TD Passive ETFs Questions and Answers

An ETF is an investment fund traded on a stock exchange, much like stocks. An ETF holds assets such as stocks, bonds, or commodities, and generally trades close to its net asset value over the course of the trading day.

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Passive ETFs seek to track the performance of a market benchmark (i.e. an index), before the deduction of fees and expenses. They are not actively managed by a portfolio manager on a daily basis. Instead, passive ETFs periodically rebalance their portfolios to align with the underlying index.

Each ETF offered by TDAM will pay a management fee and will be responsible for certain operating costs and expenses. For details, please see the ETFs' prospectus. The management fee and operating expenses make up an ETF's management expense ratio (MER). Additionally, each ETF is subject to brokerage expenses and commissions on its portfolio transactions. Such expenses are not included in the MER of the ETF but are reported separately as a trading expense ratio (TER). Although management fee, operating expenses and brokerage expenses incurred by an ETF are not paid by investors directly, they reduce an ETF's returns.

Note: Because these six ETFs are new, the operating expenses and therefore their MER's are not yet known; however the maximum management fees are as follows:

TD ETF Maximum Annual Management Fee (%)
TD Canadian Aggregate Bond Index ETF0.10% of NAV
TD S&P/TSX Capped Composite Index ETF0.07% of NAV
TD S&P 500 CAD Hedged Index ETF0.10% of NAV
TD S&P 500 Index ETF0.10% of NAV
TD International Equity CAD Hedged Index ETF0.18% of NAV
TD International Equity Index ETF0.18% of NAV

Since ETFs trade like stocks on an exchange, investors may be subject to transaction fees and/or commissions, payable to their brokers or dealers, when they buy or sell ETF shares.

  • Liquidity - ETFs trade on stock exchanges and can be bought and sold at any time during the trading day.
  • Price Transparency - Investors know intraday the price at which they can buy or sell ETF shares on a stock exchange. For conventional mutual funds, investors do not know the price at which they can buy or sell units in advance as the fund's net asset value is calculated at the end of the trading day.
  • Trading fees - Every time an investor places an order for the purchase or sale of shares of an ETF they will pay a trading fee, just like when trading a stock.
  • Bid-ask spreads - ETFs trade on the open market like equities, trading at a price near the price of the underlying securities and like equities, ETFs trade within a bid and ask spread. At times, the bid-ask spread can be wide which can reduce its cost effectiveness.
  • Trade price versus NAV - ETFs trade on exchanges like stocks and can be bought and sold anytime during the trading day. ETFs trade intraday at a price which is likely different than the Net Asset Value (NAV) posted at the end of the day. The trade price could be higher or lower than the NAV. Mutual funds are bought or sold at a specific price (net asset value per unit) at the end of each trading day.

ETFs are not more tax efficient than mutual funds given that both trigger capital gains and losses when sold, and both could distribute income. Passive ETFs are generally not subject to the same level of turnover within the fund's portfolio as an actively managed mutual fund or an ETF which trades more often. Lower turnover typically results in a lower TER and lower distributions of realized capital gains. That said, investors are responsible for gains and losses realized when they dispose of their investment.

Investors who are considering adding ETFs to their portfolio should evaluate their personal investment goals, knowledge level, day-to-day involvement and time horizon to determine whether an ETF fits their overall investment strategy.

They may be suitable for investors who are:

  • comfortable trading on an exchange
  • seeking greater liquidity, with the ability to buy or sell intraday

Please see below for the list of 6 ETFs and their associated ticker symbols.

ETF TSX TICKER SYMBOL
FIXED INCOME
TD Canadian Aggregate Bond Index ETF TDB
EQUITY
TD S&P/TSX Capped Composite Index ETF TTP
TD S&P 500 CAD Hedged Index ETF THU
TD S&P 500 Index ETF TPU
TD International Equity CAD Hedged Index ETF THE
TD International Equity Index ETF TPE