Like most of us, passive investing in Canada makes us subject to a very slim and noncompetitive options. I think with Claymore entering the market up here has really opened the door to more competition and that is really what we need at this time. Whether they’re good or not, having more choice on the market really gives you a chance to try out new things. I know I was pretty excited when I first saw them come on the market and there was a lot of excitement on forums on the internet.
If I was to lead with the positives, Claymore offers a lot of niche type of funds that allow you to get into some interesting. Some of the big ones that pop out for me is the Claymore Oil Sands Sector ETF and the Claymore S&P Global Water ETF. They’re definitely pretty interesting areas of the market and allow you to diverse up your total portfolio that way.
Another big benefit upon release is that Scotia iTrader offered the funds at commission free. This is definitely the competition that we all want to see enter this market. And I can only hope that more competing funds will end up doing the same thing.
No American Style Management Fees
The thing that upsets Canadians the most that do passive investing is that the MER (Management Expense Ratio) in this country is no where near as cheap as it is in the United States. While Americans can get funds and indexes with 0.10%-0.25% we’re running up into the 0.30%-0.75% range.
I hate to report the Claymore ETFs are mainly in the 0.55%-0.75% range. Most of them are really around 0.65%. The only place that you find very low management fees is with Fixed Income items. In particular, the Claymore 1-5 Yr Laddered Government Bond ETF only has a MER of 0.15%.
My opinion is that it really isn’t worth it. You’re not saving anything by using their funds. You can get by perfectly fine as a small trader using cheap index funds from TD. And if you have more money where buying ETFs is worth it you can go with iShares or something along those lines.
The only reason I would really buy Canadian Claymore ETFs is if I was trying to get into very diverse markets. It seems like a very active choice for me, instead of the passive investing that I’ve chosen to do. You may think that the commission free ETFs are going to make up for it, but if commission costs are eating up too much profit (ie: new investors) you should probably be sticking with index funds that are free to buy.