As I discussed in Monday’s post, an American ETF provider launched the Global X S&P/TSX Venture 30 Canada ETF (NYSE Arca: TSXV) on March 17, the first index fund pegged to Canada’s junior stock exchange. iShares has announced that it will launch its own the S&P/TSX Venture Index Fund (XVX) in the coming months.
These new ETFs give Canadian index investors an opportunity to access a whole new market that was previously off-limits to anyone who wasn’t willing to trade individual stocks. But before you decide to add one of these funds to your portfolio, understand what you’re getting into.
A risky Venture
The Venture exchange is a play on commodities. If you think the broad Canadian market is poorly diversified, it has nothing on the Venture market. All 30 of the companies in TSXV are involved in either mining or energy (oil and gas). So don’t make the mistake of thinking that this fund gives you broad exposure to small companies in all sectors of the economy.
These are really small companies. It’s a stretch to call these companies small caps — all but the largest Venture-listed companies are micro caps (worth less than $300 million),