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.
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
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.
- XIC – MER 0.06%
- XIU – MER 0.18%
- VCN – MER 0.06%
- ZCN – MER 0.06%
Want income from your portfolio? I do too! Read about my Top Canadian dividend ETFs.
- U.S. equity
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.
- VTI – MER 0.04%
- IVV – MER 0.04%
- VOO – MER 0.04%
- Canadian XUU (mostly a fund of funds including IVV) – MER 0.07%
- Canadian VFV (holds U.S. VOO) – MER 0.08%
- Canadian ZSP – MER 0.09%
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% (U.S. listed ETF)
- Canadian VXC – MER 0.27% (ex-Canada ETF with > 10,000 stocks)
- Canadian XAW – MER 0.22% (an all-world ex-Canada ETF with >7,000 stocks)
- Canadian XEF – MER 0.22% (broad coverage of Europe and Asia with > 2,500 stocks)
- Canadian VDU – MER 0.21%
What are my favourite low-cost dividend ETFs?
Want some income sprinkled with some long-term growth? These are the funds to consider:
- Top Canadian dividend ETFs
- Top U.S. dividend ETFs (disclosure: including Vanguard’s VYM that I own).
- Top International 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 the RRSP? Why U.S.-listed ETFs? Well…
- We get solid yield (income) of about 3% from these ETFs. This income will be used to pay for our expenses without selling units of the fund. I’m a big fan of VYM. I own a few hundred shares.
- We get growth over time. These ETFs offer growth in addition to quarterly income.
- The management fee is next to nothing. These ETFs charge some of the lowest fees available across the financial industry. My fees using these ETFs are <$100 per year. If I own $10,000 of VYM for example (and I do) my money management fees are just $8 per year.
- 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. So, we tend to keep our Canadian stocks inside our TFSA and U.S. stocks and U.S. ETFs inside our RRSPs. Be tax smart where you can.
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