how many etfs should i own canada reddit
My own advisor has long counselled those in the “retirement risk zone” to be somewhere between 50% and 60% fixed income (cash, GICs, bond ETFs). I had thought about/seriously considered more geographical diversification over the years but just never got around to it. In particular, how many ETFs are enough to help you realize your goals? To avoid individual stock or sector risk, you should consider owning many companies from many sectors to decrease your investment risk in any particular company or sector. With stocks you’re taking on far more investment risk for more potential reward by holding them over bonds and definitely over cash hoarded under a mattress. If you’re looking for a more simplified way to browse and compare ETFs, you may want to visit our ETFdb.com Categories, which categorize every ETF in a single “best fit” category. The biggest mistakes I see investors make is having far too many ETFs in their portfolio. On the flip side $FONE dabbles in a lot of tech that isn't necessarily strictly smartphone related. So, today’s post will highlight how many ETFs might be enough for your portfolio, given some recent reader questions in my inbox and how I use ETFs for my own portfolio. Expensive but if it keeps gaining like that I guess it's worth it. Canadian Couch Potato: ETF Blog Posts; Fund Library: ETF Articles; Globe Investor – ETF In general, no more than 4-5 ETFs are likely enough for both diversification and/or retirement income needs for life. Another advantage is that if it’s held in an RRSP, you won’t lose the foreign dividend withholding tax as you would with VXC. I/we hope to have 1-year or so of expenses (say $50k always in cash) plus the steady dividend income (of at least $30k per year that I write about), plus RRSP withdrawals up to another $20-30k per year. If you’re using ETFs in your portfolio, it’s important to understand and take advantage of those trading differences: 1. Expect non-recoverable foreign withholding taxes to add another 0.15% to that total, giving you a relatively inexpensive investment portfolio inside your TFSA. More to GICs if you don’t like the fluctuations of bond funds. And just for giggles I calculated the breakdown of the accounts…DW’s RRSP is 60% equities, 40% GIC ladder. There is definitely a cut-over point whereby US listed assets make more sense than CDN listed assets. I didn’t mean to create confusion Grant. That means many financial experts (who are fans of index investing) generally endorse owning: Again, I use the word “many” with great discretion because there is also no clear consensus on how many funds nor more importantly in what allocation are those funds necessary for all investors. Well done. The expected return of VSB is less than ZAG, though. Scwab is underated here. It just seems that ETFs have become a good fit for me. Thoughts on that Grant? Soxl is good. Your mileage may vary! Thanks and keep up your ideas and tips coming in! Press question mark to learn the rest of the keyboard shortcuts. My new keyboard has a refresh button on it and that worked so that I could see your new post without clearing my cache. We’re not adding to any of the retirement plans and they just DRIP by themselves. An S&P 500 ETF The original ETF, the SPDR S&P 500 ETF, tracks the S&P … Yes, BAM.A, PWF are conglomerates for sure. Well, stocks are an investment in a future that is very, rather, extremely unknown. The best all-in-one Exchange Traded Funds (ETFs). For Further Reading. Accessed April 7, 2020. Schwab ETFs FTW! I recall from “The Intelligent Investor” (1949), Benjamin Graham suggested owning between 10 and 30 different companies to adequately diversify a stock portfolio. https://www.bmo.com/gam/ca/advisor/products/etfs?fundUrl=/fundProfile/ZMI!hash!holdings#fundUrl=%2FfundProfile%2FZMI%23holdings. From 2006 we concentrated on Income Generation through the Fin Crisis and recovery. TD e-funds are good products as well. Fair point but I think until I have ~ $25k or so in VXC, or XAW, if I go that route, it doesn’t make too much sense to go with VT or VXUS or VTI. Both TFSAs are 100% equities. Thankfully we changed to Concentration rather than diversification, its worked for us. This means depending upon your goals your financial decisions could be vastly different than your neighbour, your friend, your co-worker, your family and the list goes on…. Just not sure exactly what to do with it. In any case who knows what will work out best? I use Charles Schwab so I use their ETFs, but mostly for asset classes/markets that I can't invest as much time into. My understanding of this fund, ZMI, is because it’s a fund of funds it’s designed to be inside a registered account and replace many existing ETFs or funds to be an all-in-one product. For example VGRO, a new Vanguard ETF, contains thousands of stocks and bonds from all over the world, so this one ETF gives you the most diversified portfolio you could get. iShares S&P/TSX 60 Index ETF (XIU) S&P/TSX 60 Index: 0.18%: Own the biggest names in Canada, get consistent 3% yield + long term growth. Weird but I haven’t been able to view any ETF info on the BMO site for at least 6 mths now. Upon retiring, my wife and I decided that we could manage our own accounts. "Fund Overlap: The Hidden Risk In Your Portfolio." @Mark Yeah, looks like lots of stormy days ahead. It’s not to suggest you have to have only up to about 5 funds but you can also consider your handful of funds spread across your entire portfolio – since it could be considered one big account. Blue Haven Capital. How many stocks should you own? Not all ETFs are created equal. These ETFs, which you can find in our best ETFs in Canada guide, come with MERs in the 0.20% to 0.25% range. VT has 8,000+ stocks and MER of 0.10%. Hey, Marko, I just saw your post. If you are wanting something to replace maturing bonds, then ZAG would make more sense in that it would be keeping your asset allocation what it is now. Wild eh? In doing so, based on the assets it holds, it’s also designed to be income-oriented and payout about 4%. Check out Million Dollar Journey - another of my favourite dividend stock investing sites! We’ve done well financially. I could never figure that out and in our case we made more mistakes by trying to diversify, especially into cyclical sectors and foreign markets. You are doing extremely well. The big difference between the returns on the S&P 500 and bonds or T-bills becomes even bigger after tax. An ETF is just a container. The earlier you start and make the mistakes, the easier … Having said that, I almost consider stocks like BAM.A and PWF to be almost mini mutual funds themselves. Pricing and trading units:A mutual fund trade is calculated in U.S. dollars. It actually could be since there are funds of funds that can help investors these days. Subscribe and join the newsletter! Example, owning just Canadian bank stocks is probably insufficient to weather a variety of long-term market conditions. I was considering putting 20% in the iShares S&P/TSX 60 Index ETF (XIU), 20% in the iShares Core S&P 500 Index ETF (XSP) and 60% in the Vanguard Canadian Short-Term Corporate Bond Index ETF … It’s not true that bonds will always appreciate while equities depreciate. I hope that makes some sense. I’m really not saving that much. This is a list of all Canada ETFs traded in the USA which are currently tagged by ETF Database. Yes, I want to offer a post about my take re: Vanguard all-in-one funds. The interest is 100% taxable every year. I have a small amount in an RRSP in whatever mutual fund ING’s Streetwise became, and 2 more mutual funds in a non-registered account that I’m probably going to switch to ETFs. Win-win and one of my personal favourites. This term has also used in context of holding a concentrated basket of stocks (say 10 or 15) and believing this is a better approach to returns beyond owning hundreds if not thousands of stocks from various sectors and countries (i.e., indexing that you can read about here). ZMI is 50% equities, so will be more volatile but have greater expected return, so it really depends if you want more stocks or bonds in your RRSP. Cannew, when the next crash comes, using a total return approach, your income can keep increasing with inflation as you sell appreciated bonds for living expenses, and rebalance buying equities at depressed prices. Cheap and one of the best, diversified funds you can own. 9 ETFs to Own Forever These affordable and accessible exchange traded funds are a good fit for long term investors. It offers monthly distributions. Seems like a great set-up to me RBull. In terms of being relatively “safe” that’s subjective but what I can say is because 18% of the bonds are short-term (ZCS) and 6% are short-term government bonds (ZSU) then as rates rise, bond prices fall but not as dramatically since the bond terms are generally short. Example, owning just Canadian bank stocks … Heavy on vanguard etfs I also hold a little of sector specifics with concentrations of Consumer Goods and Tech. With 7 ETFs traded on the U.S. markets, ARK ETFs have total assets under management of $52.85B. Beyond the obvious such as portfolio/investor confusion, increased portfolio management costs and lowering your portfolio returns, here are a couple of indicators that you might have diworsified your portfolio: You own too many stocks from the same sector. Time will tell . Along with VYM there are many great funds to own the U.S. market here. @Grant: Yes Japan has seen 15 years or so stagnation and ones portfolio would not have grow in value. I know of many investors that like bond ETFs for the simplicity. If I’m still around when the next one occurs, though the Trade Wars may do it, lets compare notes. VXC is a good U.S. product that is listed in Canada. Do you need a few dozen ETFs? We cannot fill the surge in demand, the most pent up demand in history, with the existing number of locations open. Thanks for the shift+refresh tip RBull. Hindsight is 20-20, which is why investors tend to diversify. But, we hardly know only a handful of ETFs that are popular and well-received by the investor community. I have many bonds and other fixed income, that will come to term this year and in a year or two. Our income stream (pensions and disability income replacement) exceeds our expenses for now and for the next 8 years so we don’t really need a large cash wedge. Well, a LIRA can be a different consideration than an RRSP since it’s technically a pension fund. And Japan is ~8% of world economy. I’m not really all that keen on mutual funds. While you cannot go to sleep, and there is a place for monitoring, there is no reason to panic if a firm has earnings that fall short in a given year or two. Smart of you (in my opinion) to DRIP your ETFs – money that makes money can make more money! Great post Mark! Accessed April 7, 2020. Fair Warren, but there is nobody like you! Are they both (relatively) safe in a rising rate environment? Ideally, the stop-loss should be no more than 20% below the original entry price and should be moved up accordingly as the ETF gains in price. To date, I’ve managed to build a portfolio (on my own) that includes about 60% of the companies held by XDV. Whether you decide to invest in ETFs or stocks, you should know what you’re investing in. To me the CDN equivalents aren’t yet (and probably will never be) competitive enough, although if smaller amounts invested and/or convenience desired then I can understand VXC. I would need to read the fund prospectus to understand more. For many investors one (1) all-in-one fund across all your investing accounts could be enough! Why? There were 848 ETFs offered by 38 providers with a total value of $183.7-billion as of July 31, according to National Bank of Canada’s ETF Research Group. What is your rationale for using many ETFs versus just a few? I also really like the one fund Vanguard ETF’s – https://www.vanguardcanada.ca/individual/etfs/about-our-asset-allocation-etfs.htm? With so many different choices, many investors find it hard to decide what exactly to invest in—especially when it comes to choosing between stocks and ETFs. So, in that respect, a few funds in the RRSP and a few funds in the LIRA can make great sense. I’ve looked at the Canadian Couch Potato model portfolio for ETFs which proposes only 3 ETFs as you know. I’ve read on your site you own Vanguard’s VYM ETF. All Rights Reserved. Funny enough I can’t read the latest blogposts here on myownadvisor unless I clear the cache on my Chrome browser/ OS each day. For investors comparing multiple ETFs, this is definitely something to be aware of. The ETFdb Stock Exposure Tool recognizes only stocks (including international equities). Or maybe there are better fixed income ETFs out there that could fit the bill. What is a Financial Plan and what should it cover? My problem is with interest yields so low, I’m not inclined to “go back” to individual fixed income, so I was thinking that the ETF route might be the solution. But if one owned Japanese stocks which paid growing dividends and I’m sure there are some, would one have not seen a growing income? In fact I agree if one sticks to their plan for the Long-Term they will probably be successful (provided they hold for the long-term). For example, Schwab’s Broad Market ETF and Vanguard’s S&P 500 ETF both have expense ratios of 0.03% as of this writing, meaning you’ll pay just 30 … He’s a sharp guy! The product in question is so-called all-in-one exchange-traded funds (ETFs), currently offered by Vanguard, iShares, BMO and Horizons, some of Canada’s largest ETF … You could also ask how many mutual funds a person should own. Remember risk and returns are related. You own too many stocks from the same sector. But importantly, these stocks are all much more heavily tethered to the domestic economy, so if the U.S. is in for a 2021 rebound, SCHA should be one of the best ETFs to leverage it. Please note that the list may not contain newly issued ETFs. is that they are U.S. listed ETFs and therefore you need USD $$ to buy and hold them. Most of the return on the S&P 500 stocks would be capital gains, which is only 50% taxable, and is not taxable until the investment is sold.”. I love them. Stocks showing long-term growth are chosen considering their dividend growth, yield, and payout ratio. This is wrong. Where and how to start a portfolio is a question all investors ask at one point in their investing journey. Not so much. Although it holds about 3% CDN equity. I wouldn’t have more than about 30% of equities in Canada. If you want less price fluctuation (but less growth) ZAG would serve that purpose. "Get a Complete Portfolio in One All-In-One Fund." I use the TD Dow and Euro E-series funds (technically not ETFs) for foreign diversification and orphaned cash. What do you make of ETFs? While having only three funds or ETFs is likely too few and accumulating 30 is far too many, retail investors are often at a loss on determining a range that would produce enough diversification. Evolve is a leader in thematic ETFs and specializes in bringing innovative ETFs to Canadian investors. One of the common investing fallacies is that the number of holdings within your investment portfolio should increase as your portfolio’s value increases. That’s well put Grant – “It’s important not to confuse strategy with outcome.”. Yet, they fluctuate and you’re not certain you’ll get your capital back in 5 or 10 years. For the ETF portion of our portfolio we have 5. Last Updated on: January 6, 2021 by Sagar Sridhar. “Wide diversification is only required when investors do not understand what they are doing” – Warren Buffett. Investors may want to consider these top exchange-traded funds (ETFs) in 2021, based on their recent performance, their expense ratio, and the kind of exposure that they offer. May, you’re right, bonds will not always go up when stocks go down, but it’s very rare for both stocks and bonds to go down together on an annual basis. RBull, excellent point about using VT instead of VXC. ETFs Bonds Best Investments ... For many investors conducting that exercise today, their portfolios may well look light in foreign stocks. BMO Canadian Dividend ETF seeks to provide unitholders an exposure to the performance of a Canadian dividend paying stock portfolio based on dividend yields. I would agree given the withholding taxes drag, CDN listed ETFs that hold U.S. and international funds will never be as competitive as U.S.-listed ones. Strange. A large part of the cash was recently added from our daughter’s estate. Can you suggest any that will (should) stand the road for the next 5-10 years? That guidance is nowhere near what Burton Malkiel, an investing guru, believes is sufficient. They are the ETF version of a balanced mutual fund. 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. The average expense ratio is 0.71%. A. There’s also the Horizons Gold Yield ETF (HGY), which offers Canadian-dollar-hedged exposure to gold bullion and a covered-call options strategy as a way to create income. Mark, yes, I agree VXC or XAW is great way to diversify out of Canada. Grant – that’s a good explanation of bond fund prices and yields. Hopefully, these three approaches to portfolio diversification can help guide you in … “The above table shows before-tax returns. You’re very smart to have a healthy cash wedge in retirement Lloyd. 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. Hardly. I’ve chosen the latter! However, if interest rates do go up the price decline of bond funds is only temporary – the higher coupons of the new bonds bought from old bonds coming due make up for the price drop so you are back it even by the duration of the bond fund, about 6 years for ZAG ans about 3 years for a short term bond fund like VSB. Yeah, like I mentioned in my post I agree with you Mark on the investment amount being a factor in choosing currency for a global ETF. Diversify into all sectors, all markets, all everything? Thankfully, there are a lot of good ETF … Yes, it’s the index ETFs that offer great diversification, and all ETFs are certainly not index trackers. I love their funds and etfs. $FONE as well. ETF holdings data are updated once a day. Since I have plenty of time, and a bit of knowledge on investing, that’s what I do with 7 accounts: 1 taxable, 2 RSPs, 2 LIFs, 2 TFSAs. Buying all-in-one ETFs like these will keep you safe rather than sorry. I only have two ETFs, ZWB and ZWU, dripping. Small pensions on top of that in our 60s and 70s and beyond (another $25k+ per year) should be enough for us – I will appreciate the fixed income as I get older! Are these three generally better than just throwing into a target retirement fund? This ETF is comprised of the 30 highest yielding dividend paying companies seeking to replicate the performance of the Dow Jones Canada Select Dividend Index, based on factors such as stable dividend growth, yield and average payout ratio. BMO ZAG is well rated – http://www.moneysense.ca/save/investing/etfs/best-fixed-income-etfs-for-2018/. You know my thoughts on diversifying globally! In December I plan to transfer them to my Questrade RRSP account and put into an ETF. During financial crisis, everything went down, including bonds. Conversely, equity returns should be greater than those delivered by bonds and certainly cash long term. You’re welcome. Own all the major stocks in the Canadian market, >200 of them and ride their returns less minor fund fees. Millennials have time on their side, but you don't have to get risky to see huge returns from growth stocks. Because I am not licensed to sell investment securities or ETFs, I will simply share with you the 3 ETFs that I own to create monthly passive income and why I own them. I was there once and I needed to figure it out on my own with the help of a couple of books (The Investment Zoo and The Lazy Investor).I have also made mistakes and learned some invaluable lessons the hard way in some cases. Mark, I think there’s some confusion about diversification when it comes to ETFs. It’s the evil cousin to diversification in your portfolio. edited 3 years ago. Probably not. SRI ETF is in my radar and will let you know about it. withholding tax, which helped form part of my personal choices. We’ve discussed this before and I don’t have a problem with those believing Diversification is the best route to success (or preserving their capital). This is quite a normal phenomenon.” – Stephen Jarislowsky, The Investment Zoo; author, billionaire businessman, philanthropist. You’ve done very well with a concentration of CDN stocks, which is excellent since you have met your goals this way, but I suspect you’re somewhat rare in that regard! Or maybe a mix of ZAG and ZMI? I didn’t know about that. I'm surprised it doesn't hold Tesla with the whole automated trucks reveal. In fact, it’s only happened 3 times since 1926, and 2008 was not one of them – 1931, 1941 and 1969. With XAW or VXC I don’t have to worry about currency conversions but yes, there is trade-off; higher costs to own XAW and VXC with the foreign withholding taxes. Normally we worry about where to find the money that we need to spend. (It should be noted there really is. I use Charles Schwab so I use their ETFs, but mostly for asset classes/markets that I can't invest as much time into. Furthermore, how many ETFs should you own anyhow? 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. Each investment instrument brings its own unique set of benefits and disadvantages. Businesses will fill this demand, and will require more locations to support the spending. I just bought a new Google Pixelbook and this is the only site I have problems with. Why? VTI VOO VIG are my big 3. Find out how, what I did, and what you can learn to tailor your own financial independence path. You have too many individual stock positions. When we started our portfolio was only generating $15k of Income. We don’t have a lot in the e-funds (85K over all the accounts mostly the Dow) but they work well for us and we’re happy with them. @Grant: “give themselves the best chance of the optimal outcome”. Assuming an equal amount invested in all seven ETFs, the average performance over the past year is 14.1%. Either I can own XDV and pay the management fee of 0.50% or I can own many of the companies directly as a shareholder and never pay management fees. This is where every investor is different. All the other equity is being held as individual stocks. If you keep your investing costs low and stick to your investing plan I suspect you’ll do just fine regardless. My name is Mark Seed and I'm the founder, editor and owner of My Own Advisor. I was wondering if that could be a good candidate for an RSP account? My RRSP/LIRSP is 71% equities, 29% GIC ladder/debentures. But I won’t feel any comfort if I have to sell depreciated assets for my living expense. How many stocks you should own in your portfolio depends upon a number of factors, including your level of investment experience, experts say. From my blogpost on where I disagree with Mr. Swensen: Is your portfolio going to flop long-term if you invested in just the S&P 500 and not any Canadian stocks or international stocks? The other day, Berman (on BNN), talked about ZMI (BMO Monthly Income ETF). The truth is, over many years of investing, equity returns are correlated. For most investors, the following list of options should serve your needs. in Plano, TX. This means their upside should command a good return! Beyond the obvious such as portfolio/investor confusion, increased portfolio management costs and lowering your portfolio returns, here are a couple of indicators that you might have diworsified your portfolio: Here is a previous article about how many dividend paying stocks I believe are enough for me. Not in it yet but ARKQ is a good way to get a slice of Amazon and Telsa. Hard to go wrong with that for the next 10-20 or even 30 years! For dividend investors like me ample diversification can be an issue. My wife’s RRSP is Couch Potato + ZPR (4 ETFs). Each holds seven underlying ETFs—three for bonds, four for equities—covering the Canadian, U.S. and international markets. I don’t know that yet. As for ETFs I have 3 in non-registered, 1 in my RRSP, and 2 in my TFSA and I still don’t think it’s enough. another of my favourite dividend stock investing sites! Just so you know…his asset allocation is very different than any Canadian Couch Potato model!