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, for the last 20 years, 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.

I’ve owned a bit of QQQ for some time and I use it as my tech-growth kicker. 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. 

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, 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 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.

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 in my wife’s acocunt and now in mine in more numbers, 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.