How they work?
ETFs can be bought and sold at any point throughout the trading day through your advisor or trading platform.
The purpose of an indexed ETF is to track as closely as possible the return of a specific market benchmark or index. Deviation from the benchmark return, known as a tracking error, can occur for several reasons:
- Trading Costs. However, since the underwriters deliver, or take possession of, the underlying securities during subscriptions and redemptions, ETFs lessen the need for the Fund Manager to trade securities on the exchange. Therefore, trading and commission costs are kept to a minimum.
- Cash drag is the result of an un-invested portion of a portfolio’s net assets. ETFs will seek to minimize cash drag by reinvesting the proceeds or providing income distributions to investors
Understanding Liquidity and Building Equity
The liquidity of an individual security is directly related to the traded volume of that security, the same correlation however does not apply to ETFs.
Included below are the answers to most of the commonly asked questions on BMO ETFs. If you have an additional question or comment, please contact us.