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Exchange-traded funds (ETFs) have made it possible for Canadians to invest at a fraction of the cost of a traditional mutual fund portfolio that you’d find at a big bank or investment firm.

No doubt ETFs have been a huge boon for investors, but with more than 700 ETFs now available, finding the best ETF in Canada can be a challenge.

Thankfully, there are a lot of good ETF options in the marketplace. Low-cost indexing pioneers, such as Vanguard, as well as other ETF industry titans such as iShares, have driven down costs so that Canadians can easily build a globally diversified portfolio for around 25 basis points.

To put that into perspective, a similar portfolio of mutual funds might cost 2.5%. In dollar terms, assuming a portfolio of $25,000, investors would pay $62.50 per year for an ETF portfolio, while mutual fund investors would pay $625. A massive difference!

To invest in ETF’s we recommend using Questrade and Wealthsimple Invest.

Finding the Best ETF in Canada

The ETF landscape in Canada seems to improve every year. The most recent addition to the space is a new trend of all-in-one “asset allocation” ETFs. Finally, we have a balanced mutual fund available in ETF form.

These one-ticket ETF solutions eliminate the need to hold multiple funds and takes the burden of rebalancing off of investors’ plates.

The beauty of ETFs is that while you can get broad exposure to the entire world with just one fund, you can also drill down into specific sectors such as REITs, or even into specific industries like cryptocurrency and cannabis.

For the purpose of this article, we’ll stick with core “set-it-and-forget-it” ETFs rather than trying to guess which hot new sector or industry will outperform.

How do you put together a list of the best Canadian ETFs? We started with ranking the top ETFs for the Canadian market, the U.S. market, the International market, and the bond market (Canadian and global).

Finally, we looked at the all-in-one ETFs as an efficient way to bring everything together under one fund and then ranked the best.

Best ETFs to Buy in 2021 for Canadian Investors

ETFMarketMER %# of HoldingsDescription
Vanguard FTSE Canada All Cap Index ETF (VCN)Canada0.06202Provides broad exposure to predominantly Canadian large-, mid- and small-capitalization companies
iShares Core S&P U.S. Total Market Index ETF (XUU)U.S.0.073,688Offers broad exposure to U.S. large, mid, small, and micro capitalized companies through the S&P Total Market Index
iShares Core MSCI All Country World ex Canada Index ETF (XAW)Global, ex-Canada0.228,924
Captures large, mid and small cap representation across 22 developed markets countries (excluding Canada) and 23 emerging markets countries.
BMO Aggregate Bond Index ETF (ZAG)Canada0.091,259A broad measure of the Canadian investment-grade fixed income market consisting of Federal, Provincial and Corporate bonds.
Vanguard Balanced ETF Portfolio (VBAL)Global0.2512,595Maintains a long-term strategic asset allocation of global equity (approximately 60%) and fixed income (approximately 40%) securities.

Invest in ETFs with Questrade. Get $50 in free trades.

Top Canadian ETF – Vanguard’s VCN

The biggest ETF in Canada (by far) is iShares’ XIU, which tracks the S&P/TSX 60 Index (the largest 60 companies in Canada). But in this case, bigger isn’t necessarily better.

Instead, we like Vanguard’s VCN as the top Canadian ETF due to its exposure to small, medium, and large-cap stocks (202 in total) at a rock-bottom fee of 0.06% MER (compared to 0.18% for XIU).

VCN tracks the FTSE Canada All Cap Index and the fund has delivered a solid annual return of 7.62% since inception in August 2013.

Canada is a small market dominated by the financial and energy sectors. By diversifying our holdings to 202 we reduce the risk of concentrating our investments in those two sectors and get exposure to small and medium-sized companies that may be poised to break out.

Top U.S. ETF – iShares’ XUU

The U.S. stock market is the largest in the world and so it stands to reason that you’d want to own the entire market to get exposure to American ingenuity at its finest.

iShares got the diversification right with its Core S&P US Total Market Index ETF (Ticker: XUU). With an ultra-low MER of 0.07%, XUU holds an incredible 3,688 stocks with all the familiar faces such as Microsoft, Apple, Amazon, Alphabet, and Facebook, plus hundreds of small-cap firms you’ve never heard of before.

XUU is a fund of funds, meaning its underlying holdings actually consist of four other iShares’ ETFs.

  • IVV iShares Core S&P ETF
  • ITOT iShares Core S&P Total U.S. Stock
  • IJH iShares Core S&P Mid-Cap ETF
  • IJR iShares Core S&P Small-Cap ETF

Two of its top three sector holdings are technology and healthcare, which you’ll barely find in the Canadian market. That reason alone should be enough for Canadian investors to add U.S. exposure to their portfolios.

XUU has returned 11.76% since inception in February 2015.

Top International ETF – iShares’ XAW

One of the great ETF revelations occurred several years ago when Vanguard and iShares introduced their All-World ex Canada ETFs. What that means is that for the first time, Canadian investors could build exposure to every global market (minus Canada) with just one fund.

Before the advent of these All-World funds, investors needed a minimum of four-five funds to construct a proper globally diversified portfolio containing Canadian, U.S., International, and Emerging Markets.

iShares’ XAW stands out ahead of Vanguard’s VXC due to its lower cost (0.22%) and more tax efficient structure.

It’s complicated but, in a nutshell, Canadian investors are subject to foreign withholding tax on dividends, adding another 30 to 40 basis points to the cost of these ETFs. XAW is a “fund-of-funds”, with its underlying holdings made up of other U.S.-listed iShares ETFs. The one exception is that it gets its developed market exposure from XEF – a Canadian-listed ETF that holds its underlying stocks directly – making XAW slightly more tax efficient than its main competition VXC.

XAW comes with a MER of 0.22% and holds 8,924 large, mid, and small cap stocks across the U.S., International, and Emerging markets. The fund has returned 9.18% since inception in February 2015.

Top Bond ETF – BMO’s ZAG

Most investors need a dose of fixed income in their portfolios. Bonds help reduce volatility, making it easier for investors to ride out a market correction or crash without losing their nerve.

The largest bond ETF in Canada is BMO’s Aggregate Bond Index ETF (Ticker: ZAG). It’s designed to track the FTSE TMX Canada UniverseXM Bond Index, holding a mix of federal, provincial, and corporate bonds at both short- and long-term durations.

ZAG has been around since January 2010 and has delivered annual returns of 4.10%. It comes with a MER of just 0.09%.

An honourable mention goes to Vanguard’s Canadian Aggregate Bond Index (Ticker: VAB). It tracks the Bloomberg Barclays Global Aggregate Canadian Float Adjusted Bond Index.

VAB launched in November 2011 and has delivered annual returns of 3.48% since inception. The fund comes with a MER of 0.09%.

Top All-in-One ETF – Vanguard’s VBAL

These funds have been called one-stop ETFs, one-ticket solutions, asset-allocation ETFs, and balanced ETFs. For the purpose of this article we’ll call them “All-in-One ETFs”.

Investors have several choices when it comes to all-in-one ETFs. We’ll briefly highlight all of the different options before declaring a winner.

First up is Vanguard, who arguably changed the game for DIY investors (and put robo-advisors on notice) with the introduction of its line-up of all-in-one ETFs. They include:

  • Vanguard Conservative Income ETF Portfolio (VCIP) – 20% equities / 80% bonds
  • Vanguard Conservative ETF Portfolio (VCNS) – 40% equities / 60% bonds
  • Vanguard Balanced ETF Portfolio (VBAL) – 60% equities / 40% bonds
  • Vanguard Growth ETF Portfolio (VGRO) – 80% equities / 20% bonds
  • Vanguard All-Equity ETF Portfolio (VEQT) – 100% equities

Each of the above ETFs comes with a low-cost MER of 0.25%

Next up is iShares’ asset allocation ETFs:

  • iShares Core Income Balanced Portfolio (XINC) – 20% equities / 80% bonds
  • iShares Core Conservative Balanced ETF (XCNS) – 40% equities / 60% bonds
  • iShares Core Balanced ETF Portfolio (XBAL) – 60% equities / 40% bonds
  • iShares Core Growth ETF Portfolio (XGRO) – 80% equities / 20% bonds
  • • iShares Core Equity ETF Portfolio (XEQT) – 100% equities

The iShares funds are expected to have a MER of 0.20%.

BMO also launched three asset allocation ETFs:

  • BMO Conservative ETF (ZCON): 40% equities / 60% bonds
  • BMO Balanced ETF (ZBAL): 60% equities / 40% bonds
  • BMO Growth ETF (ZGRO): 80% equities / 20% bonds

The three BMO all-in-one ETFs come with a MER of 0.20%.

We initially crowned Vanguard the winner of this category due to the breadth of its offerings for the ultra-conservative to ultra-aggressive investor, and everything in between. Recently, iShares matched Vanguard’s suite of asset allocation ETFs and now has a similar offering of five funds.

I personally switched my previous two-ETF portfolio, consisting of VCN and VXC, to the new 100% equities all-in-one ETF VEQT.

Personal preferences aside, I stand by my statement that most investors should add bonds to their portfolio to smooth out the ride. For that reason, I’ll highlight the classic 60/40 balanced portfolio – VBAL – as the top all-in-one ETF in Canada.

As “set-it-and-forget-it” as investing gets, VBAL offers instant global diversification with more than 12,000 holdings. A fund of funds, VBAL is made up of the following underlying ETFs:

  • Vanguard US Total Market Index ETF – 23.8%
  • Vanguard Canadian Aggregate Bond Index ETF – 23.6%
  • Vanguard FTSE Canada All Cap Index ETF – 17.9%
  • Vanguard FTSE Developed All Cap ex North America Index ETF – 13.8%
  • Vanguard Global ex-US Aggregate Bond Index ETF CAD-hedged – 9.2%
  • Vanguard US Aggregate Bond Index ETF CAD-hedged – 7.2%
  • Vanguard FTSE Emerging Markets All Cap Index ETF – 4.5%

One area to highlight is the exposure to both U.S. and global bonds, which most investors can’t get in a typical ETF or mutual fund portfolio.

How to Invest in ETFs

Now you have a list of the best Canadian ETFs, but how do you go about investing in them? That depends on whether you want to be a do-it-yourself investor or want to take a more hands-off approach to investing. Either way, here’s a brief explanation of how to invest.

For DIY investors, you’ll want to open a discount brokerage account. The lowest cost option is at Questrade, where you can purchase ETFs for free and there are no annual fees no matter what your account size. Their other trading fees range from $4.95 to $9.95, and their account minimum is $1,000. If you transfer your RRSPs or TFSAs from another institution, Questrade will cover your transfer fees. See our full Questrade review for all the nitty-gritty details.

Get $50 in free trades when you start investing with Questrade!

Once your discount brokerage account is set-up, you’ll need to fund the account with a contribution from your bank. You can do this with a one-time lump sum or with regular automatic contributions.

From there you’ll want to select your ETF, or portfolio of ETFs, by entering the ticker symbol(s) and purchasing the appropriate number of units. Unless you hold an all-in-one balanced ETF, you’ll need to do your own portfolio rebalancing. Decide on some rules. Let’s say your target allocation is 33% Canadian, 33% U.S., 33% International. You can either rebalance whenever you add new money by contributing to the fund that is lagging behind. Or you can rebalance once or twice a year by selling some of the top performing fund and buying more of the fund with the poorest returns. Buy low, sell high. That’s the name of the game.

ETFs offer plenty of benefits for self-directed investors and for advisors alike. Besides the ability to trade ETFs just as easily as stocks, and the diversification investors can get with just one or two ETFs, the biggest advantage is how cheap ETFs are compared to mutual funds. Yet, the amount of assets held in ETFs is still tiny compared to the amount of assets held in mutual funds. Indeed, the total amount invested in ETFs is around $248 billion, while there is more than $1.6 trillion invested in mutual funds. Read more about ETF vs. mutual funds.

For investors looking for some hand-holding through the process but who still want to save on fees, a robo-advisor is worth a look. Robo-advisors, or digital advisors, allow investors to build a portfolio of low-cost ETFs and will automatically rebalance your portfolio as you add new money or whenever your portfolio drifts away from its target allocation. Most robo advisors charge a management fee of around 0.40 – 0.50% to monitor your portfolio.

I’d be remiss if I didn’t mention that if you’re interested in a basic ETF portfolio, you should likely consider one of the leading Canada’s robo advisors, such as  and Wealthsimple (our top pick). The combination of reasonable pricing, overall usability, and unique perks make it our top choice.

Now is a great time to sign up because Wealthsimple is offering Young and Thrifty readers an exclusive deal: get a $100 cash bonus open and fund your first Wealthsimple Invest account (min. $1,000 initial deposit).

Get $100 when you open your first Wealthsimple Invest account!

Is Now a Good Time to Invest?

Now you know about ETFs and you’re ready to start investing. But wait — aren’t we in the middle of a global pandemic and potentially historic recession?

Sure, most stock markets around the world have plunged in the neighbourhood of 30% due to the economic shutdown caused by COVID-19. Here’s why investing during a market downturn is a good thing for young investors.

Stock markets like the TSX and S&P 500 had been on an incredible run – posting almost 11 years of uninterrupted gains since the 2008-2009 financial crisis. Now we’re facing a new crisis – and nobody knows when it will end and what the global economy will look like when it’s over.

Here’s what we do know. Whether it’s the Great Depression, world wars, hyperinflation, 9/11, technology bubbles, or a financial crisis, markets have always found a way to recover and reach new heights. That will happen again, we just don’t know when.

As a young investor, consider that context and start investing today. You’re taking advantage of a 30% discount in stock prices. Yes, stocks may fall further in the short-term. But as a long-term investor, you’re going to set up small, frequent, automatic contributions to your investment account and ignore the current volatility.

That’s what I’m doing in my RRSP and TFSA. When I started investing during the depths of the financial crisis, I just put my head down and kept adding to my portfolio. A decade later, I’ve watched my $200,000 RRSP portfolio fall to $160,000 in just one month due to the coronavirus crash. I know it will recover eventually.

I’m older, wiser, and have more money at stake than I did in 2008. But I’m still two decades away from needing this money to live on in retirement. Time is on my side, which is why I’m sticking to my plan and staying invested for the long haul.

Final Thoughts

The Canadian ETF landscape continues to get better and offer investors more robust options from which to choose. In fact, it’s never been easier and cheaper to build your own portfolio using the best ETFs in Canada.

If you’re thinking about heading down the DIY investing path, make sure and check out our Questrade Review as it is our preferred discount brokerage (mainly because it allows you to buy ALL ETFs – including the ones listed here – for free).

Questrade is our top choice for an online brokerage because you just can’t beat its low-cost trading commissions on stocks and free ETF purchases for investors.

What mix of these do you currently have in your portfolio?  Are there superior options I might have missed somewhere? Let us know!

Disclaimer: Young & Thrifty has entered into a referral and advertising arrangement with Wealthsimple US, LTD and receives compensation when you open an account or for certain qualifying activity which may include clicking links. You will not be charged a fee for this referral and Wealthsimple and Young and Thrifty are not related entities. It is a requirement to disclose that we earn these fees and also provide you with the latest Wealthsimple ADV brochure so you can learn more about them before opening an account.

Article comments

Paul says:

I currently hold DXG , ZUT and BAM.A in my granddaughter’s RESP. Would you suggest I consider the VGRO or VEQT. She is less than 5 years old. Thank you

Kamy says:

Hi, thanks for the great article, here’s my situation:
My TFSA and RRSP account is full as I have recently moved to Canada and purchased some mutual funds and put it in my TFSA, now I want to invest roughly 20k CAD into ETFS, is it fine to buy these into my regular investment account? second question is what do you think of a growth portfolio which is a mix of VEQT, HXQ & VFv? do you think adding some dividend ETFs like VDY or even real estate ones like VRE is worth it?

Josey Thong says:

Hi, I’m curious why Horizons all in one ETFs weren’t included here?

Sam says:

Hello, thank you for your article.
Iam looking to invest for my retirement. Iam currently 28 y/o.

I currently hold VSP.TO AND VFV. TO
Do you think there are good ones to hold?
I plan on buying 15-20 shares of these each per year until I retire.

Love to hear your thoughts on this and I would appreciate any other points you might want to add.

T-bone says:

Hi Robb, really like this article, I’m a new investor who moved to Canada about 6yrs ago. I’ve only just started to use my TFSA & RRSP with questrade.I have a diversified account but mostly all in equities. My 1st question is I can max out both accounts but should I do that right away or dollar cost average until we see where this pandemic goes, (talks of a -40%drop) all info says max it out right away. 2) question is, I’d like to add individual stocks like 10% as well, or just stick to ETF, safer I know.
Thanks again

Misa says:

Hello, I am planning to hold VIU_ VEE or XEF_ XEC. Should I hold these ETFs under Non Register Accounts for foreign tax recoverable ? or Under TFSA ? ( RRSP is maxed with US ETF , and TFSA for Dividend Canadian ETF )

Sam says:

Hi ,
Thanks for the article, I have some confusion on holding Canadian based ETF holding USA stocks such a TD’s TEC.TO
its in Canadian currency and XUU as well. My confusion is lets say I buy them and put them in my TFSA and one year after I make 10% profit and Sold it. How it will be 15% taxed as per USA law does the ETF do it by itself or I have to declare it somewhere when I file my tax returns? does it make sense to Hold such ETF which holds all USA stocks but are traded in CAD $ into TFSA ?

Robb Engen says:

Hi Sam, no need to be confused on this. The TFSA isn’t recognized as a ‘retirement’ account in the U.S. and so any U.S. securities held inside a TFSA will be subject to the 15% withholding tax – it’s not recoverable. The good news is that you don’t have to do anything, the tax is withheld each year based on 15% of the foreign dividends – it’s all taken care of by the ETF provider and you won’t see it.

Best practice is to keep Canadian listed ETFs inside your TFSA and, if possible, hold Canadian stocks inside since they won’t be taxed at all.

veen says:

Hi, all the etf options is still very confusing to me. Im 30 and want to use my TFSA to invest, I plan to keep buying more etf’s each month and when the market dips. Which etf’s do you recommend I should buy? and id like to diversify my portfolio, any help will be much appreciated

Robb Engen says:

Hi veen, it doesn’t get much easier than just buying one asset allocation ETF, such as Vanguard’s VBAL or VGRO. It has global diversification and low fees of 0.25%. You don’t need to get any more complicated than that when you’re first starting out.

B19 says:

If we have already invested in XGRO, does it make more sense to go with any of these aforementioned ETFs in particular (e.g., XUU, XAW, VBAL/XBAL, VCN, or ZAG) due to similarities/redundancies in their holdings in comparison to XGRO?

Many thanks!

Robb Engen says:

Hi B19, these asset allocation ETFs are designed specifically as one-fund solutions, so there’s no need to buy any additional ETFs to further diversify. Remember, XGRO is actually a wrapper ETF and inside it contains eight individual ETFs that all represent different regions and asset classes (Canadian, U.S., International, and Emerging Markets stocks, plus bonds). XGRO wraps all of those up into a low cost, globally diversified, and automatic rebalancing product.

moscow123 says:

hello, i am canadian and new investor .
1) Should i buy canada vanguard or US vanguard ETF VOO. Do i need to pay extra taxes if i Buy US VOO ETF from canadian broker.

Robb Engen says:

Hi moscow123, if you’re starting out I’d recommend just sticking with Canadian listed ETFs for now. You can build a diversified portfolio with just one asset allocation ETF like VGRO or VBAL, or you can buy individual ETFs for Canada, U.S., and International (plus bonds if needed). U.S. listed ETFs tend to be cheaper but they must be bought in USD and that can cost you in terms of foreign currency conversion fees.

Ryan says:

so for 33% Cdn, 33% US, 33% International split a solid sample portfolio would be XUU, VCN, XAW? just making sure I’m not “doubling” up on US stocks by having XAW and XUU since both hold US stocks?

Robb Engen says:

Hi Ryan, that would be duplicating your U.S. holdings by owning XUU and XAW together. XAW is market weighted and so 58% of it is in U.S. stocks. You’d be better off owning 33% VCN and 67% XAW to get your target exposure.

Omar says:

Hi Robb, sorry my comment and answers were for you, I confused your name with Kyle. Thanks

Omar says:

Hello Kyle, excellent article, even for the least understood ones 😉 I am not a resident in Canada, but my daughter fortunately lives in Canada and has recently received resident status. I personally invest stocks in my country because we don’t have many ETF options. But I have great interest in helping my daughter and I have found good articles, for me, yours is one of the best. Thanks. I would like, if you can’t answer everything here, to recommend me where to find how to choose the TFSA or RRSP account to associate investments in ETF’s, or are some recommended for TFSA accounts and others for RRSP? Thank you again.

Robb Engen says:

Hi Omar, thanks for the kind words. I highly recommend you check out Andrew Hallam’s Millionaire Expat book: https://andrewhallam.com/category/millionaire-expat-book/

He helps investors all over the world find low cost index investing solutions and maybe it can help you where you live.

As for your daughter, she should know that she can buy ETFs in a TFSA and in an RRSP account. The difference between the two comes down to taxes. In short, if you are in a low tax bracket then you should open a TFSA and invest there. If you’re in a higher tax bracket then an RRSP makes sense because you get a tax deduction when you make a contribution.

She can buy any ETF inside of a TFSA and I’d recommend new investors keep things simple with one of the all-in-one asset allocation ETFs like VBAL or VGRO (depending on her time horizon and risk tolerance). I wouldn’t waste any more time looking for more complicated alternatives at this stage – just set up the TFSA, buy the one ETF, contribute regularly, and watch your portfolio grow over time.

D says:

Be aware, TFSA is not an account a US Citizen should hold in Canada. I’d also highly recommend Andrew Hallam’s especially as a US citizen. There are ways to invest but because of the IRS options are limited and most be done smart.

George says:

Dear Kyle,

I’m with TD Webbroker. Nice user interface, good customer service, but $9.99 per trade, it gets expensive.

Does anyone here use Webbroker? If so, is there a workaround where I could buy multiple stocks without being charged the $10 for each purchase or sell I make?

I only have $1,000 invested in total, divided up between 22 individual Canadian, US stocks and a few international ones (I own an average of 4 shares per individual stock), plus I also have 1 Vanguard Total ETF VEQT Fund.

Given my overall stock makeup of my portfolio, can you please tell me if I have purchased stocks in a diversified and logically gainful way? Should I sell ALL of my individual stocks and buy as many Vanguard Total ETF VEQT Funds I can buy for $1,000? Is there another better stock portfolio strategy that you would suggest for me? I’m 55 years old, but very healthy and youthful looking for my age.

Lastly, is there a better no fee online brokerage that I should consider using i.e., Schwaub, Questrade? The problem is that if I sold all of my holdings with Webbroker, I would be charged roughly $200 just in selling fees – $10 per transaction as I own 23 different stocks in total, and own an average of 4 – 6 shares of each stock.. Again, I only have $1,000 invested in total. And, should I just stick with Webbroker to avoid the selling costs that I would incur?

I would really appreciate it if you could provide some guidance for me, as after only 3 years at this I am still a ‘newbie’ and anxious that I may not have gone about this in a rational and sensible way. As such, some good advice from a seasoned trader such as yourself would be greatly appreciated. Please post your response right here in the comments section.

Thank you so much. Best Regards,


kris says:

don’t sell, only choice for you is to add. place larger share orders next time and minimize your fees.

Kyle says:

Hi there. I’m interested in the VFV ETF from Canada as it seems to be the best annual returns over past 5 years for Vanguard ETFs in Canada. Any reason why it’s not on the list or why many people aren’t talking about it? Am I missing something? VBAL only has 1.5 years of history to show, why is it recommended based on such short time of inception?

Robb Engen says:

Hi Kyle, you have to remember that an asset allocation ETF like VBAL is really just a wrapper that contains 6-7 other ETFs. It packages them in a way so that investors can hold one product that is always automatically rebalanced behind the scenes.

VBAL actually holds the following ETFs, which have all been around for some time:

Vanguard US Total Market Index ETF
Vanguard Canadian Aggregate Bond Index ETF
Vanguard FTSE Canada All Cap Index ETF
Vanguard FTSE Developed All Cap ex North America Index ETF
Vanguard Global ex-US Aggregate Bond Index ETF CAD-hedged
Vanguard US Aggregate Bond Index ETF CAD-hedged
Vanguard FTSE Emerging Markets All Cap Index ETF

VFV tracks the S&P 500 which had the best performance of any market over the past 10 years. But that doesn’t mean it will continue to have the best performance. Which is why an investor should diversify across global markets.

Finally, looking at past performance is a very old school way to judge and select investments. It’s what actively managed mutual fund managers use to try and sell products that “beat the market”. With index ETFs, you’re getting the market performance, minus a small fee.

Even though VBAL has only been around for a short time, you can use its underlying holdings to reconstruct its performance over the past 20-25 years. It has a 10-year return of 7.55% per year and a 25 year return of 7.0% per year.

Jasraj says:

Thank you for the great read, it was very helpful. I’m just looking for some information as to why you picked VBAL as a better option than XBAL?

Thank you for your time.

Robb Engen says:

Hi Jasraj, it’s purely subjective for me – I have a preference for Vanguard products. The two can be used interchangeably, with only a slight difference in MER (XBAL is slightly cheaper). BMO’s ZBAL is another interchangeable balanced ETF solution.

Amandeep says:

Hi Kyle,
Can you write an article about the investing options for Canadian Expats? Unfortunately, you cannot invest with Wealth Simple if you are a Canadian Resident. Thank you so much.

Lisa Jackson says:

Thanks for the suggestion! We’ll put it on our list of article ideas.

Ronaldo says:

Canada is the end of a toothpick in the total picture of markets – therefor the main rational for investing in Canada has to be the dividend tax credit in a non – registered account (puting aside the witholding tx thing from USA investments in TFSA (altho British stocks and maybe other countries so not have such)and no other reason; So the question Kyle is R u touting a Canadian Dividend etf for non-registred equity or do u believe as i do for now that there is no way that such an etf can give one the same tax enhancement that the higher dividend blue chip individual stocks can and one should continue with this method almost exclusively in non-registered? (also in long run the Gross up methodolgy of dividend stock of 20% can bring claw back in government OAS payments if one lives long enuf and grows an account high enough – any comment here and should one even concern about oas clawbacks if making great dividend income from non-reg rather than going through manipulations to keep it down below the approx $70,000 per year)? thks for your opinions

J-P Hunt says:

Hello Kyle,

I followed you for a couple of months now and have read your ebook on ETF’s investing.
I appreciated your update on your ETF’s recommendations.
I understood that in your ebook you proposed a portfolio for the young investors and another one for near-retirement investors.
Being retired for 3 years now, I am asking if you have a portfolio for retired people who are already pumping into their revenues while looking to see them improving as much as possible for the time left?

Thanks again for all your feedbacks to all, they give the light to understand the “why”, “when” and “how” that are often missing from others.

Quebec retiree

Kyle says:

Hi JP. Thanks for the kind words! Basically, I’d just recommend a higher percentage of fixed-income as you approach retirement. So a bond ETF would likely be your best bet (or perhaps a HISA if you want to be ultra safe). It really depends on several different goal and cash flow variables.

Al says:

Leading institutions are not always the best for consumer. VCN has 2.5% dividends, XIC = 2.8%. XIC had near zero growth in 10 years – that’s Canada for you :). VCN is 3-years old, performs very similarly to XIC, I would not expect it to outperform XIC well enough to compensate for much lower dividend.

Kyle says:

May I ask what leads you to these conclusions Al?

Allan says:

What is the difference between HXT and XIC?

Which fund would be more tax efficient?


Kyle says:

XIC has more holdings, HXT is very slightly cheaper, and has some interesting tax-efficiency features in non-registered accounts due to capital gains vs dividend tax treatments.

Allan says:

Hi Kyle,

How about the after tax returns of holding XIC versus VCN?

XIC has a higher dividend yield. If held in a non-registered account, wouldn’t we be better off owning XIC?


Kyle says:

They track slightly different indexes Allan. Essentially, what you’re doing is place a bet that the small- and medium-sized companies included in VCN will not outperform the larger companies-only offering of XIC.

If you’re worried about taxes in a non-registered, I’d actually consider HXT as well.

Kirk says:

Alan/ Kyle,

I just opened a brokerage account as a non resident of Canada since I am current living and working in the USA. I am looking to invest my CAD cash into ETFs within the Canadian market for the long term / retirement (30+ years) and would like to know what funds would be ideal to avoid additional taxes, etc. I have also spoken to others and they recommended the following split ( 35% USA, 35% CAD, 20% international, 10% emerging markets). I am new to all of this, so any advice would be greatly appreciated. Thanks!

Robb Engen says:

Hi Kirk, I’m not a tax expert at all and it’s almost impossible to recommend an asset allocation mix without knowing your full financial picture or what kind of ETFs you’re looking to purchase. Each have their own unique make-up and potential for tax issues like foreign withholding taxes on foreign dividends. I’d recommend checking out the Canadian Portfolio Manager site run by Justin Bender. He’s an expert on individual ETFs and foreign withholding taxes: https://www.canadianportfoliomanagerblog.com/

Stefan says:

For the 3 ETFs listed in the new section, how do I determine what balance to go with? Is there an article related to this here? Thanks!

Kyle says:

Check out our free ETF eBook Stefan!

Barbara says:

Great Articles, I am not young nor thrifty but have some questions! & apologize for the lengthy text in advance. I am 57 next month. When I lost my job 2 years ago (have new employment with very limited matching) but I had a DB that turned DC Pension RRSP Locked in that I took out to invest myself. About $90,000 sitting in cash waiting to be invested. I’ve been leary with the bullish market we are in to make a move but am
losing out on monthly/quarterly distributions and feel a bit stuck to move forward. I wish I had invested when I thought to in the downturn of the market last February but was so
busy with my new job it quickly went to the backburner. I also wish I bought Facebook stock at $18 when I thought to in Sept. 13, hindsight is 20/20!!
I have a Questrade account with ETF’s mix of Vanguard & Ishares & some Company Stock from my former employer. All doing pretty well with good + % returns except for Ishares CBO (I have some XBB so may sell the CBO & add to my XBB holdings which are doing better) which has been a dud & some stock in Redknee which I’ll sit on until it comes back (if ever), not a huge issue. Live & learn. About $53,000 in investments there. Sunlife fund from DC about $16,500 that is low MER for actively managed fund through group work plan so I left it for now in one Med-High Risk Equity Fund. About $24,000 in TD E-Series & small bit in TFSA GIC. My question (s) is this; wondering whether to buy 10-20 individual dividend income stocks (Bank Stocks, utilities, Reit’s & blue chip/other) with my Pension Funds or keep it simple
and buy 1-4 ETF’s to add to my already (my picks from reading various Couch Potato strategies were VCN, VUN, VAB, & possibly VDU) but suggestions seem to change so often! Even though I am fairly close to retirement I want a limited amount in fixed income funds only because I want a higher rate of return, if possible & have an investment horizon of hopefully 30 + years still. I may only hold ultimately about 20% of my portfolio in fixed income (maybe 25% & that may climb higher as I get older). I will be coming into some additional money to invest (about $100,000) so I can max out my TFSA to the tune of $50,000 which I haven’t to this point) pay off a little debt and have another $40,000 to invest in non-registered account/top up very small amount of unused RRSP room. Does it make sense to buy shortest term laddered GIC’s in that non-registered account? & any suggestions for the TFSA investments? All toled I should have about $260,000 invested before any additional savings over the next 10
years or longer, but I am trying to simplify so rebalancing is easy & I do not overwhelm
myself. I have read quite a bit about Dividend Investing and like the idea of creating an income stream from dividends, & so that I may not have to touch too much of my principle for quite some time into my retirement. My plan is to step up saving over the next 8-10 years until I retire, try for $10,000 a year now that my vehicle in great condition will be paid off in less than a year, save $5,000 until then and just roll
those bi-weekly payments into an additional $5,000 in savings. I’ll
set up to invest every 2 weeks when I get paid so will help
with dollar cost averaging of purchasing any new funds. Was toying with the idea of a fee only based advisor to set me
in the right direction. Any ideas as to someone who is trustworthy? I went to passive investing because I did not want to pay an advisor all the hidden fees to do not much or so they could buy a bigger boat! Any suggestions would be very much appreciated.

Kyle says:

Hey Barbara, a lot of questions there so I’ll try to sum up:

1) I think a fee-only advisor would really help. I have three suggestions that I completely and fully trust. Chris Enns, Robb Engen, and Sandi Martin. Just Google them and read what they’ve written. You can decide for yourself if you’re a fan.

2) I would not recommend you picking specific stocks or continuing the scattered approach that you’ve articulated. Check out our free eBook on ETF investing for why I believe this.

Good luck!

EKG says:

Why not VFV? Returns 60%.

Kyle says:

Past returns are no indicator of future results! Nothing wrong VFV, it’s just I get the same US Equities exposure in VXC.

Saud says:

Hi kyle,
Thanks for such a wonderful informative article… i m new to canada and dont know much about financial markets here.. i want to invest 25k and found that etf are better option than mutual funds if u want to save commissions and fee expenses… i m also not aware of RRSP and TSA accounts and how can we manage funds in that accounts and what are the pros and cons of keeping ur investments in those accounts as compared to a brokerage account… can you please advise me some articles to understand the basics of investing in canada how and where to buy those etfs which u suggested?

Kyle says:

Hello Saud, check our our free ebook here: https://stg.youngandthrifty.ca/etf-investing/

And this article about RRSP vs TFSA accounts: https://stg.youngandthrifty.ca/tfsa-vs-rrsp/

Kate says:

Hi Kyle,

Another question — when I looked at the fund facts for some of the TD-e series, a couple of things jumped out:

1) Switch fee. Your representative’s firm may charge you up to 2% of the value of securities you switch to another fund.

Is this true for all funds?!

2) The trailing commission is an ongoing commission. It is paid for as long as you own the fund. It is for the services and advice that your representative and their firm provide to you. TDAM pays the trailing commission to your representative’s firm, including a discount broker. It is paid from the fund’s management fee and is based on the value of your investment. The
rate is 0% to 0.25% of the value of your investment each year. This equals $0 to $2.50 each year for every $1 ,000 invested.

Is this above and beyond the MER?

3) The charts below give you a snapshot of the fund’s investments on May 31 , 201 6. The fund’s investments will change.

How do you stay on top of the holdings in funds that have high turnovers? Or do you just keep an eye on returns and not worry about that?

Speaking of high turnovers, I noticed that XIC has a 30.52 turnover versus 6.42 in VCN. But their performance seems pretty close — if XIC has to turnover more frequently to achieve the same performance as VCN, wouldn’t that indicate that VCN is a ‘cheaper’ option given the turnover costs that XIC is generating?

Thanks – sorry, this was longer than I anticipated!

Kyle says:

Hi Kate,

1) Not sure to be honest, I haven’t used TD for a long time tbh.

2) In regards to trailing commissions – do you mean on the TD series or other mutual funds?

3) I’m not too worried about the fund’s turnover at all because they’re tracking an index – I know that those companies will change. The turnover difference is likely due to the rebalancing policy in each fund. Those costs are included in the return of the fund. I’m not concerned about it for that reason. Long story short, both Vanguard and iShares/Blackrock know what they’re doing when it comes to ETFs.

Kate says:

Hi Kyle,

Great article! We’re starting to put our portfolio together and I have a couple of questions:

1) Timing. When exactly do you put your portfolio together? I pretty much know what I want it to look like in terms of diversification but when do I start buying? Stocks are on the upswing at the moment so it seems like a bad time to buy the ETF’s but it would beat cash just sitting around in my RRSP.

2) In the comments you say “look at putting ETFs or individual stocks from the NYSE in your RRSP and CAD-listed ones in your TFSA if you’re looking to invest in both from the long term…”. Why is that?

Thank you!

Kyle says:

1) Kate, I can tell you that I know exactly what the markets will do from here: they’ll go up, or they’ll go down, or they’ll go sideways. If you decide that the math makes sense when it comes to index investing (it does) then you should embrace passive investing and not worry about bad time vs good time.

2) It has to do with foreign witholding taxes Kate, stay tuned this week for a huge article we’re just finishing up on going into this in detail.

Young Earner says:

Hey Kyle,

Great article! Do you think that it’s still a good time to invest in index funds like vanguard S&P 500? How will the current recession affect it?

Is something like the ZAG – BMO Aggregate Bond Index ETF a worthy investment right now?


Kyle says:

Hi YE, as far as I’m aware the US is not in a recession, but has been steadily growing for a while? The truth is I have no idea where markets are going. We are essentially in an unprecedented situation right now as far as the world’s monetary and fiscal policies. At the best of times I’m not sure I could answer your question very well. I’m a dedicated index investor. I’ll let the sharks fight it out and be happy to take capitalism’s average over the long term. To answer your question, both the bond fund and equity fund that you mentioned will probably be ok investments over the next thirty years!

Sorry I didn’t give you more of a silver bullet answer.


pal vin says:

Hi Kyle,

Thanks for your reply.
How/ Where do i buy the Vanguard canadian ETFs.

Kyle says:

You can buy them on the TSX using a discount brokerage Pal. I’d start here: https://stg.youngandthrifty.ca/questrade-review/

Camaro says:

Hi Kyle, thank you very much for the effort you put into your website! It gave me the push to start my CP portfolio:
VAB (20%)
XIC (20%)
XRE (10%)
VUN (20%)
XEC (15%)
XEF (15%)
Although the portfolio is currently small (5k), I think it’s a good start; will be pumping in more in the next few years. Given the MER vs. that of the TD e-series, I didn’t see a big difference.

I noticed in the comments above, you commented that if you need the cash in a few years it’s best to put it in fixed income. So what ETFs should I be looking at? I plan to set aside some funds (different from this one) in preparation for my first child; 3 – 5 year timeline during parental leave. I would love your insight on the matter Kyle! Thanks for your time!

Kyle says:

Fixed income right now is super boring Camaro. TBH I’d just recommending putting it all in an online bank high-interest savings account. It’s definitely a good idea to have some money in something safe like that in order to prepare for the chaos of the child bearing years!

James says:

Hi Kyle,

Thanks for the great article and for the additional clarifications in your comments. The article seems to be a discussion of the merits between iShares and Vanguard ETF products. I wonder if BMO products (or others) were not included in the discussion, either because you find they don’t compete/compare or if there is some other reason.


Kyle says:

Hey James, when you’re discussing basic vanilla index ETFs they’re all pretty similar. BMO either doesn’t have the specific product or they’re just a few points more expensive.

Gavin says:

I have decided to put my RSP into ETFs because my company mutual fund was charging a MER of 2%. I’m currently waiting for the funds to transfer to my questrade account but here is where my funds will be going.

– Canadian Markets – VCN (30%)
– .06% MER
– American Markets – VUN (25%)
– .16% MER
– Canadian Bonds – VAB (25%)
– .13% MER
– International – XEF (10%)
– .22% MER
– Emerging Markets – VEE (5%)
– .24% MER
– Real Estate(REIT) – ZRE (5%)
– .61% MER

Kyle says:

Makes sense to me Gavin. Do you have a re-balance plan ready to go? If you don’t paying attention to this, then you’re saving yourself a few points versus VXC for sure. It’s always about the balance between fee savings and workload to keep up the actual save & invest logistics.

WomanInvestor says:

Love your site!

Kyle says:

Thanks, we appreciate it!

Juan Aristizabal says:

Great article thanks. I came across this post regarding the structure and effectiveness of VXC:


What do you think about this statement: “foreign withholding taxes would add approximately 0.45% to the cost of the fund if it

Kyle says:

I’m a big fan of that site Juan and you’re right – it does add some extra expenses – but read further down where Dan talks about currency conversion charges when buying US-listed ETFs. There is a large advantage to keeping your money in CAD. Still, the greatest value by far is the simplicity of the set up in my opinion!

James Hilton says:

Hi Kyle,

Have really enjoyed your posts on the site. and also your ETF book. You have given lots of practical advice. I am new to investing and I was wondering if you could help access my situation.

Firstly, I am young (23 years old). I have saved up about 44K right now and plan to save an additional 10K this year. Right now, I have maxed out my TFSA at 36.5K. The rest is sitting in a generic savings account. I am looking to buy my first home in approximately 1 year. The downpayment will be about 40K. Although I would like to save up for the long term, my current investment horizon is only 1 year since I need to have 40K with 100% certainty. Do you think I could execute your ETF strategy with a very large proportion in the fixed income ETF? Say, 75% fixed income and 25% with the other equity ETFs? My parents tell me not to take any risk and put my money into GIC’s. Do you think a 80% portfolio of fixed income is just as safe as a GIC?

Thanks in advance!


Kyle says:

Hi James, fixed income is and GICs would be considered roughly equivalent in terms of risk in return. I’d look into putting 25 of the 44K in an RRSP account and then using the Homebuyer’s Plan for a downpayment. Nothing wrong with just going with basic GICs if you’re going to need the money right away James. I would stay from equity ETFs if you need the money in the next couple years. Cheers!

Tito says:

Hi Kyle,

great comments. I downloaded your book a couple of weeks ago, congratulations, I loved it! I had always been convinced about passive investment (I was fortunate to hear John C. Bogle discuss his view about this), but not until very recently I’ve had the chance to save (and invest).

So here are a couple of (big?) questions for you:
1) How do you recommend I start looking into which ETF to invest in? There seem to be a gazillion out there, so I am sort of lost and don’t know where to start. I have my money standing there, begging me to be invested in something! I could of course follow your lead and simply invest in what you have (we’re more or less in the same personal situation, I think), but I like being informed before making any decisions. Additionally, you mention which ETFs you’re investing in, but not what % of your portfolio each one represents. And this leads me to my second….
2) How do I establish what part of my portfolio I should be investing in each ETF? This is particularly important for rebalancing (which I’m planning to do once/twice a year). Is there some sort of formula or logic? And finally…
3) What is the criteria for deciding which ETF I should be investing in, in relation to the type of account I will be using? Right now I have the option of investing through my TFSA and my RRSP, but soon I’ll max them so I’ll just use a margin account at Questrade. So… is there some logic or best practice to follow to decide which one to use for a specific ETF?

Thanks so much in advance.

Kyle says:

Hi Tito, the short answer is this: http://canadiancouchpotato.com/2010/03/05/put-your-assets-in-their-place/ The longer answer will happen when I refresh this article in the next few weeks. Great job maxing out both of your registered accounts btw!

Hey, great post!

Wondering if you’ve ever considered investing in “exotic” ETFs? For example, a few that come to mind are:

BMO Low Volatility Canadian Equity ETF (ZLB)
BMO S&P/TSX Laddered Preferred Share Index ETF (ZPR)
BMO Covered Call Canadian Banks ETF (ZWB)

These are pretty unique investment solutions, and while I’ve never actually invested in any of them, I find them tremendously interesting.

Kyle says:

I have looked at these and rejected them FC. I don’t think with the MERs they have that they will outperform my broad indexes over the long run (20+ years).

Che says:

I think the “I

Kyle says:

We’re going to update this article in the new little while Che – stay tuned! Looks like it wasn’t a bad call though eh?

Jozo says:


Thank you once again for your instructive advise.
I am definitely going to read those articles you recommended me.
Also I will take this articles as yours affirmation of my assumption that I should consider including at least one more ETF in my TFSA portfolio.

Jozo says:

Hey Kyle,

Thank you for your effort. You did really good job with this article and all your comments.
So far i ve invested only within my RRSP and TFSA.
My RRSP I have invested in TD e-series, I would like to know your opinion on investing in TD e-series beside ETFs and my TFSA I have invested in only one ETF and that is XIC. Could you please tell me your opinion on my portfolio. I think I should maybe try with at least one more ETF in my TFSA, any suggestions?

Kyle says:

Thanks Jozo. You sound like you’re on the right track. There is certainly nothing wrong with the TD eSeries. Rather than give a specific recommendation, I’ll point you towards some good resources so that you can evaluate it yourself: https://stg.youngandthrifty.ca/vanguard-etfs-versus-td-e-series-mutual-funds/ & https://stg.youngandthrifty.ca/book-review-value-simple/

Master Nerd says:

Hi Kyle,

Nice list. Just wondering why you went for XIU vs XIC? The latter has a lower MER, higher yield, and lower portfolio turnover. I debated back and forth in the past, but the numbers just seemed a hair better for XIC. As you argue for VTI it’s important to have broad exposure to the whole market, and not just the S&P 500. To me, picking stocks based on market cap seems rather arbitrary. Also, why 60 and not 65 or 100 or 30? I’m sure there was some logic behind that number when the ETF was created, but basing success based on market cap alone seems a bit too simplistic. In any case, the performance of both is very similar, just curious about your logic for preferring XIU.

I don’t have a pension (I might never), but I hold a small position in XBB just because bonds are one of those things everyone should have, but few younger people do.

In terms of VUN vs VTI, from what I’ve read if you make smaller more frequent contributions, VUN is probably the better choice, since the forex fees will eat you alive otherwise. For VTI, if you’re doing bigger lump sums (>$10k at a time) your best bet is to do Norbit’s gambit to minimize forex fees. Depending on your portfolio, VUN might also be a good option if you’re trying to avoid the extra CRA paper work for having >$100k in foreign assets. To my knowledge, a Canadian listed ETF regardless of holdings wouldn’t trigger that requirement. There’s also the issue of considering what account you hold these in. VTI is a better choice for RRSPs since the distributions won’t be taxed as long as it’s in the account.

Kyle says:

The only reason I chose XIU over XIC is that when I wrote the column XIC had almost no volume. Then I just got lazy and decided to stay with the one I have. Canada’s stock market is even more top heavy than the USAs, so I’m pretty sure the returns will be almost identical over the long term.

I’ve written about Norbit’s Gambit before as well. If you choose VTI inside of an RRSP it has added tax advantages over VUN as well (see witholding taxes and Canadian-listed US ETFs).

Ferd says:

I would just have one question/comment on using VXUS. The principle of using just one ETF to get your whole international exposure is great, but doesn’t it minimize the power of rebalancing. If, say, emerging markets are down, the index would have a lower exposure to them, which contradicts the buy low/sell high ideology. I guess this depends on how the index is computed, but I would think that holding a separate emerging and developed international etf would offer upside with rebalancing, unless this is what VXUS does within its fund?

Kyle says:

VXUS would do this within the fund Ferd. It has a certain exposure % for emerging markets. So if they went down, it would buy more shares. That being said, you could obviously micro-manage your exposure to specific emerging markets by using more niche ETFs if you wanted to. I just think there is a lot of value in keeping it simple for most people.

Ferd says:


Ferd says:

With VXUS having 7.5% of its assets in Canada, are 7.5% (or the exact amount) of the distributions treated as eligible dividends and also forego foreign withholding taxes? Or since it’s a US ETF they don’t bother going through this procedure?

Kyle says:

That I’m not sure on Ferd, since I still have plenty of room in my RRSP for US-listed ETFs so it’s not a worry for me. I would assume that because it’s a US ETF you’re guessing right.

Ferd says:


Grant says:

I don’t think that’s correct, Kyle. The ETF is cap weighed, it doesn’t keep a certain % of emerging markets. If emerging market go up from 20% to 25%, that’s what it is. If you want to capture a rebalancing bonus, you need to to own an international and emerging markets ETF, such as XEF and XEC.

Mat says:

Great article! I’ve been looking at some of these ETF’s for the new year as I will be looking to do some restructuring of my accounts, very good information!. As a young investor, my biggest concern now is asset allocation for each account. For example, should I be looking at individual stocks for my TFSA, RRSP, or, where and which ETF’s are the best play for long term and short term? Should I be looking at income investing for my TFSA or growth? If you could provide me with some tips and/or advice regarding the issue, I’d greatly appreciate it! Thanks, Mat

Kyle says:

Hey Mat,

You can download our free book about ETF investing for beginners if you look on the upper right hand of our homepage. As a general rule, look at putting ETFs or individual stocks from the NYSE in your RRSP and CAD-listed ones in your TFSA if you’re looking to invest in both from the long term. Throw out all of that crap about growth vs income, most of it is all fancy terminology to describe some pretty basic stuff. Take a look at the book and let us know if you have any questions! Thanks for stopping by.

barwelle says:

Kyle, I’m afraid there is an error in your in your post. Vanguard’s VUN is NOT hedged. VUS is the hedged version of VUN.

Fun fact, neither ETF invest directly into the US market. Vanguard takes your money, exchanges it for US$, and “buys” units of VTI with it.

Kyle says:

You are completely right Barwelle, it is not CAD-hedged, it is only available to be purchased in CAD funds.

Bet Crooks says:

I like PH&N bond funds. We have a good one available through our work defined contribution plan which has a lower MER than available on the street. They seem to have a team that really understands how to play the game given the wild swings bonds have gone through in the last 4 years, especially in May/June.

For a new investor with no DB, I think I’d suggest they just sink their fixed income percentage in short term GICs (1-2 years) until things calm down a little. Bonds could sink a bit over the next few years if they cut back on QE. And GICs will go up if rates go up, so locking in for 3-5 years at today’s pitiful rates wouldn’t suit me.

Kyle says:

Bet, why would you go with fixed income products if the person is a new investors and presumably young? Timing the market doesn’t work for about 99.99999% of investors.

Bet Crooks says:

Well, we are new investors (to the stock market) since about 3 years ago (not counting DC pensions) and we’re much closer to retirement than to starting out, so I’m not sure I agree with the “presumably young” part….

I think all portfolios should have a fixed income component. The % is up to the investor of course. Having lived through more than 3 major stock market crashes, I know many people who stopped investing in the market out of fear after losing a huge amount of their portfolio because they didn’t have a fixed income counterweight to catch them. (Remember you also can’t “buy low” if you have no cash.)

I’m not sure where the market timing comes in to my comment? I would agree with investing steadily over time in low cost ETFs (or mutuals if you can’t get ETFs for some reason) that capture as close to the whole market as possible. That’s what I’d do with the Equity % of a portfolio. For e.g. even though the market is really up right now, we’re still buying market ETFs at the same pace.

For the fixed income part there’s really only a couple of choices: GICs, cash, money market, and bonds. (Preferreds and the like are actually varied income not true fixed.) I guess putting new money into GICs instead of straight into bonds is a type of market timing. But I’ve never seen a case before where interest rates have been kicked down so long and so hard. I’d feel guilty suggesting someone start buying a bond fund right at this time unless they had no choice. (e.g. some DC plans) GICs aren’t as flexible as bonds but they have always been a part of our portfolio (most of it in fact) and they’ve done very well by us. We’re ultra conservative and would rather sleep easily than try to maximize our return.

I hope this has clarified my view and not just made it murkier!

Kyle says:

This makes a lot more sense Bet. I misunderstood a few things. I tend to default to the opposite end of the spectrum from you I guess as a someone with a long investment horizon pension and someone with a pension that can take care of their “fixed income” part of the portfolio. It makes sense now. I often find myself arguing for a higher allocation of equities than most are comfortable with…

Phil says:

Higher allocation of equities… You and me both. I consider our “fixed income” portion to be our owned primary and secondary residences (which make up about 40% of our net-worth interestingly enough – right they say % fixed equal to your age…)with everything else in equities… let it ride baby! We sleep comfortable at night because we own the 8 walls and 2 roves that protect us at night – Cheers.

Grant says:

Bet, I wouldn’t feel guilty about suggesting someone buy a bond fund right now. So long as you hold a bond fund for it’s duration, you’ll get at least your money back (at least in nominal terms), in a rising interest rate environment as new bonds are bought at higher interest rates, resulting in higher income. Nothing wrong with GICs (you do get slightly higher income due to the illiquidity premium), but it’s great having the liquidity and bump up in price that occurs when equities crash (the “flight to safety”), for buying equities at depressed prices to rebalance. So for the young, long term investor, I’d go with VAB (lower MER than XBB, at only 0.19). I agree with you. Most people should have some fixed income to smooth the ride and help you stay the course.

Phil says:

I’m not into ETF’s unfortunately. I got into Mutual funds back a number of years ago and have been very happy with the returns I’ve had. That said, one of the ETF’s missing from your list is the Cdn banks – WEB. Others good ones I’ve considered include: CDZ, IWO, SPY, VIG, IBB. ETF’s are a good way to get broad coverage, but I still like individual stocks better for my personal situation, and honestly for the rush I get when I pick the ONE! – Cheers.

Kyle says:

You don’t think you get enough exposure to the banks with the basic Canadian ETFs Phil? I mean they’re like a third of the index, would WEB be a little overboard?

Phil says:

Maybe, and thinking about it probably, and also probably why I do not invest in ETF’s… That said, if I was to build a perfect portfolio of ETF’s I would probably look at building it using the 10-15 different sectors as my headers and owning an ETF for each sector, so that I could follow sector rotation as I input money… You know when tech stocks are turning around, I’d add to my tech ETF… materials, add to my materials ETF, etc… this is what I do with my stocks, so why not with ETF’s? Sorry, just think’n out loud. I really do prefer stocks, for my growth side, and Mutuals for my standard market side. Bissett cdn Equity fund has returned near 20% ytd, with a low MER of 1.18%… TSX is only up 8.5%… – Cheers.

Kyle says:

I know using ETFs to play the sector rotation game is popular amongst a solid niche. It’s more a pure-sector play than trying to pick the specific companies that will outperform the sector itself as it enters its favorable point in the cycle. I just don’t trust the science behind some of the rotation theory. Some sectors stick out a little more than others for me, but I’m not familiar enough to commit yet. Same thing with mutual funds. There are undoubtedly some talented fund managers out there, but choosing them ahead of time has proven to be too tricky for almost academic study I’ve read. I just don’t trust my instincts yet in that area either. Perhaps when I have little more free capital to play with. Just out of curiosity Phil, how do you do versus the mutual funds you often pick?

Phil says:

Bissett Cdn Equity fund – +19.5% ytd
PH&N Dividend fund – +14.8% ytd
My main stock account (14 holdings)- +16.6% (since June 1st, since consolidated many other investments to one account)
My TFSA (5 holdings) – -1% ytd(This is my play account, and where I put my high risk plays, and in March I made 2 gambles that did not play out well…)
My wife’s TFSA (7 stocks) – +26% ytd

So looking back I beat the mutual +5 to +7%. First 2 years I was about flat, and ever since I’ve been increasing my gain… is it worth it, for me yes, I’m young, have capital, no debt and time.

Kyle says:

Interesting. Thanks for being so upfront about your successes and your not-so-successful picks. I like the voyeuristic part of watching active management (like watching poker) but don’t trust my own portfolio yet!

Phil says:

my 2 gambles were AM-T and WIN-T, both resulted in a combination of bad time of buy and ultimately my decision to cut losses at wrong times… Lesson learned! – Cheers.

Master Nerd says:

I’m inclined to agree with you Kyle. Picking sectors is really not much better than picking stocks. Statistically, the odds are not in your favour over the long term (20+ years) with that approach. You’d basically be saying you are betting against armies of people with finance PhDs that do this day in day out that you know when to pick the right sector to buy/sell. I think keeping it simple and just buying the broad market is a much better option (at least that’s what the math and Buffett say).

Kyle says:

Finance PhDs, super computers, and insider information…

Andre says:

Hi Phil, your think’n out loud comment caught my attention. I am thinking of this strategy of owning ETFS for each sector for a while now. It seems like a solid play and also a great way to hedge your self from one sector to the next.
But, I cant pull the trigger on this play yet. Call it foolish but I feel like the experience is similar to going out for sushi.(stay with me on this)
I like to choose and buy the rolls of sushi I want from the list. However, some people don’t want to bother with the menu and go with the chef selection of 20/30/40 rolls. In the latter case you get screwed with a bunch of avocado filled rolls at the same price as you would pay for some awesome salmon, tuna or lobster rolls. Anyways, sorry to digress with the sushi analogy. But I feel like its the same thing with ETFs. I’d rather buy and position myself with the sectors I like and not get stuck with an index fund full of avocado rolls. You know what I mean?

Anyways, I would really appreciate all of your opinions/resources/anecdotes/advise on this style. Maybe we can outline some pros and cons.
All the best


Kyle says:

Thanks for commenting Andre. Have you done any research into how successful most people are when it comes to using sector-based investing? It’s a lot harder than one thinks, and those ETFs full of “mediocre sushi” have done pretty well over the last several decades!

BeachBoy says:

To my view / portfolio:
1) Instead of VXUS I have SCHF (MER 0.09% which is much less than 0.16$)
2) I also have VTI, a major part of my portfolio
3 & 4) I have XIC to track the S&P/TSX index
5) XBB is also in my portfolio
6) I don’t mind being on the NYSE so no use for me
7) I have ZRE, which is equal weight, which is even more “severe” than the cap option. I also have SCHH for the US REIT side.

I also have ZRR (Real Return Bonds) in my low risk part.

Kyle says:

Sounds like we’re thinking along the same lines BB.

In response to 1) Those two ETFs aren’t equivalent. SCHF doesn’t have the small-cap exposure or the exposure to developing markets. I’ll happily give up a few hundredths of a MER point for access to those two key sectors.

I’ve thought about ZRR, but with my pension plan I don’t feel that I really need that level of safety at this point.

BeachBoy says:

I haven’T thought about that, but I also have a corporate plan with mutual funds. Although I have the riskiest of their “settings”, they already have a safe portion of the portfolio.
Now you are making me think of dumping the two bond funds, and maybe open emerging markets (standalone ETF instead of merged into VXUS)

Kyle says:

Yup looking at getting exposure to emerging markets is probably a good idea from what I can tell. A government pension is pretty much as safe as you can get so I’m happy with that part of my portfolio!