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:

MOA - December 31, 2020 Final Dividend Income

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!

XAW ETF

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.

  1. 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, for the last 20 years, but I think I’ve finally landed on owning what I want more of: 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!

QQQ ETF

Image courtesy of Invesco.

I own a small bit of QQQ as my tech-growth kicker on the U.S. side of my LIRA. 

This way, 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 inside that account once I add more of the next ETF below. 

  1. Vanguard Total Stock Market Index Fund (VTI)

I’ve owned a very small position in this fund, for many years, but only a small portion since I’ve had a long-term bias for over a decade to one of Vanguard’s dividend ETFs (VYM).

VYM has done well for me overall for the last decade, as has individual U.S. stocks such as Microsoft, Johnson & Johnson, and Procter & Gamble to name a few, but with 2020 market calamity, VYM didn’t perform nor rebound nearly as well as the U.S. total market.

VTI vs. VYM Returns January 30, 2021

Image courtesy of Vanguard.

I figured it was time to make the permanent switch last fall, so I did.

I sold all VYM, plowed that into VTI.

With VTI, I own more than 3,600 U.S. stocks for a wimpy 0.03% management fee. I also avoid any U.S. withholding taxes (which are 15%) since I only keep U.S.-listed stocks like VTI inside my RRSP.

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?

I intend to. I mean, enough flip flopping already. Buy and hold and buy some more right?

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.

My name is Mark Seed and I'm the founder, editor and owner of My Own Advisor. As my own DIY financial advisor, I've surpassed my goal and I'm now investing beyond the 7-figure portfolio to start semi-retirement with. Find out how, what I did, and what you can learn to tailor your own financial independence path. Subscribe and join the newsletter! Follow me on Twitter @myownadvisor.

82 Responses to "3 ETFs I want to buy in 2021"

  1. Hi Mark,
    I am addicted to your blog!! Very inspirational! I invested in a couple of BlackRock Science & Technology CEF’s (like BST/BSTZ) in my US RRSP account last year. It provides total return and income through a combination of income, gains and long-term capital appreciation. The Trust invest at least 80% of its total assets in equity securities issued by United States and non-United States science and technology companies in any market capitalization range. It employs a strategy of writing covered call options on a portion of the common stocks the trust holds. They have a number of funds like these if you browse their website. For example BSTZ pays a distribution of 5.28% (Annual dividend is 2.05 USD). I have plenty of exposure in the US market through QQQ/VTI etc. However this particular fund is pretty Geographically diversified (though 55% is in the US) and the rest in countries like Korea, Japan, UK, China, Germany, Australia etc. it holds about 127 companies. It holds companies like Tesla, Square, Twilio, Snap etc. BST is more concentrated in the US with 70% and holds Apple, Microsoft, Paypal, Mastercard etc. One year total return with BSTZ alone is about 80%.
    What is your and the other readers opinion about these offerings from BlackRock. I just invested a small portion of my PF in these funds. I am getting tempted to buy some more moving forward since it has been paying distributions with capital appreciation as well. Here is a link to the site:
    https://www.blackrock.com/us/individual/products/308764/science-and-technology-trust-ii-class-fund
    Extremely intelligent people exchanging ideas on your blog. So much to learn.
    Thanks Mark !!
    Karan

    Reply
  2. Hi Mark,
    Love your posts. Just wanted to add that besides QQC. F (hedged version listed on the TSX), Invesco now has an unhedged version available too, Ticker Is QQC.

    Reply
  3. Hi Mark,
    I owned all three ETFs in this article, but did not go in detailed breakdown like you here.
    Thanks for such a nice write up.
    Just wondering is there a Canadian dollars version of QQQ?
    Thanks!

    Reply
  4. HI Mark I’m just wondering if it makes sense for a 60 year old to transfer some USA cash (sitting in my taxable account) into my RRSP USA account since I’ve never done this before plus I have a DB plan so I can only put in a small amount that wont build up to much before it has to be pulled out or just stick with ETFs like XAW , TDB 908 or all in ones. Thanks

    Reply
    1. I personally like a bit of USD $$ in a taxable account, for travel, whenever that happens again!!!

      I think it really depends on what your goals are Paul. Do you want this $$ available for near term expenses in USD $$? If you don’t need this USD $$ for >5 years then it’s possible it’s worth investing.

      That’s just how my brain works!
      Mark

      Reply
  5. Hi Mark,

    Thanks for covering my questions to your previous post in this one. 🙂
    I was wondering why you chose VTI over VT ? Is it because you already own XAW in your TFSA ?

    Reply
    1. Yup! It is tax-efficient, optimally, to own U.S. listed stocks inside your RRSP, LIRA, RRIF. So, I do.

      I will own more XAW over time in TFSA because the TFSA offers no tax efficient advantage to put U.S. stocks there. So, might as well own CDN-listed ETFs and own a bit of the world beyond Canadian stocks I already own.

      More reasoning on this page 🙂
      https://www.myownadvisor.ca/dividends/

      Reply
      1. Thanks, so as I understand you own ETFs like XAW, VTI, QQQ for growth and canadian stocks for income and possibly growth as well, is that correct ? And another question I have is about your income vs growth ratio ?

        Reply
  6. QQQ has been a great performer. I’ve held it for years, I wish I bought more at the time my cost basis is very low at 50’s. I didn’t pay attention to it for years and it has just exploded the past few years. I hold too little of it. I also hold VTI but in the form of VUN.TO. I didn’t want to convert to US currency because at the time of purchase back in 2017,2018 the CAN dollar had already dropped about 30%. But nonetheless I am satisfied with VUN.TO’s performance.

    Reply
    1. Just that I liked the structure (mirrors an index) of QQQ. Investors have also been rewarded for owning VGT as well along with many other funds like that. VGT is a great fund, lower cost than QQQ and more diversified as well. Really a mix of tech vs. index tracker is VGT.

      Reply
  7. I think you’ve convinced me to get some QQQ. The only non dividend company in our portfolio of dividend paying stocks is BRK.B. We have seen how well tech stocks have done in our RESP, and the little bit we also have in the retirement portfolio. I think it’s time to sell some Berkshire and get some QQQ. This will not affect our dividend income at all and give us some more diversification. BRK.B is like an emergency fund, I sell covered call options on it to fund any US purchases I have from time to time. (we also have other US dividends in our RRIF’s for travel, when we can again)

    Reply
    1. Ha.

      I mean, I will only keep ~1-5% max in QQQ but I see some advantages as a tech-growth kicker per se. BRK.B is absolutely very bond-like… Well done!!

      I don’t own any but thought of it, but with VTI, I own it indirectly too!!

      Reply
  8. Hi Mark,
    In searching for more info on QQQ, I came across QQQM (mini version) and QQC or QQC.F. Would you mind commenting on their comparisons, please?
    I’ve been reading your posts for a few years now. I have learned a great deal from you and appreciate the advice of a fellow Canadian/Ontarian. Thanks for sharing your knowledge and experiences.

    Reply
    1. Ha, very nice of you to say that Karen.

      From what I can tell, QQC.F is a hedged product for QQQ in USD. Hedging in an imprecise science but overall, you should be close to mirroring the performance of QQQ without having USD $$ to buy it.

      I don’t know much about QQQM. Seems like it’s a “mini-me” for that index:

      The Invesco NASDAQ 100 ETF (Fund) is based on the NASDAQ-100 Index (Index). The Fund will invest at least 90% of its total assets in the securities that comprise the Index. The Index includes securities of 100 of the largest domestic and international nonfinancial companies listed on Nasdaq. The Fund and Index are rebalanced quarterly and reconstituted annually.
      https://www.invesco.com/us/financial-products/etfs/product-detail?audienceType=Investor&productId=ETF-QQQM

      QQQ instead is designed to replicate the Nasdaq-100 not just 90%.

      Slightly different methodologies between QQQ and QQQM but I would need to read the complete prospectus of each to know the true differences.

      Reply
  9. Does VTI hold any Canadian stocks? The jump in the market yesterday and today was a bit unexpected but still doesn’t have me strongly feeling I need to dump VCN. Instead of moving that money to my bond index or over to my powerhouse XAW maybe this VTI would give me a bit of a tweak with a tiny Canadian content. Honesty I’m fine not holding Canadian indexes at all unless there is one that only holds health, finance and tech without all the resource based equities which is my biggest fear in Canada.

    Reply
    1. Nope. Just a 100% total U.S. market fund for VTI Chris, with steady 1.7%-2% ETF distributions. The rest is capital growth.
      It’s been a rockstar of a fund for decades:
      https://investor.vanguard.com/etf/profile/VTI

      VTI is biased to tech, consumer stocks, healthcare and then other sectors.

      I think XAW is an outstanding fund beyond Canadian borders. I only hope to buy more with 2022 TFSA contribution room myself.

      Reply
  10. Hi Mark,
    excellent choices and as i said before I do have VUN as a US total stock market and recently added TDB908 ( Nasdaq 100 ) for my Wife’s Tfsa, what i like about the td e-series is that you can buy it and have it automatically invested on a monthly basis down to 25$ a month if you want which it will make it excellent for someone who’s starting out and don’t have much cash to invest and at the same time wants to dip their toes in the Tech heavy index.

    Reply
    1. VUN is a great CDN equivalent to VTI. I have no quibbles if folks ever wanted to own that long-term.

      TD e-series are great as well and no commission right if you have a TD self-directed account?
      Mark

      Reply
    2. Hi, Gus, thank you for mentioning the TD e-series. I just opened a self-directing account at TD, would like to set up an automatically investing on monthly basis approach. How is TDB908 performance comparing to other ETF associated with Nasdaq100)? If there are so many ETF related to Nasdaq100, why this one? Apart from the automatic investment? Thanks.

      Reply
      1. Hello Angela,
        The performance of the tdb908 is a stellar but part performance is no indication for a future performance this is why in my own portfolio I have VUN which is US total stock market and it includes all the stocks in the Nasdaq plus about 3500 mid and small cap companies but we bought the tdb908 for my wife TFSA because she said she want more exposure to Tech stocks that’s all.
        As for performance 2020 the fund returned 40% and 2019 38% but 2018 -1.8% which it was better then the s&p 500 .
        The beauty and ease of the e-series are unmatchable I think because when I started with diy investing I called TD and told them how much I wanna invest in each fund so they did that on a monthly basis which is perfect because it eliminates all the thinking when the market is acting a bit weird because everything is on auto pilot 🙂
        After couple of years I switched to ETFs but I missed a lot of advantages that e-series provide .

        Reply
        1. Thank you, Gus, for your information and thought.

          The whole ETF and e-series fund are new for me, I will spend sometime learning and researching the field. I mainly invest in individual Canadian and US stocks. But for some accounts with small amount of contributions every month, I see the reasons of having positions of ETF and e-series fund.

          Reply
    1. It’s really amazing how well Nasdaq has performed and I wonder if the trend will continue? There is some overlap between QQQ and VTI. VTI getting more tech-heavy with time. At least I don’t have to pick and choose winners with either 🙂

      Reply
  11. Hi, Mark, thanks for providing so many valuable information and your honest thoughts regarding the investment journey.

    I have been investing in individual stocks, and recently start to think about the ETF options due to a few accounts with small amount of regular contributions. You mentioned QQQ, there is a Canadian side of QQC.F with currency hedge feature in it, though the rate of return is slightly lower, can we know why choose QQQ versus QQC.F?

    Thank you!

    Reply
    1. There is a CDN QQC.F for a hedge feature but based on my readings and understanding of hedging, it’s an imprecise science so you may lose a bit of the returns with any hedging strategy.

      Here is a good overview from my friends at Horizons ETFs.
      https://www.horizonsetfs.com/news/Blogs/Hedging-Your-Currency-Risk-Exposure

      Because I have USD $$, I bought QQQ. QQC.F could do quite well over time with minimal tracking error to QQQ…that is certainly a consideration if you don’t want to bother with CDN <> USD money exchanges.

      Pros and cons to every investing decision!

      Good detailed question!
      Mark

      Reply
      1. Thanks, Mark, for the link. Currency fluctuation matters in a short period of time, thus, hedging might work. If it is a long term investment, currency hedge may not matter as much as the overall total return of the market. Depending on one’s specific situation, which account to invest, the amount to invest, the frequency to invest, I could invest in both QQF.C and QQQ, to get tech exposure in the portfolio.

        Mark, I love this forum’s discussion, it gives one a solid base for investment decision. Thank you.

        Reply
        1. Yes, these are not recommendations for purchase, just how I invest and what funds/$$ I have access to!

          I figure XAW (tax-free = TFSA) and VTI and QQQ (tax-deferred but also U.S. listed so tax-efficient) I think, makes good sense for me beyond existing CDN and U.S. stocks for extra diversification.

          XQQ, ZQQ, QQC.F are of course great considerations to avoid CDN <> USD $$ headaches 🙂

          All the best and thanks for being a fan.
          Mark

          Reply
    2. Hi, Angela, HXQ is a Canadian ETF seeking to replicate the performance of the NASDAQ 100® Index .
      The best is of course the QQQ, but only if you have USDs, otherwise you start by adding the currency exchange cost to your investment. The management expense is 0.28%, quite reasonable for a Canadian ETF and even compared with the QQQ’s (0.20%).
      Personally, I invest in NASDAQ 100 via ZQQ that is hedged to CAD.

      Reply
      1. Thanks Marie. Yes, There is also XQQ to consider as well, but ZQQ is also a great product to avoid current conversions and remain hedged in CDN $.

        I appreciate the addition!
        Mark

        Reply
      2. Hi, Marie,

        I have both Canadian and US currency. Just try to compare the pros and cons for the end performance considering the fees, and currency fluctuation. QQQ has better performance and less fees. Maybe it is better to invest in QQQ if it is a long term investment say at least 10 plus years, and no need to convert the US dollars back to Canadian in a short term period, considering the Canadian currency appreciate more than 10% since last March. Need to stay for minimum 10 plus years.

        Reply
          1. Good article in Globe but I would argue for optimum tax efficiency coupled with a long-time horizon, nothing wrong with U.S. listed ETFs.
            Do investors need that though? Nope! Lots of great CDN ETFs now.

            Thanks for the link Marie.

            Reply
          2. I guess I just don’t follow why Rob did not compare a CDN S&P500 etf with VOO or IVV. MER for those is .03%. We have a lot more choices now in Canada but they are considerably more expensive.

            Of course one has to have access to USD or be able to transact a Norberts Gambit (instead of letting the broker do the conversion as Rob stated), which would be well worth it for larger amounts to invest. I’ve always done my own gambits to convert to USD.

            Reply
  12. Hi Mark – I agree with you. I am balancing all the CDN dividend stocks in my TFSA/NR, with global equity allocations in XAW for my $CDN and a combo of VTI/VXUS for my $USD in my RRSPs and LIRAs. I decided not double down any further on QQQ as it is already represented in XAW and VTI.

    Any thoughts on using ZGQ vs XAW? Over last 5 years ZGQ has done much better than XAW. It is not a direct apples to apples due to the quality factor but worth looking at I think. I hate chasing returns but the quality factor BMO uses here seems to work well.

    Reply
    1. I haven’t looked into BMO’s ZGQ but I won’t rule it out over time. MER a bit higher. 40% tech and healthcare which is interesting and plays into last 5-year returns for sure.

      Gosh, impossible to know what fund to buy and hold really. I figure just pick a few of the lowest cost ones and go to sleep at night. 🙂

      I won’t buy more QQQ until I buy more VTI this year. QQQ is only 1% of my overall portfolio whereas VTI is closer to 10%, and I would like that higher of course over time.

      Reply
  13. Hi Mark,

    As a long time educator and DIY investor for 20 years, it is great to see the learning opportunities your site provides for existing and potential investors.

    I, like you, am looking to increase the “out of Canada” content in my accounts. I am fortunate to have maxed out TFSAs and RRSPs and have an excellent defined benefit pension plan. I note your suggestions of QQQ and VTI in TFSA and RRSP accounts. I am not as educated as I would like to be in what US/international content to put into my non registered account. If you can direct me to any information and/or have suggestions, I would appreciate it.

    Reply
    1. Thanks for that Bruce.

      What specific questions do you have? I know for me, and I admit my bias, I have a bias to CDN dividend paying stocks in my taxable/non-registered account. Always have for the last 11+ years. I know the Horizons ETFs seems to be rather tax efficient in a taxable account? This was my recent overview post.
      https://www.myownadvisor.ca/tax-efficient-investing-horizons-etfs/

      Here is a quick overview from RBC.
      https://www.rbcgam.com/en/ca/learn-plan/types-of-investments/etf-investing-common-questions-for-tax-season/detail

      You can see that Foreign Withholding Tax is not recoverable in taxable account, although U.S. withholding is. Something to consider.

      Mark

      Reply
      1. Thanks, Mark. Reading the RBC article and your comments, which I’ll do a couple of more times to fully get it, I am thinking:
        NON Reg – Perhaps it is best to stick with Canadian Dividend stocks and Canadian ETFS (currently have CNR, EMA, BNS, TD.)

        For wanting to increase my US/Foreign content, do that in RRSPs, TFSA, and RESPs for my grandkids with ETFs such as VTI, XAW.

        I think I may have become to ‘hung up” on tax implications.

        Reply
        1. Well, taxable = tax-efficient thanks to the CDN dividend tax credit. That’s my bias for the last 11+ years to hold only CDN payers in there. You know, the banks, EMA, FTS, AQN, etc. No REITs or other in taxable, too many tax computation headaches.
          https://www.myownadvisor.ca/dividend-tax-credit-101/

          There are of course some good tax-efficient all-in-one funds like HGRO, although that may have a small capital gains to contend with/report from time to time due to rebalancing Bruce – I talked to the VP there to confirm 🙂
          https://www.myownadvisor.ca/tax-efficient-investing-horizons-etfs/

          So, my bias, and not advice of course, is that I keep CDN payers in taxable, and then use RRSP for mostly U.S. assets to avoid FWT (foreign withholding taxes).

          I know many bloggers and investors that hold XAW in TFSA, RRSP, RESPs, etc. just because it’s a nice all-in-one equity ex-Canada fund. They then can own some VCN or XIU or other for any CDN content without owning individual stocks.

          Hope that provides some insights!

          Reply
  14. Hello Mark!
    Which brokerage company do you use? I’m curious because BMO InvestorlLine doesn’t allow DRIP for US stocks, and I assume ETFs as well. (Not very happy about that!)

    Reply
  15. Hi Mark,

    We’re also hybrid, and our thinking is quite similar. 🙂 However, instead of VTI, we own ITOT. Wondering if you did consider ITOT? Our main reason to buy ITOT was the price (as of today, ITOT=87.47 x VTI=197.30), and the possibility of dripping ITOT faster than VTI.

    Thanks for your insights 🙂

    Stay safe!

    Reply
    1. Yes, DRIPing ITOT and VTI would be good Gean, I think either one is a winner. ITOT is a great fund.
      https://www.myownadvisor.ca/vanguard-vti-or-ishares-itot-which-is-better/

      I believe we have enough (well, I know we have enough) to DRIP VTI in my wife’s account. We’ll see with mine depending on the next distribution.

      DRIPping is definitely an enabler to overall returns but it doesn’t guarantee them.

      ITOT has historically been more tech and health care heavy but VTI is catching-up on those sectors.

      The key is to stick to one of them long-term and avoid flipping like I did between VYM and VTI. Luckily, BLK and other stocks covered some mistakes.

      Reply
        1. Ya, really trying to reduce my home bias and bulletproof my portfolio whereby I can live off both dividends (stocks) and distributions (from ETFs: QQQ, VTI, etc.) such that I don’t draw down barely any portfolio capital in the first 5 years or so of semi-retirement. I think that will serve us very well with our part-time jobs + cash wedge.

          I will keep JNJ, PG, MSFT and BLK along with a few other U.S. stocks but primarily going-forward, just plow any RRSP $$ into VTI and some QQQ over time. It really simplifies my plan in the coming 4-5 years as working on my own terms approaches I think.

          Reply
          1. Seems like a very good plan. It seems you’re going to end up not too far different from us, other than US stocks and working PT for a while.

            Highly doubtful you’ll be anywhere near needing to draw capital outside distributions/dividends along with PT work. Even if you did it’s very small potatoes with all future income sources considered.

            Reply
              1. Well I think you’re aspiring even more financially than I have, and are already in fantastic shape with few years of working to save even more and dump the debt anchor!

                Very well done my friend. And thank you.

                Reply
  16. Great choices. Coincidentally I also expect to buy a little more of 3 here.

    Ditto here on QQQ and VTI, but my third is VXUS.

    Will any go on sale in 2021?

    Reply
  17. Hi Mark
    Given your interest / emphasis on dividend growth, wonder if you have ever purchased or considered purchasing NOBL? I did some quick calculations and came up with a CAGR of 11.4% for its dividend payout from 2014 through to end of 2020. The MER is a bit higher (.35%).
    I also own some VIG (lower MER but also lower CAGR over the same period — 5.4% dividend growth rate).

    Reply
    1. I have absolutely thought about NOBL and considering owning it but it’s hard to compare with 0.03% like VTI.
      I did well with VYM for a decade up to last fall ~ 10-year around 11%.

      I’ll continue to hold a few U.S. stocks but more and more I’m trying to eat my own cooking by investing in lowest-cost ETFs as possible.

      I know a few investors and bloggers that own VIG. It’s done rather well since inception; close to 10% I recall for the last 14-15 years? Very good.

      Reply

Post Comment