Fund Facts/ETF Facts (2024)

FAQs

What is the difference between a fund facts document and an ETF facts document? ›

Your mutual fund dealer must deliver Fund Facts to you before you buy a mutual fund. Exchange-traded funds (ETF) have a similar plain-language document named ETF Facts. Your dealer must deliver an ETF Facts to a client within two days of a purchase.

Take the time to read the ETF Facts to find out more about the ETF before you invest. Since December 2018, your dealer (the firm) is required to deliver the ETF Facts to you no later than midnight on the second business day following the purchase of ETF securities.

The fund facts document is a clear, plain language document that contains key information about the mutual fund you're thinking about purchasing. In no more than two double-sided pages, it explains the basics of what the fund invests in, the risks involved, how the fund has performed, and the costs of ownership.

An ETF Facts document is a disclosure document required for Canadian exchange-traded funds, in addition to other regulatory disclosure documents such as the Prospectus.

Since the job of most ETFs is to track an index, we can assess an ETF's efficiency by weighing the fee rate the fund charges against how well it “tracks”—or replicates the performance of—its index. ETFs that charge low fees and track their indexes tightly are highly efficient and do their job well.

For most standard, unleveraged ETFs that track an index, the maximum you can theoretically lose is the amount you invested, driving your investment value to zero. However, it's rare for broad-market ETFs to go to zero unless the entire market or sector it tracks collapses entirely.

What is the single biggest ETF risk? ›

The single biggest risk in ETFs is market risk.

While the Fact Sheet provides recent performance data, the Prospectus often includes a more extensive history of the fund's performance, allowing you to see how it has performed over various market conditions.

FoFs are actively managed funds while ETFs are considered to be passively managed funds. Hence the cost or the expense ratio is higher in the case of FoFs as compared to ETFs.

How are ETFs and mutual funds different? How are they managed? While they can be actively or passively managed by fund managers, most ETFs are passive investments pegged to the performance of a particular index. Mutual funds come in both active and indexed varieties, but most are actively managed.

Mutual funds are usually actively managed, although passively-managed index funds have become more popular. ETFs are usually passively managed and track a market index or sector sub-index. ETFs can be bought and sold just like stocks, while mutual funds can only be purchased at the end of each trading day.

The fund's legal documents, such as the partnership agreement, offering memorandum, and subscription agreement, provide the framework for the fund's operations and investments. These documents must accurately reflect the fund's investment strategy, risk management framework, and regulatory requirements.