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moneysense.ca, 17/05/06
Dividend ETFs
A few years back, the iShares Dow Jones Select Dividend Index Fund (DVY) was the only ETF available for investors looking to boost the dividend yield of their portfolios. Today, eight dividend ETFs are available in the US market based on various indices from Dow Jones, Mergent, Standard & Poors and Morningstar. Seven of them are based on US equities and the PowerShares International Dividend Achievers Portfolio (PID) is based on international equities. A recent article in BusinessWeek magazine provides a nice summary of the dividend ETFs. Canadian investors have one more option in the form of the iShares CDN Dividend Index Fund (TSX: XDV).
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moneysense.ca, 17/05/06
A lot of people focus on the low MERs associated with ETFs, but there is one thing that you must consider. An open-ended mutual fund’s unit price is adjusted according to the daily closing price of all of the equities held within that fund. An ETF trades like its own equity, so the unit prices trade based upon supply and demand of its units. So, please keep in mind that in an ETF, you could actually be paying a higher price than the value of your share of the assets held within that fund. Normally the ETF reports once every business quarter, so you don’t usually know the true value of all of its assets under management until its quarterly report is freshly issued. In a perfectly efficient market, the price should trade close to the value of its assets, but in reality there can be a difference to either the high or the low side.
Phil: Actually, the points you raise are true about closed-end funds but (most) ETFs are a different beast. They are designed to closely track an index (at least the most popular ones) whose components are well-known by allowing redemptions and contributions of a large block of shares. In practice, the largest and most liquid ETFs do closely track their underlying indices.
On a side note, does anyone here know where I can get a list of all ETFs that trade options?