I Thought I Wanted An ETF

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October 17, 2009 8:03pm ETF BASIC NEWS

etf-news“This weekend’s Financial Post contains a “package” of stories, some of which extoll the virtues of exchange-traded funds or ETFs. My own contribution was this column

, which basically argued there’s a place for both ETFs/index funds and actively managed funds, not to mention buying stocks or bonds directly,” Jonathan Chevreau Reports From¬†Financial Post.

“In it, I mention a brochure published by fund company Mackenzie Financial last month, entitled “I thought I wanted an ETF.” Space allocated to the column precluded a complete listing of the several points Mackenzie tries to make in the brochure, so here’s a link so readers can view it in its entirety,” Chevreau Reports.

“The brochure was the brainchild of Mackenzie Financial Services Inc. president David Feather, pictured above. Some of the points he made were edited out of the piece that ran in the paper, such as his contention that ETFs aren’t as tax efficient as their proponents complain. The brochure cites a 10-year comparison of the distributions of the Barclays i60s (XIU/TSX) and says the i60s were less tax efficient than the top ten actively managed Canadian equity funds over that period because the i60s “distributed” more income, which is taxable outside RRSPs, RRIFs and TFSAs.You can make of this point what you will: some might argue the more money “distributed” to an investor, the better, whether taxable or not. Personally, I side with the ETF folks on this point, which is why I suggest those who like both active funds and ETFs put the less tax efficient ETFs inside RRSPs and TFSAs, and ETFs in non-registered portfolios,” Chevreau Reports.

“But I will concede Feather’s one point that so-called “corporate class” mutual funds can be more tax efficient than ETFs in non-registered portfolios for investors who like switching between sectors or geographical regions. That’s a trick I’ve yet to see the ETF people match,” Chevreau Reports.

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