The "Narrow Down the Choices" ETF List
Canadian Equity ETFs
"Equity" means "stocks"
iShares Core S&P/TSX Composite Index ETF (XIC)
BMO S&P/TSX Capped Composite Index ETF (ZCN)
These funds are straight-up investments that gives you exposure to the Canadian stock market index.
iShares S&P/TSX 60 Index ETF (XIU)
Instead of owning the 235 stocks in the S&P/TSX Composite index, this fund owns just 60 stocks. The companies in this ETF are considered "blue chip" stocks: large and fairly steady-eddy.
iShares S&P/TSX Composite High Dividend ETF (XEI)
If you're looking for dividends, this fund will give you that. In Canada, high-dividend funds are dominated by banks. This fund has fairly good diversification with "just" 30% exposure to banks, versus 40% to 55% for some other ETFs.
U.S. Equity ETFs
"Equity" means "stocks"
iShares Core S&P 500 Index ETF - Hedged (XSP)
These funds are straight-up investments that gives you exposure to the 500 stocks in the US stock market index. A hedged ETF means you aren't exposed to a fluctuation US/Cdn dollar exchange rate.
iShares Core S&P U.S. Total Market ETF (XUU)
iShares Core S&P U.S. Total Market ETF - Hedged (XUH)
This fund holds a wider variety of stock - in fact, it holds over 3,350 stocks instead of the 500. Does that make it better? Hard to say. You're getting the same sector exposure - like technology, health care and so on - but with more companies.
International Equity ETFs
"Equity" means "stocks"
Vanguard FTSE Developed All Cap Ex North America Index ETF (VIU)
This fund gives you broad exposure to stocks from developed countries around the world except North America, which is great because you've already chosen one Canadian and one U.S. ETF.
Vanguard FTSE All-World ex-US ETF (VEU)
This fund has a broader geographic exposure (more countries) and includes emerging markets. It does have some Canadian exposure so you'll get some overlap with your Canadian ETFs, but it's not a deal-breaker. The fee on this fund is a lot lower than the Developed market ETF above.
Vanguard FTSE Emerging Markets Index ETF (VEE)
Emerging markets are more volatile than developed markets so this fund should be considered for only a small part of your overall portfolio. The top three countries in this fund are China, Taiwan and India, followed by Brazil, Saudi Arabia and South Africa.
Fixed Income ETFs
In this context, "fixed income" means "bonds"
Vanguard Total World Bond ETF (BNDW)
A super broad-based bond ETF, giving you exposure to bonds in Europe, North America, and Asia-Pacific.
BMO Aggregate Bond Index (ZAG)
This is an all-Canadian bond fund with various bond maturities - long and short.
Vanguard Canadian Short-Term Bond Index ETF (VSB)
Short term bonds tend to be less sensitive to changes in the overall interest rates; in short, they are less volatile than longer-term bonds. But in return, they pay lower rates. A short-term bond fund might be good for money that has a shorter investment time horizon.
Cash ETFs
Funds that are safe and secure
Horizons High Interest Savings ETF (CASH)
Evolve High Interest Savings Account Fund (HISA)
These ETFs invest in high interest savings accounts in Canada. They offer a nice rate of interest while keeping your money safe and accessible.
Cash ETFs
Funds that are safe and secure
All-in-one ETFs
Equities and bonds with one investment
Vanguard Growth ETF Portfolio (VGRO)
BMO Growth ETF Portfolio (ZGRO)
These portfolios are made up of 80% stocks and 20% bonds. You get exposure mainly to the U.S. and Canada with a smattering of other countries.
iShares Core Equity ETF Portfolio (XEQT)
Vanguard All-Equity ETF Portfolio (VEQT)
These portfolios are all equities, all the time. You get exposure mainly to the U.S. and Canada with a smattering of other countries.
BMO Balanced ETF Portfolio (ZBAL)
These balanced portfolios have about 40% invested in bonds and the rest in stocks, with heavy exposure to the U.S. and Canada.
Investing should be simple. Choose a few ETFs, buy them and hold them. It's a simple strategy once you have it set up - but how do you choose which ETFs to own?
There are a lot of options - too many - so to help you narrow the choices I've compiled a short list of ETFs that cover off the main asset classes: Canadian equities, U.S. equities, International equities, bonds and cash.
There's nothing complicated about my methodology for choosing these funds: they do the job for a low price.
If there is more than one fund listed, it means that they are so similar that it doesn't matter which you choose.
Disclaimer: These are not investment recommendations but rather a list of available funds that, in my opinion, are appropriate for each asset class. You need to decide what to invest in, understanding the implications of market volatility and the risk involved. It is essential that make sure you are choosing the right asset allocation, which depends in part on your investment time horizon and tolerance for volatility.