Buying ETFs

As ETFs (exchange traded funds) are listed on an exchange and generally highly liquid, you can buy ETFs in the exact same way you buy stocks.

To assist in entering and exiting an ETF position at a desirable price, you can use limit and stop orders in the same way you would use them for stock orders.

ETFs can be bought and held inside of registered accounts such as RRSPs and TFSAs, and may be purchased on margin in margin accounts.

Don’t forget to read the prospectus

Like mutual funds, ETFs are required to publish prospectuses that explain how they are structured and managed. It is wise to read and understand the prospectus before buying shares in an ETF.

Some ETFs are combinations of several different types of investments, making them more complex than they may initially appear to be. For example, there are ETFs that use leverage to amplify the inverse performance of certain commodities and indices. The prospectus presents this information in detail, and is designed to fully inform investors about what they are buying.

Since their features, historical performance and fees can vary widely, it’s important to make sure you’re buying an ETF that fits your investing goals and trading strategy.