What do the extensions of an ETF mean?
ETF issuers in Canada can offer ETFs in a variety of versions, each with its own set of features ie., currency, currency hedged and dividend policy.
ETF issuers in Canada can offer ETFs in a variety of share classes or versions, each with its own set of features, such as currency, currency hedged and dividend policy.
Currency
Typically, ETFs are made available in Canadian Dollar (CAD) and US Dollar (USD) represented by “symbol.U” extension - meaning investors can buy an ETF with US currency from their investment account.
Currency Hedged
If an investor wants to purchase an ETF with protection against fluctuations in currency, many ETFs offer a hedged variety such that Foreign Exchange (FX) fluctuations which do not impact returns in investors’ currency. Hedged and unhedged ticker symbol conventions are different across Canadian ETF issuers. For instance, “symbol.B” implies the ETF is currency hedged. A symbol with “symbol.C” means the ETF’s currency is unhedged.
Dividend Policy
There are two types of dividend policies: Accumulating or Distributing. The distinction stems from the way they manage dividend payments from the underlying shares. “Accumulating share classes” reinvest the dividends payments from the fund’s holdings. “Distributing share classes” pay the dividends out to investors as a regular income stream.
The version of an ETF you buy is an important consideration since it might affect your long-term investing outcomes.
*This article was written in collaboration with Trackinsight.
