Monday, 7 June 2010

Two of the New BMO ETFs Worth a Look

Amongst BMO Financial Group's latest batch of new ETFs announced May 26th, are two that look pretty good - BMO Equal Weight REITs Index ETF (ZRE) and BMO Real Return Bond Index ETF (ZRR).

Why ZRE? First, real estate is considered (by most people and by me) to be a separate asset class, so unlike the growing number of sub-sector ETFs there is justification for a separate holding of a REIT ETF such as ZRE. ZRE competes with the well-established iShares REIT index ETF (XRE). Second, both have the same 0.55% MER but the crucial difference is that BMO will equally weight the REITs held within ZRE, instead of the traditional cap-weighting within XRE. For those who accept the evidence that cap-weighting is inferior to equal weighting (or fundamental weighting, as I said March 8th), ZRE becomes the best choice. (Disclosure: I've already sold off my XRE and replaced it with ZRE in my portfolio.)

And ZRR? For an investor who uses real return bonds as an asset class (see various links on the Real Return Bond page by Bylo Selhi) and wants to be able to rebalance easily, ZRR is better than iShares' real return bond ETF (XRR) on two important measures - lower MER of 0.25% vs 0.35% and the ability to reinvest interest received automatically at no cost - the BMO DRIP program which applies to all its ETFs. For more comparison, see HowToInvestOnline's Which Way is Best to Invest in Real Return Bonds - Direct, ETF or Mutual Fund?

1 comment:

Stephen Pinner said...

I tend to disagree with what has been posted here as the two new BMO ETF I do not think are worth a look as I don't think that they are a valuable asset to attain in investment even if your could obtain them via online share dealing or trading, they still would not be worth the effort involved.

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