The rich certainly get richer, and that remains true in this market. After all, the market is a place where large investments can be made even larger. And those with money on hand have the means to take huge risks, without the fear of losing everything.
So what if you’re one us regular Joes – ones that have like $500 in cash they want to invest for long-term growth and income? In that case, an exchange-traded fund (ETF) with a focus on an Index might be the right choice.
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Why an Index ETF?
When it comes to investing long term, there are many benefits to investing in an ETF that focuses on an Index. First off, there is broad diversification in most cases. Whether it’s investing through numerous equities, across sectors, or through a mix of bonds and equities, this diversification reduces your overall risk.
Furthermore, you can usually get an ETF at a much lower cost than it would take to invest in all of these equities and other investments. What’s more, they also have lower expense ratios and generate lower taxable events. All this can save you a lot of cash in the long run. And with these ETFs trading like a stock, they’re quite liquid. If you need the cash, you can take it out, unlike other funds or a guaranteed investment certificate (GIC)!
What’s more, these ETFs are designed for long-term performance. You don’t have to check in on them everyday. Instead, you can count on managers to actively look after the portfolio. And with the list of holdings always available, there is transparency as to where those managers are investing as well.
One I’d consider
One of the top choices I would consider on the TSX today is the CI Morningstar Canada Value Index ETF (TSX: FXM). This is an excellent ETF that tracks the performance of the Morningstar Canada Target Value Index. It aims to capture the performance of the diversified Canadian companies that Morningstar considers valuable.
The ETF currently holds a management fee at just 0.60%, with its management expense ratio (MER) at 0.65%. Shares of the ETF have done quite well over time as well. As of writing, shares are up 5% in the last three months and over 10% in the last five years. That’s during a time of incredible volatility, as you’re likely to note.
The company also invests in a range of holdings that it deems valuable. This includes all market capitalizations, as well as looking for companies the ETF believes trade below fair value. This would be based on things like financial ratios, future growth potential, and overall business health. Plus, there isn’t a focus on one sector over the other. Instead, value comes first.
Where it invests
Right now, this ETF invests across a wide range of sectors. It has the highest holdings among financial services, energy, and utilities. This is followed by basic materials, consumer cyclical stocks, and industrials. There are lower investments in technology, communication services, and consumer defence. It’s currently not investing in real estate or healthcare.
Even if you don’t want to invest in this ETF, eyeing up the investments it makes can be especially beneficial for investors. While it holds the most in financial services, its highest investment for instance is in Celestica (TSX: CLS). So looking into this stock might also prove beneficial for you as well! Overall, however, this ETF looks like the best option for those wanting in on the market, without the worry.
