An exchange-traded fund (ETF) is an open-ended investment fund that holds a basket of assets such as stocks, bonds, commodities, cryptocurrencies, or derivatives. ETF units trade on a stock exchange and can be bought and sold throughout the trading day at market values with bid and ask prices, similar to a publicly traded stock. 

The Canadian ETF industry is governed by a combination of securities regulation, exchange oversight, and self-regulatory organizations. 

ETF regulation is primarily overseen by the Canadian Securities Administrators (CSA), an umbrella organization of Canada’s provincial and territorial securities regulators. ETFs are regulated under National Instrument 81-102, which sets rules around investment practices, leverage, liquidity, disclosure, and risk management. 

ETF disclosure requirements, including prospectuses and ETF Facts documents, are governed by CSA rules and are filed through SEDAR+, Canada’s public securities filing system. 

Stock exchanges such as the Toronto Stock Exchange (TSX) and Cboe Canada regulate ETF listings and trading, including listing standards, market integrity, and trading rules. 

Dealers and advisors involved in selling ETFs are regulated by bodies such as the Canadian Investment Regulatory Organization (CIRO), which oversees investment dealers and trading activity. 

Together, these regulators and organizations work to ensure investor protection, market transparency, and the orderly functioning of Canada’s ETF market. 

ETFs use an open-ended creation and redemption process to manage supply and demand. When demand for an ETF rises, a Designated Broker can create new ETF units by delivering a basket of the underlying securities or cash to the ETF. When supply exceeds demand, ETF units can be redeemed by reversing this process. 

This structure allows the number of ETF units outstanding to expand or contract as needed and helps keep the ETF’s market price closely aligned with its net asset value (NAV). Because securities can often be transferred in kind rather than sold, this mechanism may also reduce capital gains realized inside the fund, which can improve tax efficiency in non-registered accounts. 

Net asset value (NAV) represents the per-unit value of an ETF’s underlying assets, minus its liabilities. It is calculated by taking the total market value of the ETF’s holdings, subtracting expenses and other liabilities, and dividing the result by the number of ETF units outstanding. 

For ETFs, NAV is calculated at least once per trading day and is used as a reference point for pricing and for the creation and redemption of ETF units in the primary market. Although ETFs trade on an exchange at market prices during the day, their trading prices typically stay close to NAV due to the creation and redemption process. 

A creation unit is a large block of ETF units, issued by an ETF on the primary market to a Designated Broker. Creation units typically consist of tens of thousands of ETF units, although the exact size varies. 

Designated Brokers can create ETF units by delivering either a basket of the underlying securities or cash to the ETF. These units are then sold on the stock exchange to investors. The same process works in reverse when ETF units are redeemed. 

ETF inflows and outflows measure how much money is entering or leaving an ETF over a given period on a net basis. Inflows occur when investors add new money to an ETF, while outflows occur when investors withdraw money. 

These figures are calculated based on changes in an ETF’s assets under management, adjusted for market price movements. In practice, inflows and outflows reflect net creation or redemption activity through the ETF’s primary market, driven by investor demand. 

Inflows and outflows are often used to gauge investor sentiment and usage. Sustained inflows may indicate growing demand for a particular asset class or strategy, while outflows can reflect shifting preferences or risk appetite. However, flows should be interpreted alongside performance, market conditions, and the ETF’s structure, as short-term flows do not necessarily signal long-term outcomes. 

In Canada, ETF flow data can be found through exchange-provided screening tools such as the Cboe Canada Canadian ETF Market, as well as other exchange websites and ETF research platforms. 

The main ongoing cost of an ETF is the Management Expense Ratio (MER). The MER includes the management fee paid to the ETF provider, as well as operating expenses such as administration, custody, audit, and regulatory costs. It is expressed as an annual percentage of the ETF’s assets. 

Some ETFs also incur trading costs inside the fund, such as brokerage commissions and transaction costs when the portfolio buys or sells securities. These costs are captured in the Trading Expense Ratio (TER). 

Under the proposed Total Cost of Ownership framework, the Fund Expense Ratio (FER) would combine the MER and TER into a single figure. This approach is intended to provide a more complete picture of an ETF’s ongoing costs and would be broadly comparable to the expense ratio used in the United States. 

ETF performance is typically reported as annualized total returns based on net asset value (NAV). This calculation reflects both changes in the value of the ETF’s underlying holdings and any distributions paid, assuming those distributions are reinvested. 

Performance is shown over standard trailing time periods, such as 1-year, 3-year, 5-year, and 10-year returns, as well as since inception. These figures are generally reported net of the ETF’s expense ratio but before taxes, so individual investor results may vary based on account type and tax situation. 

ETF liquidity operates at two levels. The first is the trading activity of the ETF units themselves, including daily trading volume and bid-ask spreads on the exchange. While visible and easy to measure, this is not always the most important source of liquidity. 

The second, and often more influential, level is the liquidity of the ETF’s underlying assets. Because ETFs can create and redeem units through designated brokers, liquidity ultimately depends on how easily the underlying securities can be bought or sold.  

For example, a Canadian equity ETF with low trading volume or modest assets under management may still have strong liquidity if it holds highly traded, large-cap Canadian stocks. 

As a result, an ETF’s apparent trading volume may understate its true liquidity. The structure of the ETF and the liquidity of its underlying holdings play a key role in how efficiently large trades can be executed. 

The ETF Facts document is a short, standardized disclosure document required for Canadian ETFs. It is designed to give investors clear, plain-language information about an ETF before they invest. 

ETF Facts typically includes the ETF’s investment objective, holdings overview, risk rating, past performance, costs such as the management expense ratio, and information about distributions. It also explains how the ETF trades, including liquidity and pricing considerations. 

ETF Facts documents are available through dealers and brokerages and can also be found on the ETF provider’s website and on SEDAR+. Investors should always review the ETF Facts document before investing in any ETF. 

An ETF prospectus is a legal disclosure document that provides detailed information about an ETF. It is intended to help investors understand in detail how the ETF is structured, how it invests, and the risks involved. 

In Canada, an ETF prospectus typically outlines the ETF’s investment objectives, strategies, underlying holdings or asset types, fees and expenses, risks, distribution policy, tax considerations, and how the ETF units are created and redeemed. It also includes information about the ETF provider, portfolio manager, and custodians. 

The prospectus is more detailed and comprehensive than the ETF Facts document, which is a shorter, plain-language summary designed for quick reference. ETF prospectuses are publicly available through the ETF provider’s website and on SEDAR+. 

The risks of investing in an ETF depend largely on the ETF’s underlying assets and investment strategy. While ETFs offer diversification and transparency, they are still subject to market and structural risks. Common ETF risks include, but are not limited to, the following: 

• Market risk: The value of an ETF can rise or fall based on movements in the markets or asset classes it invests in. 
• Liquidity risk: Some ETFs or their underlying securities may trade less frequently, which can lead to wider bid-ask spreads. 
• Tracking risk: An ETF’s returns may differ from its benchmark due to fees, trading costs, taxes, or portfolio management decisions. 
• Currency risk: ETFs holding foreign assets may be affected by changes in exchange rates. 
• Interest rate risk: Bond ETFs may decline in value when interest rates rise. 
• Credit risk: Fixed-income ETFs are exposed to the risk that an issuer may fail to meet its obligations. 
• Derivative risk: ETFs that use derivatives may face added complexity, counterparty risk, and amplified losses. 
• Leverage risk: Leveraged ETFs can magnify both gains and losses and may behave unpredictably over longer periods. 
• Concentration risk: ETFs focused on specific sectors, countries, or themes may be more volatile than broadly diversified ETFs. 

For a complete description of an ETF’s risks, investors should review the ETF’s prospectus and disclosure documents, which outline the specific risks applicable to that fund. 

In Canada, ETFs are assigned a standardized risk rating using a five-point scale: low, low to medium, medium, medium to high, and high. This rating is disclosed in the ETF Facts document. 

The risk rating is primarily based on the ETF’s historical volatility. If an ETF does not have sufficient performance history, a reference index or a comparable ETF may be used to determine the rating. 

The rating is meant to help investors compare the relative risk of different ETFs. A higher rating indicates that an ETF’s returns have fluctuated more over time, while a lower rating suggests more stable returns. 

There are limitations to this approach. The risk rating is backward-looking and may not fully capture risks related to strategy complexity, leverage, derivatives, liquidity, or changes in market conditions.  

As a result, the risk rating should be viewed as a starting point and used alongside the ETF’s investment strategy, holdings, and full risk disclosures in the prospectus. 

ETFs and mutual funds are both pooled investment vehicles, but they trade and operate differently. Mutual fund units are bought or sold directly with the fund company at one price per day, based on the closing net asset value (NAV), which is the value of the fund’s assets minus its liabilities. 

ETFs trade on a stock exchange throughout the day at market prices, with bid and ask quotes. A key structural difference is the ETF creation and redemption process. This process is handled by an Authorized Participant, also known in Canada as a Designated Broker. 

ETFs and closed-end funds (CEFs) are both exchange-traded investment products, but they differ in structure and pricing. 

ETFs are open-ended. The number of ETF units outstanding can increase or decrease through the creation and redemption process. This mechanism helps keep an ETF’s market price closely aligned with its net asset value (NAV). 

CEFs are closed-ended. A fixed number of units is issued at launch, and new units are generally not created or redeemed on an ongoing basis unless there is a secondary offering or tender. Because of this, CEFs often trade at a premium or discount to their NAV, depending on investor demand. 

Another difference is portfolio management. ETFs are commonly passive or rules-based, though active ETFs are increasingly common. CEFs are typically actively managed and may use leverage more frequently to enhance income or returns, which can increase risk. 

ETFs and split share corporations are both exchange-traded investment products, but they differ significantly in structure, objectives, and risk. 

ETFs are open-ended funds that hold a diversified portfolio of assets and can create or redeem units as needed. This structure helps keep an ETF’s market price closely aligned with its net asset value (NAV). ETFs are commonly used for broad market exposure, income strategies, or portfolio building, and their risk generally reflects the underlying assets and strategy. 

Split share corporations are closed-ended structures that typically hold a fixed portfolio of securities, often focused on a small number of dividend-paying stocks. They issue two classes of shares, usually preferred shares designed to provide distributions and capital shares designed to provide leveraged exposure to the portfolio’s upside. Like CEFs, split corps can trade at premiums or discounts to NAV. 

Split share corporations have structural risks, including sensitivity to dividend cuts, asset concentration, and downside risk for capital shareholders if the portfolio declines. As a result, split corps are generally more complex, expensive, and carry different risk profiles than most ETFs. 

ETFs offer a flexible and cost-efficient way to gain exposure to a wide range of asset classes, sectors, and investment strategies. They provide transparency into holdings, intraday liquidity through exchange trading, and generally lower ongoing costs than many other investment products.  

ETFs can also be used as core portfolio building blocks or to target specific markets, risks, or outcomes, depending on an investor’s objectives. Some ETFs are also designed to be used as trading tools, offering features such as leverage, inverse exposure, or options-based strategies for more short-term uses. 

ETFs in Canada are offered by a wide range of investment fund managers, including large asset managers, independent ETF providers, and bank-owned firms. Some offer ETFs as standalone products, while others provide ETFs alongside mutual funds and other investment vehicles. 

Most investors buy and sell ETFs through a brokerage account, since ETFs trade on a stock exchange like stocks. To invest, you first open an account with a discount (do-it-yourself) brokerage or a full-service dealer. After funding the account, you can place a buy or sell order for an ETF using its ticker symbol during market hours. ETFs can be purchased in registered accounts, such as a TFSA or RRSP, or in a non-registered account, depending on your goals and tax situation.  Investors can also gain ETF exposure by working with a licensed financial advisor  affiliated with CIRO-regulated firms, who can recommend and execute ETF purchases within an advised portfolio structure. 

Canadian residents can invest in ETFs through a discount (do-it-yourself) brokerage or a full-service dealer. ETFs can be held in registered accounts such as a Tax-Free Savings Account (TFSA), Registered Retirement Savings Plan (RRSP), Locked-In Retirement Account (LIRA), Registered Retirement Income Fund (RRIF), Registered Education Savings Plan (RESP), and Registered Disability Savings Plan (RDSP), as well as in non-registered investment accounts. 

CETFA provides up-to-date information and educational resources on its website. Investors and advisors can also access ETF news and data through their dealer or brokerage platforms. Additional sources include ETF-specific platforms and tools offered by Canadian exchanges, issuer and asset manager websites and blogs, independent research and screening tools, and regulatory filings available on SEDAR+, which provide official disclosure documents such as prospectuses and management reports. 

Yes. Most ETFs make distributions to investors, although the amount and frequency can vary widely depending on the ETF and its objectives / strategy. ETF distributions may also include different types of income. 

For example, Canadian dividends from domestic companies are generally subject to the dividend tax credit when held in a non-registered account. Foreign dividends, such as those from U.S. companies, may be subject to foreign withholding tax at source. ETFs may also distribute interest income, return of capital, or capital gains. 

If income is a primary investment objective, there are ETFs specifically designed to focus on yield. These ETFs may pay distributions quarterly or monthly. Investors should review the ETF’s distribution breakdown to understand the underlying tax characteristics, as the headline yield alone does not reflect how the income will be taxed. 

ETF yields are calculated using different methods, and the figure shown depends on how distributions are measured and annualized. Two common yield measures in Canada are the trailing 12-month yield and the annualized distribution yield. 

The trailing 12-month yield looks at the total cash distributions an ETF paid over the past 12 months and divides that amount by the ETF’s net asset value. This measure reflects what the ETF has actually paid and is useful for understanding historical income. 

The annualized distribution yield takes the most recent distribution and annualizes it, assuming the payment stays the same over a full year. This can be helpful for estimating current income, but it may be less reliable if distributions vary. 

When buying or selling ETFs, investors may pay a trading commission, depending on whether they use a discount brokerage or a full-service advisor. Commission levels vary by firm, and some brokerages offer commission-free ETF trading. 

In addition to commissions, ETFs have implicit trading costs. The most common is the bid-ask spread, which is the difference between the price at which an ETF can be bought and sold on the exchange. More liquid ETFs generally have tighter spreads, while less liquid or more specialized ETFs may have wider spreads. 

It depends on the type of ETF. Many ETFs are well suited for beginners, particularly those that offer broad diversification, low fees, and straightforward exposure to stocks or bonds. These ETFs are often used as long-term portfolio building blocks. 

Other ETFs use leverage, derivatives, or complex strategies and are generally designed for experienced investors or short-term trading. New investors should focus on simpler ETFs and understand how an ETF works before investing. 

ETFs can be grouped in several ways. By asset class, ETFs may invest in stocks, bonds, cash or money market instruments, commodities, cryptocurrencies, or multi-asset portfolios that combine several asset types. 

ETFs can also differ by strategy. Passive ETFs track an index, while active ETFs rely on portfolio managers to select securities or manage risk. Some ETFs focus on broad markets, while others target a specific country, region, sector, industry, theme, or even a single stock. 

Finally, some ETFs use enhancements such as leverage, inverse exposure, or derivatives to modify returns or risk. These ETFs are generally designed for more experienced investors and are often used for tactical or short-term purposes. 

Yes. CETFA’s website includes links to ETF screeners that allow investors and advisors to search and compare Canadian-listed ETFs. These include tools provided by Canadian exchanges, such as the TMX Group ETF Investor Centre and the Cboe Canada Canadian ETF Market, which offer data, analysis, and screening features. Additional third-party ETF screeners and research tools are also available online. 

For ETFs listed on the Toronto Stock Exchange, new launches can be found on the TSX New Company Listings page. For ETFs listed on Cboe Canada, new products are listed in the Funds section of the Cboe Canada Listing Directory. 

Investors and advisors can also find information on new ETFs through SEDAR+. SEDAR+ provides access to official regulatory filings, including ETF prospectuses, ETF Facts documents, and continuous disclosure materials, which outline an ETF’s investment objectives, fees, risks, and structure. 

Tracking error refers to the difference between an ETF’s returns and the returns of the index or benchmark it aims to follow over time. In simple terms, it shows how closely an ETF matches its benchmark. 

For example, a Canadian-listed S&P 500 ETF may deliver a slightly different return over 10 years than the S&P 500 Total Return Index. Even though both are linked to the same underlying basket of securities, their performance will not be identical. 

Tracking differences can be caused by several factors, including management fees, currency movements between the Canadian dollar and U.S. dollar, foreign withholding taxes on dividends, trading and rebalancing costs inside the ETF, and portfolio management decisions.  

Differences can also arise from how the ETF tracks the index, such as holding every security in the index (full replication) versus holding a representative subset of securities (sampling). 

A corporate class ETF is structured as part of a single corporation that includes multiple investment funds under the same corporate umbrella. Because all of the funds are housed within one corporation, income, expenses, gains, and losses can be managed at the corporate level rather than at the individual fund level. 

This structure can allow gains in one fund to be offset by losses in another, which may reduce taxable distributions passed on to investors. Corporate class ETFs are often used by investors seeking greater tax efficiency in non-registered accounts, although the benefits depend on the corporation’s overall activity and tax position. 

These are ETFs that invests primarily in other ETFs rather than directly holding individual securities. These products are often created to provide diversified exposure within a single investment. in Canada, ETFs of ETFs are required to clearly disclose their underlying holdings and total costs. 

A passive ETF is an ETF designed to track the performance of a specific market index by holding the securities in that benchmark, or a representative sample of them. These ETFs follow a passive approach, meaning the portfolio is managed to mirror the index rather than to outperform it. 

Common examples include ETFs that track broad market indexes such as the S&P/TSX 60 Index, which represents blue-chip Canadian companies, or the Nasdaq-100 Index, which focuses on large, technology-oriented U.S. companies.  

An active ETF is managed by a portfolio manager and research team that makes investment decisions rather than simply tracking an index. Active ETFs may use top-down approaches, such as adjusting sector or asset allocations based on economic views, bottom-up security selection, or proprietary quantitative or rules-based models. 

While many active ETFs reference a benchmark for comparison, their holdings and returns can differ meaningfully from that index. One way to assess how active an ETF is relative to its benchmark is a measure called active share, which indicates the percentage of the portfolio that differs from the benchmark.  

In general, a higher active share suggests greater deviation from the index, while a lower active share indicates the ETF behaves more like a passive index-tracking fund. 

Leveraged ETFs are designed to provide amplified exposure to a benchmark or asset class. There are two main types, and they work very differently. 

The first type uses derivatives, most commonly total return swaps, to deliver a multiple of a benchmark’s daily return. These ETFs may seek results such as 2x, 3x, or the inverse of an index’s daily performance, such as -2x or -3x the S&P 500.  

Because the leverage is reset daily, returns over longer periods can differ significantly from the stated multiple, especially in volatile markets. Higher fees, trading costs, volatility drag, and sequence-of-returns risk all contribute to this effect. These ETFs are generally designed for short-term trading or tactical use by experienced investors. 

The second type uses leverage by borrowing cash, similar to using a margin loan, to increase exposure to its underlying holdings. These ETFs typically apply more modest leverage, often in the range of about 1.25x to 1.5x. They usually hold the underlying securities directly rather than relying on swaps.  

While these ETFs tend to have higher expense ratios due to borrowing and interest costs, they are generally designed for longer-term holding periods and do not reset leverage daily in the same way as derivative-based leveraged ETFs. 

A single-stock ETF is an ETF that provides exposure to one individual company rather than a diversified group of stocks. For example, a single-stock ETF may be designed to track the performance of Apple. 

Single-stock ETFs can be structured in different ways. Some hold the underlying shares directly, while others use derivatives such as swaps to obtain exposure. Many single-stock ETFs also include enhancements, such as leverage, inverse exposure, or covered call strategies to generate income. 

Because they focus on a single company and may use derivatives or leverage, single-stock ETFs carry higher risk and volatility than most traditional ETFs. They are typically designed for experienced investors and are often used for tactical or short-term purposes rather than as core portfolio holdings. 

A spot cryptocurrency ETF is an ETF that holds the actual cryptocurrency directly, such as bitcoin or ethereum, rather than using futures contracts or other derivatives. The ETF’s value is intended to closely reflect the current market price (the “spot” price) of the underlying cryptocurrency, before expenses. 

These ETFs store the cryptocurrency with institutional custodians and allow investors to gain exposure through a brokerage account, without needing to buy, store, or secure the digital assets themselves. Like other ETFs, spot cryptocurrency ETFs trade on a stock exchange throughout the day and can be held in registered and non-registered accounts. 

A commodity ETF provides exposure to raw materials that are essential inputs for the global economy, such as energy, metals, and agricultural products. These resources are widely used in manufacturing, construction, transportation, and food production. There are two common structures.  

Physically backed ETFs hold the raw material directly in storage and are most common for precious metals such as gold and silver. The ETF’s value generally reflects the market price of the asset, before fees and currency fluctuations. 

Derivative-based ETFs gain exposure using futures contracts and are commonly used for resources such as oil, natural gas, agricultural products, and industrial metals. These ETFs typically hold cash or short-term securities as collateral. Returns can be influenced not only by price movements but also by futures market dynamics, such as contract roll costs.

A smart beta ETF is an ETF that follows a rules-based strategy designed to capture specific investment styles rather than simply weighting securities by market cap. Smart beta ETFs are also commonly referred to as factor ETFs, or fundamental ETFs. 

These ETFs typically track an index built around defined criteria, such as selecting or weighting securities based on characteristics like value, quality, momentum, size, low volatility, or dividends.  

While most smart beta ETFs are index-based, their rules can be more complex than traditional market-cap-weighted indexes. Some strategies may also be implemented within an active ETF strategy. 

A sector ETF is an ETF that focuses on a specific segment of the economy rather than the overall market. These ETFs provide targeted exposure to one of the 11 Global Industry Classification Standard (GICS) sectors: energy, materials, industrials, consumer discretionary, consumer staples, health care, financials, information technology, communication services, utilities, and real estate. 

Sector ETFs can be managed passively, by tracking a sector index, or actively, through manager-driven security selection. They may focus on the Canadian economy, the U.S. market, or global sectors, and are often used to express economic views, adjust portfolio weightings, or increase exposure to specific industries. 

A thematic ETF focuses on a specific long-term trend or investment idea rather than a broad sector of the economy. These ETFs typically concentrate on companies linked by a common concept, technology, or structural shift, making them more targeted than sector ETFs. 

Thematic ETFs can be actively managed or track a rules-based index. In recent years, popular examples have included ETFs focused on artificial intelligence (AI), cybersecurity, clean energy, robotics and automation, and genomics. 

Investors often use thematic ETFs to express a focused thesis on a particular trend or to complement a broader portfolio. Because they are more concentrated, these ETFs can be more volatile and are generally used as satellite holdings rather than core portfolio positions. 

For Canadian investors, an international ETF is an ETF that provides exposure to equity markets outside of North America. These ETFs are commonly grouped into two broad categories. 

International developed market ETFs invest in established economies such as the United Kingdom, France, Germany, Japan, Australia, and other developed countries. International emerging market ETFs focus on faster-growing but less developed economies, such as China, India, Brazil, South Korea, and Taiwan. 

When investing in international ETFs, currency movements are an important consideration. Changes in exchange rates between the Canadian dollar and the currencies of the underlying holdings can either enhance or reduce returns. Some international ETFs are currency hedged, while others leave currency exposure unhedged, which can add an additional source of return or risk

A covered call ETF is an ETF that holds a portfolio of securities, such as stocks or an equity index, and generates income by selling call options on some or all of those holdings. The option premiums collected are typically paid out to investors as distributions. 

Many covered call ETFs pay distributions monthly, which can make them appealing to income-focused investors. However, selling options can limit upside potential if the underlying securities rise sharply, since gains above the option strike price may be forfeited. The strategy may also provide some support in flat or modestly declining markets. 

Distributions from covered call ETFs are taxable events in non-registered accounts, and their tax characteristics can vary. Investors should always review the ETF’s distribution breakdown to understand the underlying tax treatment. 

An asset allocation ETF is an ETF that combines multiple asset classes, such as stocks, bonds, and cash, into a single fund. The ETF maintains a predefined mix of assets based on a target risk profile, such as conservative, balanced, or growth. 

These ETFs automatically rebalance their portfolios to keep the asset mix close to the target allocation over time. They are often used as all-in-one portfolio solutions, particularly by retail investors seeking diversification and simplicity. 

A HISA ETF holds deposits at one or more major Canadian financial institutions, similar to money held in a traditional high-interest savings account. The ETF earns interest on those deposits and passes that income on to investors through regular distributions, usually on a monthly basis. 

HISA ETFs are designed to provide capital preservation, liquidity, and a competitive yield relative to cash alternatives. While HISA ETFs are considered low risk, they are not the same as a bank savings account. Deposits held inside the ETF are not directly insured by the Canada Deposit Insurance Corporation (CDIC), and yields can change as interest rates move. 

Generally, no. Most bond ETFs hold a diversified portfolio of bonds with different maturity dates. As bonds mature or are sold, the ETF replaces them with new bonds to maintain its target characteristics, such as average maturity or duration.  

Because of this ongoing turnover, investors cannot hold a traditional bond ETF to maturity and receive a fixed principal amount back, as they would with an individual bond. 

One exception is target-date bond ETFs. These ETFs have a specific year in their name, such as a “2030” bond ETF, and are designed to wind down around that date. At maturity, the ETF is typically liquidated and investors receive a cash distribution based on the value of the remaining bonds, net of expenses. 

During their life, bond ETFs generally pay regular distributions, often monthly, which reflect the interest income earned by the underlying bonds. This differs from individual bonds, which usually pay interest semi-annually. 

A “.U” at the end of a Canadian ETF ticker indicates that the ETF trades in U.S. dollars rather than Canadian dollars. These are known as U.S. dollar–denominated units. 

The underlying investments may be the same as the Canadian dollar–denominated version of the ETF, but the trading currency is U.S. dollars. This can be useful for investors who already hold U.S. dollars or want to avoid converting currency when buying or selling the ETF. 

A currency-hedged ETF is designed to reduce the impact of foreign exchange movements on returns. This is most relevant when a Canadian-listed ETF holds foreign assets. 

For example, a Canadian-listed S&P 500 ETF trades in Canadian dollars but holds U.S. stocks priced in U.S. dollars. In an unhedged ETF, changes in the Canadian dollar affect returns. If the U.S. dollar rises relative to the Canadian dollar, returns are boosted when converted back to Canadian dollars, all else being equal. If the Canadian dollar strengthens, returns are reduced. 

A currency-hedged ETF uses derivatives, typically forward currency contracts, to offset or “hedge out” this foreign exchange exposure. The goal is for the ETF’s returns to more closely reflect the performance of the underlying index itself, with less added volatility from currency movements. 

Hedging is not free. The cost of hedging and the mechanics of rolling currency contracts can introduce tracking differences over time. As a result, currency-hedged ETFs may perform differently than unhedged versions, depending on market conditions and currency trends

If an ETF announces it will close, investors generally have two options. Until the ETF stops trading, you can sell your units on the exchange as you normally would. During this period, the ETF continues to hold its underlying assets, and its trading price is typically based on the value of those holdings. 

If you continue to hold the ETF until it is closed, the fund will be liquidated. The ETF provider will sell the underlying securities, pay any outstanding expenses, and distribute the remaining proceeds to unitholders. Investors receive cash based on their number of units, and the ETF is then delisted from the exchange.