’s investments, risk rating, past performance and the costs associated with owning it.

The ETF Facts are an opportunity to have a conversation with your registered investment adviser about your investments. You may want to discuss how a particular ETF would fit within your portfolio or how certain features of the ETF, such as its fees and expenses, compare to other ETFs.

What Information is in the ETF Facts?


Here are a few sections of the ETF Facts you should pay attention to:

Quick Facts:

Includes information such as the start date and size of the fund, as well as the ETF’s management expense ratio. The management expense ratio, or MER, is a combination of an ETF’s management fee and its operating expenses.

Trading Information:

Provides information about the stock exchange where the fund is traded, the ticker symbol used to identify it and the currency in which it is traded.

Pricing Information:

Notes quick information on the ETF’s price that can be used to help determine the cost of owning the ETF compared to other similar funds.

What does the ETF invest in? This section provides an overview of the size and allocations of the fund’s investments. It may also detail the particular index it may be tracking. You will be able to quickly see the fund’s current top ten investments as well as the investment mix. This information can help give you a sense of how diversified the fund’s investments are and a better idea of the fund’s investment exposure. Depending on the type of the fund, this breakdown can be by industry, asset class, geographic location, or by some other measure.

Distributions:

If the ETF makes money, it may make payments to investors called “distributions.” The ETF Facts document will tell you how often distributions are made. Talk to your adviser to discuss how to manage any distributions you may receive (including interest, dividend or capital gains).

How risky is it, and how has the ETF performed in the past? All investments have some level of risk. It’s important to understand the risks and circumstances that could affect the ETF’s performance in order to choose an ETF that suits your needs. It can also be helpful to consider how the ETF performed compared to similar funds.

Trading ETFs:

This section explains how ETFs are traded and includes information about pricing, orders and timing of trades. ETFs have two sets of prices: market price and net asset value (NAV). They buy and sell on exchanges at market prices that can change throughout the trading day. Market price can be affected by supply, demand and the value of ETF investment holdings. NAV is calculated after the close of each trading day and reflects the value of an ETF’s investments at that point in time.

There are some other important terms explained in this section that you should discuss with your adviser, including bid-ask spread, which indicates the gap between the price a buyer is willing to pay for the ETF’s units and the price a seller is willing to accept for them.

Who is this ETF for?

This section explains what types of investors may be suited for the ETF. You and your adviser should consider its holdings, performance and risks to help determine if the fund is suitable for you.

How much does it cost?

This section shows a more detailed breakdown of the fees and expenses you would pay to buy, own and sell units of the ETF. This includes the management fees and operating expenses. They are paid by the fund and are expressed as an annual percentage of the total value of the fund.

While you don’t pay these expenses directly, they affect you because they reduce the fund’s returns. You should consider how the costs associated with the ETF may compare to other similar funds in order to choose one that suits your needs.