ETFs

Welcome to my ETFs page.  On this page I will share some articles about ETFs, how I use them, what some considerations might be for you – as we march on our path to owning a $1 million investment portfolio.

Read about ETFs in my 101 post here.

What makes a great ETF?

How many ETFs are enough?

Here are some ETF considerations for your portfolio.

Here are some great ETFs (for exposure to thousands of stocks at a low-cost) for your TFSA.

These are simple, low-cost, all-in-one ETFs for your portfolio.

Why do I like using Exchange Traded Funds (ETFs)?

  • To obtain near-market performance less minuscule money management fees.
  • To obtain great diversification (from companies and countries from around the world).
  • To “set and forget” part of our portfolio.

What are my favourite low-cost diversified ETFs?

  • Canadian equity – XIU or XIC or VCN or ZCN (inside TFSA or RRSP).

Any of these funds will give you access to a Canadian market that is largely ~30-40% financials and ~20% energy.  Pick one of these funds and sleep easy for the Canadian portion of your portfolio.

  • XIU – MER 0.18%
  • XIC – MER 0.06%
  • VCN – MER 0.06%
  • ZCN – MER 0.06%
  • U.S. equity – VTI or IVV or VOO (inside U.S. $$ RRSP)

U.S. listed ETFs inside the U.S. dollar portion of your RRSP are the most efficient way to invest in the U.S. stock market.  Any of these funds will allow you to ride U.S. equity returns for decades to come.

Alternatively, you can invest in a Canadian-listed ETF that holds U.S. stocks as assets.  You’ll pay a bit more but at least you won’t have to worry about Canadian to U.S. currency conversions.  I’m a big fan of VUN or XUU.

  • VTI – MER 0.04%
  • IVV – MER 0.04%
  • VOO – MER 0.04%
  • VUN (Canadian equivalent of VTI) – MER 0.16%
  • XUU (mostly a fund of funds including IVV) – MER 0.07%
  • International equity – VXUS (inside U.S. $$ RRSP) or VXC or VDU or others (inside RRSP).

Admittedly there are more choices here but VXUS is hard to beat for an all-in-one ex-U.S. international fund at a very low cost.  My other favourites in this space if you don’t want to deal with Canadian to U.S. currency conversions are:

  • VXUS – MER 0.11%
  • VXC – MER 0.27%
  • XAW – MER 0.22%
  • VDU – MER 0.21%

What are my favourite low-cost dividend ETFs?

What is my ETF strategy?

After buying and holding about 30 Canadian dividend paying stocks and about 10 U.S. dividend paying stocks for income and growth – we focus on owning U.S.-listed ETFs in our RRSPs for extra diversification.

Why?  Well…

  1. We get solid yield (income) of about 3%.  This income will be used to pay for our expenses without selling units of the fund.
  2. We get capital gains over time.  These ETFs offer growth in addition to quarterly income.
  3. The management fee is low costing next to nothing.  These ETFs charge some of the lowest fees available across the financial industry.  My fees are less than $100 per year.
  4. We avoid withholding taxes.  U.S.-listed ETFs held inside an RRSP avoid withholding taxes of 15%.  It’s worth reminding you foreign dividends are taxed at your marginal rate otherwise. Be aware Canada has tax treaties with the U.S. and many other countries.  Those tax treaties waive withholding taxes on U.S. stocks or U.S. ETFs in registered accounts like RRSPs, RRIFs and Locked-In Retirement Accounts (LIRAs).  TFSAs don’t apply to these tax treaties.  In a TFSA you must pay 15% withholding taxes on distributions earned using a U.S. ETF or 15% withholding tax on a U.S. stock like Coca-Cola.

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January 2018 BMO

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