# Xfn



## Fraser19 (Aug 23, 2013)

Hey,

I have been wanting to get into banks recently and just do not have the capital available to get into banks with stocks. I do like how XFN looks as it is a good mix of banks and insurance. The returns have been good from what I see and I am a fan of the monthly distributions. 

I see the MF is .55% and the MER is .60%. Now if I buy this it will be my first EFT. So I am wondering is the fee .60% annually or is it .55+.60=1.05%?

Or are you guys aware of a similar EFT with a lower fee?

Thanks,
Fraser


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## 1980z28 (Mar 4, 2010)

Can look at ZEB

Not sure if this is the direction you would like to trek


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## Spudd (Oct 11, 2011)

Fraser19 said:


> I see the MF is .55% and the MER is .60%. Now if I buy this it will be my first EFT. So I am wondering is the fee .60% annually or is it .55+.60=1.05%?


MER includes the MF, so total fee per year is 0.60%.


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## Fraser19 (Aug 23, 2013)

Spudd said:


> MER includes the MF, so total fee per year is 0.60%.


That one looks pretty good.

While I have spent a fair bit of time watching financial, I have not spent very much time looking into insurance companies. What would be the perceived positives and negatives for ZEB over XFN vice versa


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## 1980z28 (Mar 4, 2010)

Most banks and insurance corporations are very good at handling money

They do not produce anything,such as a mining company,bakery and manufacturing

So there value is based on their ability to get you to give them your money,so now you can pick

Very hard to separate which is the best


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## My Own Advisor (Sep 24, 2012)

The future is always cloudy 

Banks make up, what, 70% of this fund? Might as well own the bank stocks outright and be done with these and similar ETFs. I'm not suggesting this for all investors but for those looking to put lots of money into XFN vs. individual stocks, I personally wouldn't.

Otherwise, buy more broadly diversified low cost ETFs like XIC and VCN.


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## Fraser19 (Aug 23, 2013)

My Own Advisor said:


> The future is always cloudy
> 
> Banks make up, what, 70% of this fund? Might as well own the bank stocks outright and be done with these and similar ETFs. I'm not suggesting this for all investors but for those looking to put lots of money into XFN vs. individual stocks, I personally wouldn't.
> 
> Otherwise, buy more broadly diversified low cost ETFs like XIC and VCN.


The only reason why I am more interested in EFT's vs individual stocks is for Dripping. I can probably put down 12,000 which is enough to drip XFN or ZEB but not enough to get drip more than one of those stocks.

Ideally I would like to own all of them or at least a few of them individually but I just cant do that right now. So the plan is to pick up an EFT and when I have enough to buy them outright so I can stop paying the MER.


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## Pluto (Sep 12, 2013)

there is always zwb. Yield is higher due to their covered call writing. Higher yield could compensate for the mer. Plus you don't have to get the insurance companies one gets with xfn.


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## Fraser19 (Aug 23, 2013)

Pluto said:


> there is always zwb. Yield is higher due to their covered call writing. Higher yield could compensate for the mer. Plus you don't have to get the insurance companies one gets with xfn.





> covered call writing


Completely new concept to me that I don't yet understand. Looked it up on investopedia and I still don't really get it.
What I see that I do like is that I need about half the capital to get ZWB dripping. What I see that I don't like is that the dividend has been reduced every year since the EFT started.


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## AltaRed (Jun 8, 2009)

Fraser19 said:


> The only reason why I am more interested in EFT's vs individual stocks is for Dripping. I can probably put down 12,000 which is enough to drip XFN or ZEB but not enough to get drip more than one of those stocks.
> 
> Ideally I would like to own all of them or at least a few of them individually but I just cant do that right now. So the plan is to pick up an EFT and when I have enough to buy them outright so I can stop paying the MER.


Nothing wrong in owning ETFs. They are the perfect investment vehicle for the majority of Canadians, and in particular: 1) those without the resources yet to buy individual stocks cost effectively, and 2) those who do not have the inclination, desire, or acumen to stock pick. I provide input to a retired person who is well into 7 figures in value of investment accounts and that person is almost exclusively ETFs and a GIC ladder. That person's day is full of other things that are more interesting to the individual.


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## My Own Advisor (Sep 24, 2012)

Great points AR.

I just can't seems to sell "my babies" = dividend stocks. I see the income come in, mostly regardless of price like clockwork and regardless of the market conditions. I recognize it's very psychological but it helps me with my plan. I am indexing more using ETFs. It just makes too much sense not to do it. I guess I'm maturing as an investor, or something like that!


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## none (Jan 15, 2013)

Mark, the way I look at it is the major gain of indexing is really having a plan and sticking with it. Sure, there is the allocation and re balancing which are important but following a plan and fighting against ones gut which makes us think we know things that we couldn't possibly is the real advantage. I think the dividend investing approach of yours has those features.

In an unrelated note regarding your comment on the G&M. The TFSA and RRSP are mathematically equivant when pre and post retirement tax brackets are the same. Will tax brackets come down (not rates) in the next 25 years? I think so but who knows really. Anyone who has room and makes less than 40K should really only use a TFSA (if ignoring withholding taxes.)


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## My Own Advisor (Sep 24, 2012)

Thanks none, re: my approach, I think? 

Yes, assuming the tax brackets are the same. I have no idea what my tax bracket will be in retirement, I can guess, but I really don't know. I 100% agree anyone in a lower income bracket should put the TFSA over the RRSP in terms of contribution priority.

I need to finish my Weekend Reading post now!


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## peterk (May 16, 2010)

Been looking at this as well right now, but what is with the yield?? Yield today (Jan 15) is 3.01%, while the weighted yield of the constituents is much higher...

Just glancing at the top 10 the yield seemed low, so I did up a little spreadsheet to calculate it properly. The yield should be 3.82%.

Anyone know why the discrepancy?


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## james4beach (Nov 15, 2012)

To the original poster: if it's your first ETF, why don't you buy the broad index with ZCN or XIC ?

The MER is much lower, basically nil. And banks are already the largest exposure in the index anyway... you're getting plenty of financial exposure.


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## Fraser19 (Aug 23, 2013)

Those make sense, but when I look at all of the holdings there are some companies I would never want to own. However it probably doesn't matter since they are so diluted by the percentage.
So at this point I am not sure what to think.


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## fatcat (Nov 11, 2009)

i agree with moa
i would let go of your attachment to dripping which has its own pluses and minuses
i would buy equal amounts of 2 banks (td and bmo or ry) and just reinvest the divvys once a year and save the mer


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## Squash500 (May 16, 2009)

I personally own XFN, XDV, CPD, and XTR in my non-registered account. No gics whatsoever. I like receiving the monthly income from these ETFS which I use to pay my rent and other expenses etc.

Also XFN, XDV and CPD are extremely tax efficient in a non-registered account. All of this monthly income is eligible for the Canadian dividend tax credit.

When the price of these ETFS fall, psychologically I don't worry because I know I'm receiving income every month.

This also enables me to avoid these high priced financial advisors.


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## Squash500 (May 16, 2009)

fatcat said:


> i agree with moa
> i would let go of your attachment to dripping which has its own pluses and minuses
> i would buy equal amounts of 2 banks (td and bmo or ry) and just reinvest the divvys once a year and save the mer


 However, some banks are better then others. I would rather pay the MER of the ETFS in exchange for better diversification.


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## My Own Advisor (Sep 24, 2012)

Could be true Squash, hard to predict the future though.

I guess I'm striving to index in all registered accounts and when it comes to non-reg., then hold most of the stocks that XDV and XFN own directly. Avoid any MER whatsoever and I don't have to worry about the composition of these ETFs changing. If I want to change up the portfolio, I can.


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## Squash500 (May 16, 2009)

My Own Advisor said:


> Could be true Squash, hard to predict the future though.
> 
> I guess I'm striving to index in all registered accounts and when it comes to non-reg., then hold most of the stocks that XDV and XFN own directly. Avoid any MER whatsoever and I don't have to worry about the composition of these ETFs changing. If I want to change up the portfolio, I can.


 I guess so. Love your blog by the way. I'm a loyal e-mail subscriber to your blog. I'm just not a stock-picker and believe in simplicity.

For example, much easier for me to hold $60000 worth of the XDV in my non-registered account, then to hold 12 individual stocks worth $5000 each in my non-registered account.

As usual, just my opinion.


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## My Own Advisor (Sep 24, 2012)

Thanks Squash...always great to hear from folks.

I certainly see the advantages of XDV, don't get me wrong, I guess for now I like the idea of "debundling" my dividend ETFs and REITs to own stocks directly. Will I change my mind eventually? Possibly!


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## Squash500 (May 16, 2009)

My Own Advisor said:


> Thanks Squash...always great to hear from folks.
> 
> I certainly see the advantages of XDV, don't get me wrong, I guess for now I like the idea of "debundling" my dividend ETFs and REITs to own stocks directly. Will I change my mind eventually? Possibly!


Fair enough. I might change my mind as well. Eventually I might buy individual stocks to save the MER fees. Who really knows for sure?


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## Fraser19 (Aug 23, 2013)

I am thinking I will go with CEW.
The returns seem good. The dividend is also good, and I am familiar with most of the companies.

While I would like to just buy the banks out right in stocks, I just don't have the the capital to do so. If I put down 6-7k in this one I will be dripping each month and building up some shares at a good rate.

I just seems to me that this is the best way to go at this time.


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## james4beach (Nov 15, 2012)

XFN traded really, really weirdly on Monday August 24. Basically it crashed severely -- far below NAV -- which indicates a failure of ETF arbitrage, and a failure of Blackrock to maintain liquidity of XFN. This ETF is broken; it became illiquid.

Does anyone here have Interactive Brokers access or another brokerage with good data access, charts, time & sales data?

The Friday close was 28.67. On Monday from what I can tell, XFN started trading at 21.00 which was *down -27% at the open*. That's right; it lost almost a THIRD of its value at the open.

This appears to have caused a trading halt for approx 24 mins, until trading resumed (normally) at 09:54. I'd like to learn how many shares traded at those depressed prices.

If you own XFN, you should phone up Blackrock and ask why the price fell -27%. Then ask why you should pay them 61 basis points of MER to hold an illiquid container.


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## cashinstinct (Apr 4, 2009)

A lof of US Etf went down 20-30% for a couple of minutes and they have millions in volume per day.

Vanguard / Blackrock Etfs...

It's not limited to Xfn


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## james4beach (Nov 15, 2012)

IVV did too, which is one of the main S&P 500 index funds.

And let me guess, this makes you.... _bullish_ on the stock market?

These arbitrage failures are the kind of thing that happened to bond ETFs in the early days of the credit crisis. It means liquidity is poor and there's much more selling pressure than buying pressure.


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## cashinstinct (Apr 4, 2009)

I have no short term opinion on what will happen on markets


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## AltaRed (Jun 8, 2009)

james4beach said:


> IVV did too, which is one of the main S&P 500 index funds.
> 
> And let me guess, this makes you.... _bullish_ on the stock market?
> 
> These arbitrage failures are the kind of thing that happened to bond ETFs in the early days of the credit crisis. It means liquidity is poor and there's much more selling pressure than buying pressure.


No need to hyper-ventllate. The prudent investor would not be selling into a market like Monday morning and thus momentary" illiquity" is mostly a theoretical exercise, lasting mostly minutes/hours while the market maker gets more units (in this case) off the market. IIRC, papers examining this issue say the biggest difficulty is establishing fair prices of the underlying assets in precipitous market movements, not unlike buying or selling individual bonds or stocks oneself. IOW, what is the actual NAV anyway in that microsecond? That is what the circuit breakers are for.


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## 0xCC (Jan 5, 2012)

james4beach said:


> XFN traded really, really weirdly on Monday August 24. Basically it crashed severely -- far below NAV -- which indicates a failure of ETF arbitrage, and a failure of Blackrock to maintain liquidity of XFN. This ETF is broken; it became illiquid.


The *market* traded really, really weirdly for the little while after the open on Monday. You already posted a question about the TSX and XIU (http://canadianmoneyforum.com/showthread.php/51265-TSX-brief-crash-this-morning), now you are wondering why other ETFs had weird activity on Monday morning?

Keep looking, you will find lots and lots more ETFs and stocks that had strange activity on Monday morning.

If the strange market activity is enough to kick off an inquiry (probably in the US if anywhere) we *might* get some little glimpse behind the curtain into what actually happened but we will likely never know for sure.


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