Exchange-Traded Funds (ETFs) Facts An example
When you invest in an ETFAn exchange-traded fund (ETF) is an investment fund whose securities are traded on an exchange like shares.
These funds generally track a benchmark index. Unlike a mutual fund manager, an ETF manager does not seek to maximize the fund’s return but only to follow an index; this explains the typically lower management fees for ETFs. , you buy units of the ETF. The ETF units are traded on a stock exchange, just like shares.
You can also read the ETF Facts before investing by:
- viewing it on the website of the firm offering the ETF
- requesting a copy from your investment dealer representative
Starting on December 10, 2018, your dealer will be required to deliver the ETF Facts to you no later than midnight on the second business day after you enter into a purchase of ETF units.
End of the warningHere is a sample Fund Facts that will be given to you. You will be able to learn more about a particular section by clicking on the numbered tablet to enlarge it.
XYZ S&P/TSX 60 Index ETF
July 30, 20XX
XYZ
This document contains key information you should know about XYZ S&P/TSX 60 Index ETF. You can find more details about this exchange-traded fund (ETF) in its prospectus. Ask your representative for a copy, contact XYZ ETFs at 1‑800‑555‑5555 or [email protected], or visit www.xyzetfs.com.
Before you invest, consider how the ETF would work with your other investments and your tolerance for risk.
What does the ETF invest in?
This ETF invests in the same companies and in the same proportions as the S&P/TSX 60 Index. The S&P/TSX 60 Index is made up of 60 of the largest (by market capitalization) and most liquid securities listed on the Toronto Stock Exchange (TSX), as determined by S&P Dow Jones Indices.
The charts below give you a snapshot of the ETF’s investments on June 1, 20XX. The ETF’s investments will change to reflect changes in the S&P/TSX Index.
Top 10 investments
(June 1, 20XX)
| Order | Nom de l'entreprise | Part dans le fond (Pourcentage) |
|---|---|---|
| 1. | Royal Bank of Canada | 7.5% |
| 2. | Toronto-Dominion Bank | 7.1% |
| 3. | Canadian Natural Resources | 5.8% |
| 4. | The Bank of Nova Scotia | 4.1% |
| 5. | Cenovus Energy Inc. | 3.7% |
| 6. | Suncor Energy Inc. | 3.2% |
| 7. | Enbridge Inc. | 3.1% |
| 8. | Canadian Imperial Bank of Commerce | 2.9% |
| 9. | Manulife Financial Corporation | 2.7% |
| 10. | Canadian National Railway Company | 1.9% |
| Total percentage of top 10 investments | 42.0% | |
| Total number of investments | 60 | |
Investment mix
(June 1, 20XX)
Industry
- Financial services
- 33.9%
- Energy
- 26.1%
- Materials
- 15.1%
- Industrials
- 8.2%
- Consumer discretionary
- 5.9%
- Telecommunication
- 4.1%
- Healthcare
- 2.3%
- Consumer staples
- 2.0%
- Information technology
- 1.9%
- Media
- 0.6%
How risky is it?
The value of the ETF can go down as well as up. You could lose money.
One way to gauge risk is to look at how much an ETF’s returns change over time. This is called “volatility”. In general, ETFs with higher volatility will have returns that change more over time. They typically have a greater chance of losing money and may have a greater chance of higher returns. ETFs with lower volatility tend to have returns that change less over time. They typically have lower returns and may have a lower chance of losing money.
Risk rating
XYZ ETFs has rated the volatility of this ETF as medium. This rating is based on how much the ETF’s returns have changed from year to year. It doesn’t tell you how volatile the ETF will be in the future. The rating can change over time. An ETF with a low risk rating can still lose money.
Low Low to medium Medium Medium to high High
For more information about the risk rating and specific risks that can affect the ETF’s returns, see the Risk section of the ETF’s prospectus.
No guarantees
ETFs do not have any guarantees. You may not get back the amount of money you invest.
How has the ETF performed?
This section tells you how units of the ETF have performed over the past 10 years.
Returns1 are after expenses have been deducted. These expenses reduce the ETF’s returns. This means that the ETF’s returns may not match the returns of the S&P/TSX Index.
Year-by-year returns
This chart shows how units of the ETF performed in each of the past 10 years. The ETF dropped in value in 3 of the 10 years.
The range of returns and change from year to year can help you assess how risky the ETF has been in the past. It does not tell you how the ETF will perform in the future.
Best and worst 3-month returns
This table shows the best and worst returns for units of the ETF in a 3-month period over the past 10 years. The best and worst 3-month returns could be higher or lower in the future. Consider how much of a loss you could afford to take in a short period of time.
| Return | 3 months ending | If you invested $1,000 at the beginning of the period | |
|---|---|---|---|
| Best return | 32.6 % | Apr. 30, 20XX | Your investment would rise to $1,326. |
| Worst return | -24.7 % | Nov. 30, 20XX | Your investment would drop to $753 |
Average return
The annual compounded return of the ETF was 6.8% over the past 10 years. A $1,000 investment in the ETF 10 years ago would now be worth $1,930.
Trading ETFs
ETFs hold a basket of investments, like mutual funds, but trade on exchanges like stocks. Here are a few things to keep in mind when trading ETFs:
Pricing
ETFs have two sets of prices: market price and net asset value (NAV).
Market price
- ETFs are bought and sold on exchanges at the market price. The market price can change throughout the trading day. Factors like supply, demand, and changes in the value of an ETF’s investments can affect the market price.
- You can get price quotes any time during the trading day. Quotes have two parts: bid and ask
- The bid is the highest price a buyer is willing to pay if you want to sell your ETF units. The ask is the lowest price a seller is willing to accept if you want to buy ETF units. The difference between the two is called the “bid-ask spread”.
- In general, a smaller bid-ask spread means the ETF is more liquid. That means you are more likely to get the price you expect.
Net asset value (NAV)
- Like mutual funds, ETFs have a NAV. It is calculated after the close of each trading day and reflects the value of an ETF’s investments at that point in time.
- NAV is used to calculate financial information for reporting purposes – like the returns shown in this document.
Orders
There are two main options for placing trades: market orders and limit orders. A market order lets you buy or sell units at the current market price. A limit order lets you set the price at which you are willing to buy or sell units.
Timing
In general, market prices of ETFs can be more volatile around the start and end of the trading day. Consider using a limit order or placing a trade at another time during the trading day.
Who is this ETF for?
Investors who:
- are looking for a long-term investment
- want to invest in a broad range of stocks of Canadian companies
- can handle the ups and downs of the stock market.
Don’t buy this ETF if you need a steady source of income from your investment.
A word about tax
In general, you’ll have to pay income tax on any money you make on an ETF. How much you pay depends on the tax laws where you live and whether or not you hold the ETF in a registered plan, such as a Registered Retirement Savings Plan or a Tax-Free Savings Account.
Keep in mind that if you hold your ETF in a non-registered account, distributions from the ETF are included in your taxable income, whether you get them in cash or have them reinvested.
How much does it cost?
This section shows the fees and expenses you could pay to buy, own and sell units of the ETF. Fees and expenses – including any trailing commissions – can vary among ETFs.
Higher commissions can influence representatives to recommend one investment over another. Ask about other ETFs and investments that may be suitable for you at a lower cost.
1. Brokerage commissions
You may have to pay a commission every time you buy and sell units of the ETF. Commissions may vary by brokerage firm. Some brokerage firms may offer commission-free ETFs or require a minimum purchase amount.
2. ETF expenses
You don’t pay these expenses directly. They affect you because they reduce the ETF’s returns.
As of March 31, 20XX, the ETF’s expenses were 0.21% of its value. This equals $2.10 for every $1,000 invested.
|
Annual rate (as a % of the ETF’s value) |
|
|---|---|
|
Management expense ratio (MER)
This is the total of the ETF’s management 0.20% fee and operating expenses. XYZ ETFs waived some of the ETF’s expenses. |
0.20 % |
|
Trading expense ratio (TER)
These are the ETF’s trading costs. 0.01% |
0.01 % |
| ETF expenses | 0.21 % |
Trailing commission
The trailing commission is an ongoing commission. It is paid for as long as you own the ETF. It is for the services and advice that your representative and their firm provide to you.
This ETF doesn’t have a trailing commission.
What if I change my mind?
Under securities law in some provinces and territories, you have the right to cancel your purchase within 48 hours after you receive confirmation of the purchase.
In some provinces and territories, you also have the right to cancel a purchase, or in some jurisdictions, claim damages, if the prospectus, ETF Facts or financial statements contain a misrepresentation. You must act within the time limit set by the securities law in your province or territory.
For more information, see the securities law of your province or territory or ask a lawyer.
For more information
Contact XYZ ETFs or your representative for a copy of the ETF’s prospectus and other disclosure documents. These documents and the ETF Facts make up the ETF’s legal documents.
XYZ ETFs
456, rue Répartition d’actif
Montréal (Québec)
H1A 2B3
Phone : 514‑555‑5555
Toll-free : 1‑800‑555‑5556
Email : [email protected]
Website: www.xyzetfs.com
