ETF Portfolio: Investment Descriptions

Updated: December 2014

Below is a list of the individual investments held in the Sample Balanced Investment Portfolio with a brief, general description of the investment’s features, the investment’s job within the context of the portfolio, and a brief summary of the issuing/managing company.

Fixed Income Investments

The sample ETF portfolio holds the following fixed income investments.

  • First Asset DEX 1-5 Year Laddered Government Strip Bond Index ETF: (BXF-TSX) This ETF invests in government compounding bonds which are similar to compounding GICs. Each bond is purchased at a discount to their actual maturity value - compounding bonds are often referred to as Residual, Strip, Stripped or Discount  bonds. Each compounding bond accumulates its interest which is paid to the bondholder an the bond's maturity date. ie. A compound bond is purchased at a price of $72 and matures at $100. No interest is paid while the bond is held, but at maturity you receive $100 and the difference ($28) between the purchase price ($72) and the maturity value ($100) equals the interest earned while it was the bond was held. 
    • Investment's Job within the ETF portfolio:  According to First Asset this ETF's Investment Objective is to replicate, to the extent possible, the performance of a Canadian 1-5 year laddered government strip bond index, net of expenses. The current index is the DEX 1-5 Year Laddered Government Strip Bond Index. The First Asset ETF invests primarily in Strip Bonds, both coupons and residuals, derived from Canadian federal and provincial government bonds issued domestically in Canada and denominated in Canadian dollars. The ETF's name is a little misleading. It implies the ETF will hold bonds maturing in the 1 to 5 year range, but it actually holds bonds maturing in the 1 to 6 year range. The ETF, just like its underlying index, is to hold approximately 25 bonds of which 5 will be equal-weighted  in each of the 5 maturity groupings. The strict laddering and equal-weighting guideline makes this ETF a perfect fit for InvestingForMe's ETF sample portfolio. This ETF gives the portfolio a strong bond maturity ladder in the 1 to 6 year range of maturities. 
    • Bond Duration: Is 2.70 years.
    • Number of Individual Investments: Approximately 25 individual bonds.
    • ETF Portfolio Turnover Ratio (PTR): This is a new ETF and it does not have a full year of activity to assess. Therefore the PTR is not available, but, given the ETF structure, we anticipate the PTR to be approximately 20% per year.
    • ETF Management Expense Ratio (MER): There is no management fee until July 1, 2014. After July 1, 2014, the management fee is set to a maximum of 0.20% per year. The Operating and Trading Expenses have not been disclosed, but we anticipate them to be minimal given the ETF's structure.
    • Dividend Reinvestment Plan (DRIP): Available to shareholders, but we have chosen to receive all ETF distributions as cash - credited to the portfolio's cash balance.
  • Transcanada Pipelines Ltd: Discount Bond, maturing on 20-November-2020 with a semi-annual yield of 3.658%. The bond's DBRS credit rating at the time of purchase was 'A'. This is an individual compounding bondTranscanada is a major North American energy company based in Calgary, Alberta, developing and operating energy infrastructure in North America. Its pipeline network includes approximately 59,000 kilometers (36,500 miles) of pipeline connecting virtually all of the major gas supply basins in North America. TransCanada is one of the continent’s largest providers of gas storage and related services with approximately 355 billion cubic feet of storage capacity. TransCanada also owns, or has interests in, approximately 10,500 megawatts of power generation. TransCanada is the largest shareholder in the general partner involved in TC Pipelines. The company was founded in 1951 in Calgary.
    • Investment's Job within the ETF portfolio: This discount bond matures in just over 7 years time and it adds strength to the bond maturity schedule maintained by the First Asset DEX 1-5 Year Laddered Government Strip Bond Index ETF. 
    • Bond Duration: Is 6.661 years.
    • Number of Individual Investments: N/A
    • ETF Portfolio Turnover Ratio (PTR): N/A
    • ETF Management Expense Ratio (MER): N/A
    • Dividend Reinvestment Plan (DRIP): N/A
  • Bell Canada: Discount Bond, maturing on 01-June-2021 with a semi-annual yield of 4.144%. The bond's DBRS credit rating was 'A(low)' at the time of purchase. This is an individual compounding bond.  BCE Inc. is Canada's largest communications company, providing comprehensive communication services to residential and business customers in Canada.
    • Investment's Job within the ETF portfolio: This discount bond matures in just over 8 years time and it adds strength to the bond maturity schedule maintained by the First Asset DEX 1-5 Year Laddered Government Strip Bond Index ETF and the Transcanada Pipelines 7 year discount bond. 
    • Bond Duration: Is 7.232 years.
    • Number of Individual Investments: N/A
    • ETF Portfolio Turnover Ratio (PTR): N/A
    • ETF Management Expense Ratio (MER): N/A
    • Dividend Reinvestment Plan (DRIP): N/A

Growth Investments

The sample portfolio has invested in the following exchange-traded-funds:

  • Horizon S&P/TSX 60 Equal Weight Index ETF: (HEW-TSX) This ETF is one of the only ones that uses an Equal Weight investment strategy, which fits perfectly with our IFM investment approach. The ETF invests equal amounts of money in the 60 individual companies that comprise the S&P/TSX 60 Index. 
    • Investment's Job within the ETF portfolio: According to Horizon, this ETF's investment objective is to seek to replicate the performance of the S&P/TSX 60 Equal Weight Index, net of expenses. The S&P/TSX 60 Equal Weight Index is an equal weight diversified index of the constituent issuers in the S&P/TSX 60 Index. Although the ETF invests equal amounts in each of the 60 companies in the underlying index, the ETF does not invest equal amounts in the different stock market sectors - financials, energy, utilities, etc. As a result the index is over-weight certain sectors and under-weight others.
    • Number of Individual Investments: 60 individual companies.
    • ETF Portfolio Turnover Ratio (PTR): Was 37.84% in 2013, 50.02% in 2012, 83.74% in 2011 and 11.37% in 2010.
    • ETF Management Expense Ratio (MER): 0.74% (2013)
    • Dividend Reinvestment Plan (DRIP): Available to shareholders, but we have chosen to receive all ETF distributions as cash - credited to the portfolio's cash balance.
  • BMO S&P/TSX Equal Weight Industrials Index ETF: (ZIN-TSX) This ETF also follows an Equal Weight investment structure, which fits perfectly with our IFM investment approach. The ETF invests equal amounts of money in the 20 individual companies that comprise the S&P/TSX Industrials Index. 
    • Investment's Job within the ETF portfolio: This ETF helps to balance the portfolio's investment exposure to the various stock market sectors - helping to offset the over-weight, under-weight allocations inherent in the  the Horizon S&P/TSX 60 Equal Weight Index ETF. According to Horizon, this ETF's investment objective is to replicate, to the extent possible, the performance of the S&P/TSX Equal Weight Industrials Index, net of expenses. The Fund invests in and holds the Constituent Securities of the Index in the same proportion as they are reflected in the Index. The S&P/TSX Equal Weight Industrials Index includes companies whose businesses are classified as industrials. The Index is a subset of the S&P/TSX Composite Index, subject to additional size and liquidity screening. Each constituent security is allocated a fixed weight rather than a market capitalization weight.
    • Number of Individual Investments: 20 individual companies.
    • ETF Portfolio Turnover Ratio (PTR): Was 128.12% in 2013 and 10.80% in 2012.
    • ETF Management Expense Ratio (MER): 0.64% (2013)
    • Dividend Reinvestment Plan (DRIP): Available to shareholders, but we have chosen to receive all ETF distributions as cash - credited to the portfolio's cash balance.
  • BMO S&P/TSX Equal Weight Utilities Index ETF: (ZUT-TSX) This ETF also follows an Equal Weight investment structure, which fits perfectly with our IFM investment approach. The ETF invests equal amounts of money in the 14 individual companies that comprise the S&P/TSX Industrials Index. 
    • Investment's Job within the ETF portfolio: According to Horizon, this ETF's investment objective is to replicate, to the extent possible, the performance of the Dow Jones Canada Select Equal Weight Utilities Index, net of expenses. The Fund invests in and holds the Constituent Securities of the Index in the same proportion as they are reflected in the Index. The Dow Jones Canada Select Equal Weight Utilities Index consists of the securities that are classified as utilities on the Dow Jones Total Stock Market Canada Index. In addition, each security in this Index is allocated a fixed weight rather than a market capitalization weight. The Dow Jones Canada Select Equal Weight Utilities Index is rebalanced semi-annually in June and December. To be included as a Constituent Security, an issue must meet certain minimum trading volume requirements and be incorporated in, or has its primary market listing in Canada.
    • Number of Individual Investments: 14 individual companies.
    • ETF Portfolio Turnover Ratio (PTR): Was 62.90% in 2013, 9.67% in 2012, 30.25% in 2011 and 21.16% in 2010.
    • ETF Management Expense Ratio (MER): 0.65% (2013)
    • Dividend Reinvestment Plan (DRIP): Available to shareholders, but we have chosen to receive all ETF distributions as cash - credited to the portfolio's cash balance.

 

Inverse Exchange Traded Funds (ETFs)

The sample ETF portfolio has invested in the following inverse exchange-traded-funds:

  • Horizons BetaPro S&P/TSX 60 Inverse ETF: (HIX:TSE) According to Horizons BetaPro, this ETF does not use leverage and it is structured to seek daily investment returns, before fees and expenses, that correspond to 100% of the inverse of the daily performance of the S&P/TSX 60 Index.

For example, if at the end of a trading day, the S&P/TSX 60 Index has declined 5.0% in value, the units of HIX should increase in value by 5.0%. The opposite should also be true - if the S&P/TSX 60 Index increases in value by 5.0%, the units of HIX should decrease in value by 5.0%. Horizon BetaPro provides the following information: "Horizons BetaPro Inverse Exchange Traded Funds (HBP Inverse ETFs) are subject to aggressive investment risk and price volatility risk, which are described in the BHP Inverse ETF prospectus. Each HBP Inverse ETF seeks a return that is 100% of the inverse performance of a specific underlying index, commodity or benchmark (the 'target'). Due to compounding of daily returns, an HBP Inverse ETF's returns over periods other than one day will likely differ in amount and possibly direction from the performance of the specified underlying target for the same period. Investors should monitor their holdings, as frequently as daily, to ensure that they remain consistent with their investment strategies."

    • Job Description: This ETF is used to help the portfolio defend against a decline in the value of its Growth investments. In a declining stock market cycle, this ETF enables the portfolio to preserve some of its gains without selling its common shares and, thus, avoid disrupting the portfolio's dividend income stream and eliminate the income tax impact that would result from selling.
    • Investment Features: This ETF is a structured financial product that seeks a rate of return that is inverse of the rate of return for the S&P/TSX 60 Index. The unit's market price can be influenced by the current economic, business and stock market cycles, interest rate environment, government regulations, and the current credit cycle.
    • (DRIP) - This ETF does not pay any dividends.
    • Additional Information: You can obtain additional information by visiting the Horizon BetaPro website.

 

Back To Top