The layers
When you buy an all-in-one ETF, there are usually three layers between you and the actual businesses:
- The fund you bought. One name, one price.
- The funds inside it. Usually a handful of ETFs, each covering a region or bonds.
- What those funds hold. Thousands of individual stocks and bonds.
Your money is really in layer three. The top two layers are packaging.
A made-up "growth" all-in-one fund, 80% stocks and 20% bonds, might be built like this:
| Fund inside | Share |
|---|---|
| U.S. stock fund | 36% |
| Canadian stock fund | 20% |
| International stock fund (developed countries) | 18% |
| Emerging markets stock fund | 6% |
| Canadian bond fund | 14% |
| Global bond fund | 6% |
The percentages are invented to show the structure. Every real fund publishes its own mix.
Where the holdings are published
- ETF Facts. The short document from Start Here. It shows the top 10 investments and the investment mix.
- The fund's page on the provider's website. Look for tabs called Holdings, Portfolio or Exposure. This is where you find the full list, the countries and the industries.
If the top 10 are other funds, open one of those funds and repeat. That's the look-through.
Four questions for any fund
- How many holdings? Thirty companies and three thousand companies are very different things.
- Which countries? Lesson 3 covers this.
- Which industries? Banks, energy, technology, health care and so on.
- How much is in the top 10? Lesson 2 covers this.
Why it matters
Names don't tell you much. Two funds with different names can hold nearly the same companies. A fund with an exciting theme in its name might hold only a few dozen. You can't judge either one until you've looked inside.
Do this before the next lesson
- Pick your largest holding and open its page on the fund company's website.
- Write down the four answers: number of holdings, top countries, top industries, and the share in the top 10.
- If the top 10 are other funds, open the biggest one and note what it holds.
An all-in-one ETF's top 10 list shows six other ETFs and nothing else. What does that tell you?
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Where this comes from
- Canadian Securities Administrators: ETF Facts, interactive sample
- Fund structure table: an invented illustration, not based on any real fund