Q: Further to my prior question, in looking at ETFs, I often thought why not just buy their top holdings, and that is quite often what I do. However, in trying to find out that info for these two I noticed something I thought was unusual.
For example, the XEQT ETF lists holdings as follows ...
iShares Core S&P Total US Stock Market ... 44.8%
iShares Core MSCI EAFE IMI ETF ... 24.96%
iShares Core S&P/TSX Capped Compost ETF ... 24.86%
iShares Core MSCI Emer Mkts IMI ETF ... 4.97%
This seems to be the total of their holdings (99.59%). I assume these also generate management fees, which seems like an approach to increase fees paid by "layering" their offerings!
Would a person not be generally better off just buying the 4 separately in the percentages to match the XEQT ETF?
... or possibly digging deepr in the layer and finding out what equities they really are holding?
Thanks! Paul
For example, the XEQT ETF lists holdings as follows ...
iShares Core S&P Total US Stock Market ... 44.8%
iShares Core MSCI EAFE IMI ETF ... 24.96%
iShares Core S&P/TSX Capped Compost ETF ... 24.86%
iShares Core MSCI Emer Mkts IMI ETF ... 4.97%
This seems to be the total of their holdings (99.59%). I assume these also generate management fees, which seems like an approach to increase fees paid by "layering" their offerings!
Would a person not be generally better off just buying the 4 separately in the percentages to match the XEQT ETF?
... or possibly digging deepr in the layer and finding out what equities they really are holding?
Thanks! Paul
5i Research Answer:
ETFs are not allowed to and do not charge 'fees on fees'. They often hold units of other funds more as a convenience but no extra fees are generated. An investor can certainly own the four separate ETFs and set their own percentage allocation, but this will not reduce fees. But, it can have an advantage, as one can sell a losing position for tax purposes, and re-allocate. With a single ETF this cannot be done. Investors could also try to replicate an ETF but owning the top individual stocks within one. But considering fees on XEQT are only 0.20%,it may not offer much in the way of savings and would certainly take more work and monitoring.