Category: Blog

This event was a presentation by Horizons Exchange Traded Funds, on the basics of exchange traded funds and was held at the TD Waterhouse Investor Centre in downtown Vancouver.   The seminar itself was just over an hour long and provided a great overview on what ETFs are, how they compare to stocks and mutual funds, how they are actually traded and what some of the advantages and disadvantages are of particular types of ETF products.  All in all, it was an informative session provided by a knowledgeable speaker on the topic.   As this was a presentation from a company outside of TD Waterhouse, there was no direct reference to TD Waterhouse products or services, and was thus an opportunity to learn about ETFs in general and Horizons’ products in particular.

Some of the most interesting points presented were around the cost structure of ETFs as well as the ETF industry in Canada and around the world. The relatively low cost of using index ETFs versus the equivalent product in a mutual fund where management fees can be three or four-fold higher in the latter were discussed.  Whether you are a deal hunter or not, the ultra-low management fees (0.07%) of some index ETFs are something worth taking notice of.

This presentation also had an interesting section on the role of market makers in trading ETFs and gave some eye-opening stats on this US$1.5 trillion dollar industry.  In addition to the Horizons Exchange Traded Funds family, other major players in Canada include iShares and BMO with Horizon’s claiming 7% of the ETF market share overall in Canada.

Horizons Exchange Traded Funds offered audience members a few great tips to close out the presentation including:

1. Use limit orders instead of market orders to improve the chances of getting an order filled at the desired price
2. Use stop losses to ensure disciplined exits
3. Avoid trading the opening and closing 15 minutes of the market
4. Take a look at the depth of ETF orders before executing a trade

To learn more about Horizons ETF family of products, you can find their website at http://www.horizonsetfs.com  and if you’re interested in attending one of their upcoming seminars, they’re listed on their events page here.

If you are interested in learning more about ETFs, you can watch a couple of introductory videos here (10mins) or here (60mins)

This past August we attended several investor education events put on by TD Waterhouse Discount Brokerage.  These events were aimed at educating retail investors on the concepts, practices and strategies that will better prepare them when trading. The most recent session we attended was about margin and short selling.

The session covered a number of topics related to using margin including defining margin trading, trading account types, the benefits and risks involved in margin trading and ways of reducing that risk. Our main takeaways from the presentation on the subject of margin trading include:

• Margin trading is leveraging assets you own or intend to buy
• Leveraging is the degree to which an investor uses borrowed funds to purchase a security
• Benefits include increased buying power, lower debt interest rate and the most interesting benefit of all, you can withdraw cash from your margin credit

Of course where there is a silver lining there is always a cloud. There are a few drawbacks to margin trading but the main one is that you can lose more than you invested. You can help mitigate some of these risks by not over-borrowing, diversifying across securities and sectors and having an exit and margin-call strategy.

Short selling was also covered in this presentation. Topics covered included the definition of short selling with examples, reasons to short sell, trading requirements in short selling, some potential risks and ways of reducing those risks. Our key takeaways for this section include:

• Short selling requires borrowing a security from a broker in order to selling it, then buying back the security to return it to the broker.
• Profits or losses are realized when shares are repurchased to return to the broker
• Losses can be infinite in short selling as there is no limit on share price gain
• Profits are capped as the share price will only go as low as zero

One can utilize the same strategies used for minimizing risks in margin accounts when short selling. These strategies include starting out small, diversifying investments and having an exit and margin-call strategy in place.

Overall the TD Waterhouse Discount Brokerage session on margin and short selling was informative. The presenter was knowledgeable and answered all questions asked throughout the presentation.

These types of education oriented events are a great opportunity to learn more about investing and trading, especially if you’re just starting out.  To find more educational events, check out our investor education calendar here.