Expert: Paul Henneman - 1/5/2009

Question
Hi Paul,

I'm interested in investing in EFTs. My questions are:

1) Is this a good time to invest in EFTs that track the TSX? or perhaps the US exchanges? It seems like things are starting to pick up here in Canada (I'm from Canada), but I have no idea.

2) I don't know how to do research on them. In yahoo finance, I can't seem to grasp which stocks are EFTs, what the symbol is, which exchange it's mirroring, etc. I thought it's suppose to trade like a stock, which I know how to find on yahoo finance. The info for EFTs are no where to be found!

3) I have no idea how to buy them! I have been doing research and playing with simulators so I'm ok with trading stocks if I were to open an online account with a discounted broker. It is as simple as just knowing what the symbol is?

4) Fees: are the fees (from the online discount broker) to buy EFTs the same as stocks?

Thanks for your expertise!  

Answer
Trang,
  Thank you for your question!
I think that you must be referring to ETF's, not EFT's? Eft generally stands for Electronic Fund Transfer, which is a way to transfer money between bank accounts, not an investment. An ETF is Exchange Traded Fund, which is an investment. I'll assume that, please let me know if I am incorrect on what you are looking for.
  I'll start with your third and fourth question. ETF's can be traded like a stock. All you need to know is the ticker symbol of the ETF, and you can buy or sell it just like a regular stock through most major trading accounts. For example, you can trade ETF's on etrade.com, scottrade.com, tdameritrade.com to mention a few.
  Regarding your first and second questions. It is true that just by looking at the ticker you will not readily be able to detect if it is an ETF. And going through each ticker symbol, reading the company description to determine if it is an ETF would be a huge time commitment! There are better ways.
   The thing to do is to determine what type of ETF you want to trade. You need to decide what exactly you are trying to accomplish, then look for an ETF that fills that function. You don't want to trade an ETF simply because it is that, there are so many radically different ETF's out there. It sounds like you are interested in trading the TSX. There are ETF's that trade the broad market, or specific segments as needed. Here is a link to a page that discusses this, and more importantly has a link to an excel file of available ETF's for the TSX:

http://www.tmxmoney.com/en/sector_profiles/exchange_traded_funds/index.html

There are 78 ETF's in this list, and you can determine essentially the purpose of each one based on its name. You could always then do a specific search on any particular ticker symbols for an ETF that is of interest, then trade that ticker if you decide to do it.

But be careful. We are seeing some improvement in the market here in the USA over the past month (I assume the same is happening in Canada). However, this may be short term. Overall economic indicators are not improving for the US economy yet and the rally could be short lived. That is just my opinion, you need to decide for yourself. My point is only that any investment right now can be risky.

I hope that this helps! Please do not hesitate to follow up with me if I can be of any additional service,

Sincerely,
Paul Henneman
President
ValuEngine, Inc