3 ETFs I want to buy in 2021

3 ETFs I want to buy in 2021

Passionate readers of this site will know I’ve been a hybrid investor for well over a decade.

I love my dividend paying stocks from Canada and a few from the U.S., for income and growth. That’s one of my investing approaches. I mean, certainly, I’ve been fortunate with my selections overall.

Just look at this chart for assets inside my taxable account and our tax-free accounts only.

We have a new target identified for the end of 2021:

But I do know that in the 11+ years I’ve been a dedicated DIY investor, and ran this blog to chronicle that investing journey, I simply cannot predict the future. So, not all of my stocks come up big winners.

I’ve made some stock selection mistakes. I’ve made some poor timing choices. I’ve held stocks that have cut their dividends and dropped significantly in value from time to time. Thankfully those mishaps are rare.

So for approach #2, I invest in a small basket of low-cost Exchange Traded Funds (ETFs) to combat my love for dividend payers. 

Why low-cost ETFs?

A few key reasons come to mind:

1. I invest this way primarily for growth (not income) from a collection of stocks, whether they pay dividends or not. Growing dividend income is only one path to wealth building. 
2. I invest this way to reduce individual stock selection risk.
3. By investing this way, I own many companies in various countries, far beyond Canadian or U.S. borders.

My 3 ETFs for 2021

As a follow-up to this popular post, 5 stocks I hope to buy more of in 2021, here are some of the ETFs I hope to add more of this year and why.

1. iShares Core MSCI All Country World ex-Canada Index ETF (XAW)

With so much of my/our TFSAs filled with Canadian stocks, I felt it finally made sense to diversify away from our borders and invest ex-Canada in one of the lowest-cost funds around.

Welcome XAW to my portfolio – a simple way to own U.S., international and emerging market stocks in a tax-free way!

I used our entire 2021 TFSA contribution room to buy XAW units. Those accounts are now maxed out again for another 11 months. Should excess cash build-up inside our TFSAs later this year, I will buy more XAW.

Image courtesy of iShares Canada.

2. Invesco QQQ – U.S. Equity ETF (QQQ)

With thanks to a pension from work, I don’t have much RRSP contribution room every year, so I need to make the most of any RRSP contributions; avoid mistakes, along with my small Locked-In Retirement Account (LIRA) from my former employer.

I’ve been in-and-out of various ETFs over the years inside my LIRA and RRSP but I think I’ve finally landed on owning what I want more of in recent years: QQQ.

You can read about what a LIRA is, a case study about a LIRA from a financial planner, and how I used to invest inside my LIRA here.

QQQ is an ETF based on the Nasdaq-100 Index^®.

The fund, will essentially try to mirror the returns of that index, which have been historically at least, stellar when compared to the U.S. total return market. We’ll see how the future plays out!

Image courtesy of Invesco.

By owning more QQQ, I don’t have to worry if Apple, Amazon, Google, Microsoft or any other tech stock will become the world’s largest company – providing generous gains. I get to own them all.

As more RRSP contribution room opens up for me over time, I am very likely to add more QQQ there as well over time.

3. Vanguard Total Stock Market Index Fund (VTI)

I’ve owned a very small position of this fund relative to my overall portfolio value (<10%) for many years now.

While I had a bias to VYM in my early investing years, my wife has owned VTI from the start.

In recent years I’ve sold all VYM, plowed that into VTI and QQQ. 

With VTI in my wife’s acocunt she owns more than 3,600 U.S. stocks for a slim 0.03% management fee. I/she avoids any U.S. withholding taxes (which are 15%) since we only keep U.S.-listed stocks like VTI inside our RRSPs or LIRA.

You can consider the same too by reading up on foreign withholding taxes here. 

Some readers have asked, will I keep these three (3) funds for the long-term?

If I had to focus on just two, it would be two: XAW and QQQ. 

This approach should help me continue to reduce my Canadian home bias – something you can consider yourself here.

Lessons learned in diversification – reducing my Canadian home bias

I’ll keep you posted as major changes occur.

What ETFs are you buying this year? Are you a fan of ETFs? Do you prefer just individual stocks instead?

For further reading all about ETFs – visit my dedicated ETFs page here. 

Thanks for reading.