Total Market ETFs offer investors the fastest way to get exposure to the entire Canadian equity market, while generally charging low fees. And investors love them. Among the top 10 largest ETFs in Canada, five invest in the entire Canadian equity market.
The bedrock of these ETFs is market-cap-weighting, which harnesses the market’s collective wisdom of each stock’s relative value with the added benefits of low turnover and trading costs. It’s a sensible approach because the market tends to do a good job pricing the stocks that make up the bulk of this portfolio. Larger stocks attract liquidity and widespread investor attention such that prices quickly reflect new information.
Pros and Cons of the Total Market Approach
These ETFs accurately mimic the Canadian stock market. However, the market’s inherent sector biases translate into sector-specific risks. The ETFs load up on financials, energy, and industrial stocks, which…
