| |
 |
  |
|
| News Articles Stocks DRPs Brokers Links Free Newsletters |
| Rothery Report: Login Learn More Performance Sample Subscribe Contact Us |
5 Stingy Stocks for 2008
5 Graham Stocks for 2008
Is your index too active?
Graham's Simple Way
Canadian Graham Stocks
5 Stingy Stocks for 2007
8 Graham Stocks for 2007
Top SPPs
The Simple Way
A hole in your IPO?
Monkey Business
8 Stingy Stocks for 2006
Graham Stock Gainers
Blue-Chip Blues
Are Dividends Safe?
SPPs for 2005
Graham's Simplest Way
Selling Graham Stocks
RRSP Money Market Funds
Stingy Stocks for 2005
High Performance Graham
Intelligent Indexing
Unbundling Canadian ETFs
A history of yield
A Dynamic Duo
Canadian Graham Stock
Dividends at Risk
Thrifty Value Stocks
Stocks in Short Supply
The New Dividend
Hunting Goodwill
SPPs for 2003
RRSP: don't panic
Desirable Dividends
Stingy Selections 2003
10 Graham Picks
Growth Eh?
Timing Disaster
Dangerous Diversification
The Coffee Can Portfolio
Down with the dogs
Stingy Selections
Frugal Funds
Graham Revisited
Just Spend It
Ticker Temptation
Stock Mortality
Focus on Fees
SPPs for the Long Term
Seeking Solid Stocks
Relative Strength
The VR Approach
The Irrational Investor
Value Investing
Eye on PI
MoneySense Articles
Small stocks, big profits
Cdn Top 200 2008
US Top 500 2008
Value that sizzles
So simple it works
Income 100
No assembly required
Investing by the book
Cdn Top 200 2007
US Top 500 2007
Invest like the masters
A simple way to get rich
Top Trusts 2006
Stocks for cannibals
Car bites dogs
Cdn Top 200 2006
US Top 1000 2006
So easy, so profitable
Top Trusts 2005
Dogs of the Dow
Top 200 2005
Money for nothing
Yield of dreams
Return of the master
Norm Speaks
Compare buying an ETF to the cost of buying its stocks
| Cost Comparison: ETF vs Stocks in the ETF | ||
| Canadian ETF | ETF Cost | Stock Cost |
| iShares CDN Tech Sector (XIT) | $1945.00 | $160.00 |
| iShares CDN REIT Sector (XRE) | $1945.00 | $240.00 |
| iShares CDN Financial Sector (XFN) | $1945.00 | $580.00 |
| iShares CDN Dividend (XDV) | $1770.00 | $600.00 |
| iShares CDN Gold Sector (XGD) | $1945.00 | $700.00 |
| iShares CDN Materials Sector (XMA) | $1945.00 | $1080.00 |
| iShares CDN Energy Sector (XEG) | $1945.00 | $1160.00 |
| iShares CDN Jantzi Social (XEN) | $1770.00 | $1200.00 |
| iShares CDN LargeCap 60 (XIU) | $615.00 | $1220.00 |
| iShares CDN Growth (XCG) | $1770.00 | $1260.00 |
| iShares CDN Income Trust Sector (XTR) | $1945.00 | $1280.00 |
| iShares CDN Value (XCV) | $1770.00 | $1600.00 |
| iShares CDN Completion (XMD) | $1945.00 | $3860.00 |
| iShares CDN SmallCap (XCS) | $1945.00 | $4220.00 |
| iShares CDN Composite (XIC) | $895.00 | $5060.00 |
| iShares CDN S&P 500 (XSP) | $860.00 | $10020.00 |
| iShares CDN MSCI EAFE (XIN) | $1735.00 | $16360.00 |
| ETF Stats | ||
| Canadian ETF | MER | # Stocks |
| iShares CDN Tech Sector (XIT) | 0.55% | 8 |
| iShares CDN REIT Sector (XRE) | 0.55% | 12 |
| iShares CDN Financial Sector (XFN) | 0.55% | 29 |
| iShares CDN Dividend (XDV) | 0.50% | 30 |
| iShares CDN Gold Sector (XGD) | 0.55% | 35 |
| iShares CDN Materials Sector (XMA) | 0.55% | 54 |
| iShares CDN Energy Sector (XEG) | 0.55% | 58 |
| iShares CDN Jantzi Social (XEN) | 0.50% | 60 |
| iShares CDN LargeCap 60 (XIU) | 0.17% | 61 |
| iShares CDN Growth (XCG) | 0.50% | 63 |
| iShares CDN Income Trust Sector (XTR) | 0.55% | 64 |
| iShares CDN Value (XCV) | 0.50% | 80 |
| iShares CDN Completion (XMD) | 0.55% | 193 |
| iShares CDN SmallCap (XCS) | 0.55% | 211 |
| iShares CDN Composite (XIC) | 0.25% | 253 |
| iShares CDN S&P 500 (XSP) | 0.24% | 501 |
| iShares CDN MSCI EAFE (XIN) | 0.49% | 818 |
| The number of stocks needed to replicate different ETFs | ||||
| % of ETF | ||||
| Canadian ETF | 25% | 50% | 75% | 100% |
| iShares CDN Tech Sector (XIT) | 1 | 2 | 4 | 8 |
| iShares CDN REIT Sector (XRE) | 2 | 3 | 7 | 12 |
| iShares CDN Financial Sector (XFN) | 2 | 4 | 7 | 29 |
| iShares CDN Dividend (XDV) | 4 | 10 | 18 | 30 |
| iShares CDN Gold Sector (XGD) | 2 | 3 | 7 | 35 |
| iShares CDN Materials Sector (XMA) | 2 | 4 | 12 | 54 |
| iShares CDN Energy Sector (XEG) | 2 | 5 | 11 | 58 |
| iShares CDN Jantzi Social (XEN) | 4 | 9 | 17 | 60 |
| iShares CDN LargeCap 60 (XIU) | 5 | 12 | 25 | 61 |
| iShares CDN Growth (XCG) | 3 | 7 | 15 | 63 |
| iShares CDN Income Trust Sector (XTR) | 3 | 11 | 27 | 64 |
| iShares CDN Value (XCV) | 3 | 8 | 17 | 80 |
| iShares CDN Completion (XMD) | 17 | 45 | 91 | 193 |
| iShares CDN SmallCap (XCS) | 23 | 58 | 108 | 211 |
| iShares CDN Composite (XIC) | 7 | 19 | 50 | 253 |
| iShares CDN S&P 500 (XSP) | 15 | 53 | 151 | 501 |
| iShares CDN MSCI EAFE (XIN) | 27 | 90 | 257 | 818 |
|
| Introduction |
|
|
This calculator explores two options for long-term index investors
with a focus on fees. The first option is to purchase an iShares
exchange traded fund (or ETF). Here fees include a brokerage
commission to buy the ETF and an annual fee (or MER) that is charged
by the ETF. The second option is to buy the index's stocks directly.
In this case many more brokerage commissions are charged but there is
no annual fee.
At first glance, the choice between buying a low-cost exchange-traded fund that holds many stocks or buying each of the stocks directly appears to be obvious. The exchange-traded fund is likely to be the better bargain. However, buying the stocks directly may be better for some investors because the Canadian stock market is very small and it is dominated by a few big names. As a result, one might reasonably approximate an index fund by holding only a few stocks. One could even replicate the entire index by buying all of the stocks that it holds. Our calculator lets you run the numbers for various portfolios sizes, holding periods, growth rates, commission costs, replication ratios, and dividend reinvestment frequencies. Try it out. Run a few different scenarios and you'll soon discover that buying the stocks directly can be a good bargain for longer holding periods and larger portfolios sizes. This is particularly the case for specialized ETFs that track only a few stocks. On the other hand, inexpensive ETFs such as the iShares Large Cap 60 (XIU) or very diversified ETFs such as the iShares S&P500 (XSP) continue to represent good bargains for many investors. |
|
| Related Articles |
|
| Unbundling Canadian ETFs |
|
| Definitions and Notes |
|
Portfolio Size ($): The starting size of the portfolio in dollars.
Commission Per Trade ($): The cost of each stock or ETF purchase. We assume at least one buy and one sell transaction for each stock and ETF. That is, the stocks and ETFs are bought initially and sold a the end of the holding period. Additional commissions are charged as dividends are reinvested.
Annual ETF Growth Rate (%): The assumed growth rate of the ETF. As the ETF grows, the dollar cost of its MER fee also increases. Here we approximate the annual cost by charging by the ETF at its MER rate based on the average portfolio size at the start and the end of the year.
Dividend Reinvestment (Times Per Year): The number of times a year that dividends are reinvested. If 4 is selected (quarterly reinvestments) then 4 commissions will be charged per year for the ETF and 4 times the number of stocks used to replicate the index will be charged per year for the stock portfolio.
Amount of index to replicate (%): Select 100 here if you want to buy every stock in the ETF which represents 100% replication. Select a lower percentage if you want to buy the largest stocks that form 25, 50, or 75 percent of the index. Buying less than 100% of the index is less expensive but your returns will not match the index's returns.
All ETF data is based on iShares info collected on February 21, 2008.
|
|
| About Legal | Contact Us |
A Dan Hallett and Associates Inc. publication. Norm Rothery, Ph.D., CFA, is the Chief Investment Strategist at Dan Hallett and Associates Inc. (DH&A) and the founder of StingyInvestor.com. DH&A is registered as Investment Counsel in the province of Ontario. Norm, DH&A, or related-parties may have an interest in the securities mentioned. More...