More and more investors are converting to Exchange Traded Funds (ETFs) over picking stocks individually. But what is it that’s so appealing? Why are more investors considering ETFs over individual stock picking? With the growth of the ETF market, you can access precise strategies that reflect how you want to invest, while at the same time reducing single security or concentration risk with strategies such as “high-dividend ETFs” “clean energy ETFs” “commodity ETFs” and “tech ETFs”.
Sector ETFs deliver diversified returns
Essentially, an ETF is a bundle of securities that tracks an index, sector, commodity, bond, or other asset, and is traded on the exchange like an individual stock. So, by buying an ETF, you end up gaining exposure to a whole basket of stocks, commodities, or bonds.
But what makes them more popular is that they are easy to use, as a single ticket solution on the exchange, just liking buying a single stock.
Consider that academics—who have conducted a lot of research on the subject of stock picking—have found that investors can reduce market risk by diversifying across securities, typically starting at 20 holdings.1
In fact, they’ve concluded that while talented stock pickers can add value, the majority do not. According to S&P Dow Jones, as of the end of December 2020, 75% of large cap fund managers underperformed the S&P 500 over a five-year basis and 60% underperformed over a one-year basis. 2
So, if stock pickers aren’t the most consistent way to generate market returns, what is?
ETFs provide exposure that captures the returns of all the securities in its targeted market. With a variety of ETFs, you can gain exposure to a diversified group of securities across industries and sectors.
This diversified exposure allows you to track entire industries that are set to see growth, like, for instance, tech ETFs and clean energy ETFs.
Plus, you can easily diversify your portfolio with ETFs across asset classes, from asset allocation ETFs to bond ETFs to the ones mentioned above.
This range of available ETFs coupled with their success on the market and typically lower risk levels relative to individual stock picking is precisely what has made these investment vehicles so popular among many investors.
Invest with BMO ETFs
Looking for balanced ETFs, bond ETFs, sector ETFs, tech ETFs, and more? Evaluate BMO ETFs.
We are a leading ETF provider in Canada with more than 11 years of experience providing clients with over one hundred strategies, accounting for over 25% market share in Canada.
Benefit from our comprehensive suite of ETFs developed in Canada, such as:
- Cost effective core equity ETFs following market leading indexes
- A broad range of fixed income ETFs
- Solution-based ETFs responding to client demand
- Innovation with smart beta ETFs
- Combining active and passive investing with ETF series of active mutual funds
BMO ETFs is partnering with you to help maximize the potential in your portfolio. Visit our website and sign up for our webinars to learn more about how you can benefit from BMO ETFs.
1 Investment Analysis and Portfolio Management, Reilly & Brown, 2011
2 spglobal.com, 20203 Morningstar, June 2021
DISCLAIMER:
This communication is for information purposes. The information contained herein is not, and should not be construed as, investment, tax or legal advice to any party. Particular investments and/or trading strategies should be evaluated relative to the individual’s investment objectives and professional advice should be obtained with respect to any circumstance.
The portfolio holdings are subject to change without notice and only represent a small percentage of portfolio holdings. They are not recommendations to buy or sell any particular security.
Commissions, management fees and expenses (if applicable) all may be associated with investments in BMO ETFs and ETF Series of the BMO Mutual Funds. Please read the ETF facts or prospectus of the relevant BMO ETF or ETF Series before investing. BMO ETFs and ETF Series are not guaranteed, their values change frequently and past performance may not be repeated.
For a summary of the risks of an investment in the BMO ETFs or ETF Series of the BMO Mutual Funds, please see the specific risks set out in the prospectus. BMO ETFs and ETF Series trade like stocks, fluctuate in market value and may trade at a discount to their net asset value, which may increase the risk of loss. Distributions are not guaranteed and are subject to change and/or elimination.
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