Index funds

Money Digest, Jan, 2003

As an alternative to investing in ETFs, you may consider investing in index funds. Index funds, like many ETFs, represent a portfolio of stocks that track the performance of a specific index such as the S&P/TSX Composite Index. Index funds allow you to invest smaller amounts (such as $500 or even $100) using a regular payment plan. In addition, investing in a variety of index funds within the same fund family may make balancing your portfolio makeup easier. The disadvantages are that index fund management fees (MERs) are usually much higher than fees for ETFs, and you cannot buy or sell index funds any time of the day. You will have to wait until the end of a business day.

Some investors, for various reasons, prefer to invest in index funds. The accompanying table lists several index funds, and their benchmarks, now available to investors.

Please note that, although index funds are supposed to reflect the performance of the index they are tracking, the returns of the funds vary. There are many reasons for this. For example the MERs charged by the funds reduce your returns. Also, the index fund may not invest all the money right away but keep some liquid cash. Finally, some funds may try to "improve" returns by slightly deviating from the index.

Index funds

                                                      Returns(%)
Fund name                         Load      MER       1 yr.     3 yr.

TD Dow Jones Avg Index (US$)-e      NL      0.31       -8.3      -4.9
TD Dow Jones Avg Index-e            NL      0.31       -8.6      -2.9
TD Dow Jones Avg Index (US$)        NL      0.88       -8.9      -5.7
Altamira Precision Dow 30 Index     NL      0.51       -9.1      -3.7
TD Dow Jones Average Index          NL      0.88        9.2      -3.7
National Bank Amer Index            NL      1.28       -9.5      -6.4
RSP (US$)
National Bank American Index RSP    NL      1.28       -9.8      -4.4
S&P 500 Composite Total Return                        -16.9      -9.3

Foresters Canadian Index             B      2.25      -10.9         -
iUnits S&P/TSE 60 Index PF          NL      0.17      -11.3      -4.2
Middlefield Equity Index Plus      F/B      2.41      -11.8         -
iUnits S&P/TSE 60 Capped Index      NL      0.17      -11.9         -
GWL Equity Index (G) DSC             B      2.37      -12.3      -5.2
Altamira Precision Cdn Index        NL      0.51      -12.3      -3.6
GWL Equity Index (G) NL             NL      2.58      -12.5      -5.4
National Bank Canadian              NL      1.65      -13.2      -0.2
Index Plus
S&P/TSX 60 Index                                      -13.7      -5.9

Apex Canadian Equity Index          NL      2.74       -2.8         -
Sm Cap
TD Cnadian Index-e                  NL      0.3        -9.9      -2.6
S&P/TSX Total Return                                   -9.9      -3.0

Source: globefund.com; data as at November 30, 2002.