Changing your ETF strategy as you get older

Changing your ETF strategy as you get older

You save, you invest.

You keep your investment costs low when you invest.

You diversify your investments across various stocks, bonds and some cash.

You stick with that plan, for years on end.  You’re doing a lot of things right.  Well done!

So, should you change your investment strategy as you get older?  Absolutely.

Does that mean you need to overhaul ETFs in your portfolio?  Potentially.

Yet the need to change your ETFs as you get older is largely the thesis I read in a recent Globe and Mail article.  In that article, it highlighted the use of Exchange Traded Funds (ETFs), as an “…incredibly powerful tool that investors at any age can use to customize their portfolios and fine-tune their strategies,” says Daniel Straus, vice-president of ETFs and financial products research at National Bank Financial Inc. in Toronto. “But it’s important to get the right one.”

So…what does that mean?  Is there a “right” ETF to own?

Not in my book.

The “right” ETF depends on your goals, the income sources you desire from various assets in your portfolio, your tax considerations and much more.  I totally get that things change.  My investing approach has changed quite a bit in the last 20 years.  That doesn’t mean there are the right ETFs to own – only the ones right for you.

After reading this article, I thought I would counter (or agree) with what experts said about ETFs changing as you get older.  I can do that from time-to-time on my site.  It’s my blog 😊.  As always, let me know what you think…your opinions matter too!

ETFs for investors in their 20s (or 30s; just starting out; building their career)

The article suggested young or new investors, with no immediate need for cash, they should be in an all-equity fund like the Vanguard Total World Stock ETF (VT) (which trades in the United States) or in a product like the iShares Core MSCI All Country Ex-Canada ETF (XAW) provides exposure to almost every stock market around the globe.

While I would agree with the premise that young investors should embrace stocks more than bonds when it comes to investing (I’ve learned to live with stocks and so should you), I’m not entirely convinced these funds are ideal.  With VT, you’ll have withholding taxes to consider.  With XAW, there is no Canadian content.


I think many 20- or 30-somethings would do well to own some simple all-in-one, low-cost funds like the ones from Vanguard.

There are TD eFunds to consider.  Great products (no affiliation).

Not all mutual funds are evil.  These are some great all-in-one mutual funds to help younger investors build wealth.

They might want to consider a robo-advisor like the one I partner with:  ModernAdvisor.

Try ModernAdvisor risk-free for 30 days with a trial account funded with $1,000 of ModernAdvisor’s money.  Yes, you read that correctly.  At the end of your trial period you can keep any gains if you open and fund a new ModernAdvisor account.

Any investor can always be more hands-on with ETFs and/or individual stocks later.  Whether it’s ETFs like VT or XAW or any other low-cost diversified product I believe younger investors simply need to get started.

ETFs for investors in their 40s (growing the career and family)

The recent launch of Vanguard’s three “asset allocation portfolio” ETFs are a bit of a game-changer.  Unlike the experts in the article, I think you could use them at any age – depending upon your goals.

I wrote about these simple all-in-one Vanguard fund here.

You could easily use the more aggressive VGRO ETF for the 20- or 30-something, it doesn’t have to apply to a 40-something.  The VBAL ETF could apply nicely to the 70-something who wants to keep things simple but also get some growth.

Whether you’re younger or older, investing boils down to meeting your goals, while managing your risk, as you progress through time.  Consider those before owning any financial product.

ETFs for investors in their 50s and 60s (nearing traditional retirement)

Maybe I’m an old-soul when it comes to investing or just plain short-sighted and biased.  I dunno!  But for many years now, I believe using a broad selection of Canadian and U.S. dividend paying stocks can not only help me reduce investment risk, it can also help me earn some solid income via steady dividend income and dividend increases – without touching the capital.

This way, from the G&M article, I don’t have to invest in the “…Invesco Low Volatility Portfolio (PLV)…” ETF that focuses on holding stocks with fewer “…day-to-day price movements, providing a buffer in a downturn”.   I simply hold the stocks I do, collect the dividends (and reinvest those dividends every month and quarter) to eventually spend as I wish in retirement or semi-retirement.  Volatility is really a short-term headache.  Don’t let any short-term price movements scare you.

Whether you want to own stocks directly like I do, or invest in broad market ETFs, you can see some of my favourite low-cost ETFs here.

ETFs for investors in their 70s+ (retirement and beyond)

From the article: “In this category, investor goals crystallize around capital preservation and consistent income generation. A pure fixed-income ETF might be a “safe and solid” choice, says Mr. Raes.”

I agree to a point but I also think if you’ve selected a good long-term plan in your 50s or 60s, you don’t really need an ETF overhaul – at least that’s my bias with dividend investing and low-cost ETF investing.  A powerful one-two hybrid punch.

Despite my knock on some pricey monthly mutual funds, I believe there are some decent monthly income ETFs for seniors to consider if they wanted that focus.

Consider the BMO product ZMI for a moment – the BMO Monthly Income ETF.  This ETF is a fund of BMO funds with the rebalancing work done by BMO.  With a solid yield, you can rely on steady income with this all-in-one product.  This one-fund solution can be a good home in your RRSP, RRIF and/or your TFSA – a reminder there are many great things you can do with your TFSA!

Since I’ve gotten some emails on this subject this fall, from 60- and 70-somethings, here is a short-list of modestly priced income ETFs and/or dividend ETFs to consider.  There are certainly others…

Data current at time of this post.

ETF Holdings Overview/Index MER Yield 3-Yr 5-Yr
BMO Monthly Income ETF (ZMI) ·         ~55% equities + ~45% fixed income

·         A BMO fund of funds

·         17 holdings

·         >$100 M assets under management


0.61% >4% 3.7% 3.8%
BMO Canadian Dividend ETF (ZDV) Weighted yield of Canadian dividend paying stocks – a rules based methodology that considers the three year dividend growth rate, yield, and payout ratio to invest in Canadian equities 0.39% >4.5% 5.4% 3.1%
iShares Core S&P/TSX Composite High Dividend Index ETF (XEI) S&P/TSX Composite High Dividend Index 0.22% >4.7% 6.3% 3.2%
iShares Diversified Monthly Income ETF (XTR) ·         ~50/50 split equities and fixed income

·         An iShares fund of funds

·         10 holdings

·         >$500 M assets under management

0.62% >5% 4.7% 3.5%

As an alternative, there is also the Horizons S&P/TSX 60 Index ETF (HXT).  It’s referred to as a “swap-based” fund since it doesn’t hold stocks directly. The management fee is super skinny, 0.07% and I think on their site there might even be a rebate associated with that.  Anyhow, rather than a traditional cap-weighted fund, the fund operates based on an arrangement with a counterparty/bank.  It works to deliver the same total return as the index it tracks (Canada’s biggest 60 stocks).  The benefit of this swap-product:  price increases will be taxable as capital gains (which can be taxed at a lower rate than dividends depending upon your taxable income – so it may be beneficial to hold this product, sell assets when you need income, in a non-registered account).


Over time, I expect to see many more all-in-one fund products offered by various financial institutions AND lower fees for these products, as the investment industry grapples with higher investing expectations:  including the need for income for aging investors.

At the end of the day though, while your financial plan should definitely change over time I’m not convinced you have to always overhaul your ETF portfolio as much.

What are your thoughts?  Although I believe financial plans can and should change, does that mean ETF strategies should change as much?  What’s your approach to sufficient income in retirement?

My name is Mark Seed and I'm the founder, editor and owner of My Own Advisor. As my own DIY financial advisor, we're inching closer to our ultimate goal - owning a 7-figure investment portfolio for semi-retirement. We're almost there! Subscribe, join the journey to learn how I'm getting there and how you can get there too! Follow my on Twitter @myownadvisor.

9 Responses to "Changing your ETF strategy as you get older"

  1. I agree. It is unnecessary, and just adds complexity and extra cost (especially in taxable accounts) to be changing ETFs as you age. I’d go with VCN, XAW and ZAG (or ZDB if in a taxable account) from day 1 and leave it at that until it’s game over, increasing the bond fund allocation at retirement day approaches. Another good option is to go with VGRO or VBAL and add in a bond ETF as you approach retirement.

    1. Great to hear from you Grant. Buying and selling adds costs that are not necessary. When in doubt, go with “a few good funds” and march on. Sounds like a movie I watched. I hope fall is treating you well.


  2. as i watch the snow come down here in wasaga beach i read your post with particular interest in the 70+ comments. we own a bit of xtr and the monthly income is nice but we are getting back some of own capital in the distribution and paying the mer! etf’s are a safer way to go but we’ll stick to our blue chip dividend paying stocks for now. the worst that can happen mark is we’ll come and live with you in ottawa! lol.

    1. I figured you might like that post. Yes, XTR does pay a bit of capital back…so buyer beware and definitely less growth over time because of that.

      Ha, I don’t think you’ll need to do that but when in Ottawa it would be nice to meet up eventually! Going South again soon?

  3. I hold XAW – for the sole reason it has 0 canadian content.

    My work plan is invested heavily in the Canadian market – so when I was choosing an ETF via my direct investing, I wanted something completely Canadian Free.

    I also own a decent chunk of the RBC Canadian Equity fund too. That said, I get what you are saying…had I not already had a high exposure to Canada, an all in one ETF would be ideal. Sometimes, a niche ETF (EX Canada, for example) can have its benefits for some ppl though 🙂


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