The New Investment Frontier III: A Guide to Exchange Traded Funds for Canadians

Sarah Robertson is editor of the Canadian Book Review Annual.

The author, head of public funds at Barclays Canada, defines an exchange
traded fund (ETF) as “a portfolio of securities that trades on a stock
exchange.” Part mutual fund, part stock, this hybrid, passive
investment offers the broad diversification of mutual funds but more
transparency, greater tax efficiency, and—crucially—lower management
fees. Atkinson dramatically underscores the importance of fees to
long-term returns by pointing out that “[s]aving 1% over 15 years will
mean a 16% improvement in total returns. Thanks to the miracle of
compounding, that shoots to 22% after 20 years, 25% in 30 years and an
astounding 49% in 40 years.” ETFs and other index products provide
“better investment returns over the long haul” due to a combination
of lower fees and the fact that most actively managed funds eventually
succumb to the dreaded “reversion to the mean.”

The New Investment Frontier III is divided into four parts. Part 1
makes the case for ETFs and describes various index products. (With 16
ETFs currently available, versus 181 in the United States, Canada is
typically behind the eight ball.) Part 2 deals with ETF investment
strategies, using ETFs with an adviser, and tax implications and
strategies. Part 3 covers the mechanics of ETFs and emerging trends
(commodity and income trust ETFs, actively managed ETFs, etc.). Part 4
(ETF Reference) provides a wealth of data on Canadian, U.S., and
international ETFs and their underlying indices. Interspersed throughout
the book are interviews with industry experts, including John Bogle,
low-fee advocate and founder of the world’s largest index fund
company. An annotated web directory, glossary, bibliography, and index
round out the volume.

Atkinson sells ETFs for a living, so he’s no impartial observer.
Luckily for readers of this lucidly written, information-packed book, he
has the facts on his side.