Exchange-Traded Funds For Canadians For Dummies

Chapter 6

Large Value: Counterintuitive Cash Cows

In This Chapter

Recognizing ETFs that fit the value bill

Choosing the best options for your portfolio

Why do suburbanites gingerly cultivate their daisies yet go nuts swinging spades or spraying poison chemicals at their dandelions? Why is a second cup of coffee in a diner free, but a second cup of tea isn’t? Some things in this world just don’t make a lot of sense. Why, for example, would slower-growing companies (the dandelions of the corporate world) historically reward investors better than faster-growing (daisy) companies? Welcome to the shoulder-shrugging world of value investing.

We’re talking about companies you’ve probably heard of, yes, but they aren’t nearly as glamorous as Google or as exciting as Cisco. We’re talking about companies that usually ply their trade in older, slow-growing industries, like finance, energy, and telecom. We’re talking about companies such as Bank of Montreal, Sears Canada, Suncor Energy, and BCE.

We see you yawning! But before you fall asleep, consider this: In the past 85 years, large value stocks have enjoyed an annualized growth rate of about 11.1 percent, versus 8.8 percent for large growth stocks — with roughly the same standard deviation (volatility). And thanks to ETFs, investing in ...