Chapter 19: Exchange-Traded Funds

In this section

• 19.1 The Regulation and Structure of Exchange-Traded Funds
  • 19.1.1 Overview of ETFs
    Explore the fundamental characteristics and regulatory frameworks surrounding Exchange-Traded Funds, and distinguish them from mutual funds.
  • 19.1.2 Regulatory Framework
    An in-depth look at the regulatory framework governing Exchange-Traded Funds (ETFs) in Canada, focusing on investor protection, market integrity, disclosure, and compliance.
• 19.2 Key Features of Exchange-Traded Funds
  • 19.2.1 Trading Flexibility
    An in-depth exploration of the trading flexibility of Exchange-Traded Funds including intra-day trading and liquidity considerations.
  • 19.2.2 Cost Efficiency
    An in-depth analysis of the cost efficiency of Exchange-Traded Funds focusing on lower expense ratios and tax advantages.
  • 19.2.3 Diversification Benefits
    Understanding the diversification benefits of Exchange-Traded Funds (ETFs) through exposure across asset classes and their role in risk management and portfolio stability.
• 19.3 The Various Types of Exchange-Traded Funds
  • 19.3.1 Equity ETFs
    Detailed exploration of Equity ETFs, including stock market exposure and style-specific options, beneficial for Canadian Securities Course learners.
  • 19.3.2 Bond ETFs
    Comprehensive analysis of fixed-income-focused Exchange-Traded Funds (ETFs) and their sensitivity to interest rate changes.
  • 19.3.3 Commodity and Specialty ETFs
    Exploration of Commodity and Specialty ETFs, their features, and benefits in the investment landscape.
• 19.4 The Risks of Investing in Exchange-Traded Funds
  • 19.4.1 Market Risk
    An in-depth analysis of the market risks associated with investing in Exchange-Traded Funds (ETFs), with a focus on volatility considerations and exposure to general market conditions.
  • 19.4.2 Tracking Error
    Understanding the nature of tracking error, its causes, and its implications on ETFs and index parity.
  • 19.4.3 Liquidity Risk
    Examining the impact of liquidity levels on ETF trading execution and market prices.
• 19.5 Comparing Exchange-Traded Funds and Mutual Funds
  • 19.5.1 Cost and Fees
    An in-depth exploration of cost and fees between Exchange-Traded Funds (ETFs) and Mutual Funds.
  • 19.5.2 Management Style
    A comprehensive examination of management styles in Exchange-Traded Funds (ETFs) compared to Mutual Funds, focusing on the differences between passive and active management styles.
  • 19.5.3 Tax Considerations
    A comprehensive analysis of the tax implications for ETFs and mutual funds, focusing on how these investment vehicles are treated under Canadian tax law.
• 19.6 Taxation of Investors in Exchange-Traded Funds
  • 19.6.1 Tax Efficiency
    An in-depth exploration of the tax efficiency afforded by exchange-traded funds, focusing on capital gains tax implications due to their inherent structure.
  • 19.6.2 Dividend and Interest Income
    Understanding the tax implications for income distributions from ETFs, including dividend and interest income.
• 19.7 Investment Strategies Using Exchange-Traded Funds
  • 19.7.1 Buy-and-Hold Strategy
    Exploring the Buy-and-Hold Strategy using Exchange-Traded Funds (ETFs) for long-term passive investing.
  • 19.7.2 Sector Rotation
    Analyzing the use of sector rotation as an investment strategy using ETFs, with a focus on tactical asset allocation to optimize performance based on changing market conditions.
  • 19.7.3 Hedging and Leveraged ETFs
    An exploration of risk mitigation and amplification strategies using inverse and leveraged ETFs for hedging and speculative purposes.
• 19.8 Other Related Products
  • 19.8.1 Inverse ETFs
    An overview of Inverse ETFs, including their structure, use case in investment strategies, and associated risks.
  • 19.8.2 Leveraged ETFs
    Leveraged ETFs aim to multiply the returns on the underlying index or asset using financial derivatives and debt instruments, offering enhanced gains, but also elevated risks.
  • 19.8.3 Actively Managed ETFs
    Understanding actively managed ETFs and the strategic approaches that blend active management within an ETF structure.