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ETFs in your RRSP

Did you know that ETFs are RRSP-eligible? There could be an ETF for you to consider adding to your investment portfolio.

There are many advantages to holding ETFs in your RRSP, including the benefits of transparency and diversification at lower cost than mutual funds, coupled with the intra-day liquidity offered by individual stocks.

  • Transparency: ETFs offer diversification as do mutual funds, but ETFs publish their holdings on a daily basis, thereby enabling you to know exactly what you own and to make more informed investment decisions. Mutual fund holdings, on the other hand, are generally published much less frequently.


  • Diversification: ETFs offer diversification because generally they are a basket of stocks rather than one individual stock. So you have the option of diversifying your portfolio by using several individual stocks, or, achieving diversification with a single ETF. Buying an ETF also allows you to spread your investment across an entire sector or market index, thereby reducing company specific risk.


  • Simplicity: Building your RRSP portfolio using ETFs also simplifies the task of building your portfolio. This can be as simple as selecting equity and bond funds, determining their weights and rebalancing as required. Or, you can use ETFs to broaden your exposure to other asset classes such as commodities or currencies.


  • Intra-day Liquidity: Whether you are making an initial purchase, adding to an existing position or rebalancing your portfolio, ETFs, like individual equities, are bought and sold on the stock exchange at the current market price during the trading day. And like many stocks, many ETFs are liquid. By contrast, mutual fund units can only be bought or sold once daily at the net asset value of the fund at the close of that business day.


  • Lower Cost: It is true that buying ETFs incurs brokerage commission charges; however, ETF MERs are usually very low in comparison to similar mutual funds. This is because ETFs generally do not experience the amount of portfolio turnover and trading costs of other investment products. Long-term, these cost savings can add up due to the effects of compounding.