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BMO Equal Weight Oil & Gas Index ETF (ZEO $81.40)
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iShares S&P/TSX Capped Energy Index ETF (XEG $19.61)
Q: I would like to purchase an energy ETF. XEG is a Capped Energy Index while ZEO is an Equal Weight Index. What do you prefer & why. Thanks … Cal
5i Research Answer:
Generally, if an investor is seeking simply sector exposure, we prefer diviersification. XEG has better long term numbers (5 years 31% vs 26%), but more than 50% of the fund is in three stocks (CNQ, SU, CVE). Now, we are fine with these companies, but ZEO will offer better diversification and less volatility. We think if an investor was interested in XEG they could just buy those three stocks and TOU (another 8%) and mostly replicated XEG and save the fees.