Are you looking to start investing with just $500?
If so, it pays to invest in exchange-traded funds (ETFs). There are several reasons for this:
- ETFs have lower fees than other types of funds.
- ETFs, with some exceptions, are not as difficult to analyze as individual stocks. The built-in diversification provides broad market exposure without the need to thoroughly understand individual stocks.
- ETFs are usually fairly diversified, meaning less risky than certain other investment options (if you’re down to your last $500, you can’t “afford” to take much risk).
So, ETFs have a lot of things going for them. With that said, they are not a magic pill. You’ll find plenty of ETFs out there that have dangerous amounts of leverage, aren’t diversified enough, or don’t track an index. You’ll want ETFs that have the opposite characteristics. In this article, I will explore one ETF that is worth being held in many Canadian investors’ portfolios — perhaps even yours!
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TD Canadian Equity Index ETF
TD Canadian Equity Index ETF (TSX: TTP) is a Canadian index fund offered by Toronto-Dominion Bank. Specifically, it is offered by TD’s Asset Management Division. A relative newcomer to the world of Canadian ETFs, it has already distinguished itself for its low fees. TTP’s management fee is 0.04%, and its management expense ratio (MER) is 0.05%. This makes the TD Canadian Equity Fund competitive with the biggest U.S. funds in terms of fees and much cheaper than the dominant Canadian equity funds.
Another fairly unique characteristic of the TD Canadian Equity fund is the fact that it tracks the Solactive Canada Broad Market Index. This is very different from the TSX Composite Index and the TSX 60. For one thing, this index has 276 stocks, making it more diversified than either of S&P Global’s Canada Indexes. For another thing, it isn’t as well covered by existing firms compared to the S&P Global Indexes. So, its components may have untapped opportunities.
When you look at the composition of the Solactive Canada Broad Market Index, you’ll see that it overlaps other indexes quite a bit. Its top 10 holdings are mainly banks, energy companies, and railroads. Those should be familiar sectors for anybody with experience in Canadian markets. However, they aren’t identical to the Top 10 of the TSX Composite Index. So, there might be some differences in the two index’s methodologies.
Foolish bottom line
The bottom line on TD’s Canada Equity fund is this: it’s one of the cheapest Canadian index funds out there, and it tracks a unique index.
If you’re already holding Canadian ETFs, it can add more diversification to your portfolio. If you’re seeking more small-cap exposure than the other indexes have, TTP can do that for you. Finally, the fund is gaining in popularity and already has $1.87 billion in assets under management. This should result in good liquidity over time.
