In this article, I’ve covered the 7 best Canadian ETFs to own in 2020. Before we get to the actual list, let’s first look at the ETF scenario in Canada.
According to the recent report from the Bank of Montreal, sales in the exchange-traded assets are set to double this year. The report also predicts further growth in ETF sales, and it is clear that investors have their eyes set on ETFs in 2020. Let’s get started
Quick Peek At The Top 7 Canadian ETFs
1. Vanguard S&P 500 ETF
2. SPDR S&P 500 ETF
3. Fidelity Zero Total Market Index Fund
4. iShares Russel 2000 ETF
5. Vanguard FTSE Developed Markets
6. Invesco PowerShares QQQ
7. Schwab US Dividend Equity ETF
What Is An ETF?
An ETF (Exchange-Traded Fund) is an investment fund that represents a basket of stocks, bonds or other investments. Unlike conventional mutual funds, an ETF is traded on a stock exchange and often tracks a market index or may have a specific investment strategy.
ETFs are an attractive investment as they are a low-cost option to build a well-diversified portfolio.
How To Invest In Canadian ETFs?
There are two main parameters to consider before investing in Canadian ETFs are:
1. Management Expense Ratio Or MER
Every ETF that you’ll invest in will have an MER fee associated.
So What Is the Management Expense Ratio?
The Management Expense Ratio (MER) is the combined total of the management fee, operating expenses and taxes charged to a fund during a given year expressed as a percentage of a fund’s average net assets for that year. All mutual funds and Canadian ETFs have an MER.
What Is A Good MER?
A good low expense MER ratio is generally considered to be around 0.5% to 0.75% for an actively managed portfolio, while an expense ratio greater than 1.5% is considered to be high. Mutual fund expense ratios are typically higher than expense ratios for ETFs. For passive index funds, the typical overall ratio across the industry is approximately 0.2%.
2. Underlying Index
This makes perfect sense, as the reason for investing is to gain a specific type of exposure and for Canadian ETFs, this will be determined by the index it tracks.
Looking under the bonnet of Canadian ETFs to examine the underlying index composition and its potential sector and/or stock biases is key to understanding the fundamental drivers of the fund’s performance.
1. Vanguard S&P 500 ETF (VOO)
Vanguard S&P 500 ETF seeks to track the performance of a benchmark index that measures the investment return of large-capitalization stocks.
Why Vanguard S&P 500 ETF?
Invests in stocks in the S&P 500 Index, representing 500 of the largest U.S. companies.
The goal is to closely track the index’s return, which is considered a gauge of overall U.S. stock returns.
It offers high potential for investment growth; share value rises and falls more sharply than that of funds holding bonds.
More appropriate for long-term goals where your money’s growth is essential.
VOO ETF Fund Facts
Domestic Stock – General
|Vanguard Equity Index Group|
Top 10 largest holdings of the Vanguard S&P 500 ETF
|6||Berkshire Hathaway Inc.|
|7||JPMorgan Chase & Co.|
|8||Johnson & Johnson|
|9||Procter & Gamble Co.|
Characteristics Of Vanguard S&P 500 ETF
Number of stocks
Fund total net assets
Net assets of 10 largest holdings
Vanguard S&P 500 ETFs Performance
2. SPDR S&P 500 ETF (SPY)
SPY is the best-recognized and oldest ETF and typically tops rankings for the largest AUM and greatest trading volume. The fund tracks the massively popular US index, the S&P 500. Few realize that S&P’s index committee chooses 500 securities to represent the US large-cap space – not necessarily the 500 largest by market cap, which can lead to some omissions of single names. Still, the index offers outstanding exposure to the US large-cap space.
SPY Summary Data
3. Fidelity Zero Total Market Index Fund (FZROX)
1. Seeks to provide investment results that correspond to the total return of a broad range of publicly-traded companies in the US.
2. There is a 0% expense ratio and no minimums to invest in FZROX.
3. Fund Facts:
Fund Category – Large Blend
Fund Inception – 8/2/2018
Expense Ratio (Gross) – 0.00% 8/2/2018
Expense Ratio (Net) – 0.00%8/2/2018
NAV – $11.2112/6/2019
Minimum to Invest – $0.00
Turnover Rate – 5%4/30/2019
Portfolio Net Assets ($M) – $4,491.6611/30/2019
12 Month Low-High – $8.24 – $11.23
FZROX Fund Objective
The fund seeks to provide investment results that correspond to the total return of a broad range of U.S. stocks.
FZROX Fund’s Investment Strategy
Normally investing at least 80% of its assets in common stocks included in the Fidelity U.S. Total Investable Market Index, which is a float-adjusted market capitalization-weighted index designed to reflect the performance of the U.S. equity market, including large-, mid- and small-capitalization stocks.
FZROX Fund’s Top 10 Holdings
1. MICROSOFT CORP
2. APPLE INC
3. AMAZON.COM INC
4. FACEBOOK INC CL A
6. JPMORGAN CHASE & CO
7. ALPHABET INC CL C
8. ALPHABET INC CL A
9. JOHNSON & JOHNSON
10. PROCTER & GAMBLE CO
1. Exposure to small public U.S. companies
2. Access to 2000 small-cap domestic stocks in a single fund
3. Use to diversify a U.S. stock allocation and seek long-term growth in your portfolio
IWM FUND’S INVESTMENT OBJECTIVE
The iShares Russell 2000 ETF seeks to track the investment results of an index composed of small-capitalization U.S. equities.
IWM Fund Key Facts
USD 46,418.23 –
United States –
Russell 2000 Index –
|Acquired Fund Fees and Expenses||0.00|
|Foreign Taxes and Other Expenses||0.00|
|Gross Expense Ratio||0.19|
Acquired Fund Fees and Expenses
Foreign Taxes and Other Expenses
5. Vanguard FTSE Developed Markets (VEA)
VEA Fund Characteristics
1. Seeks to track the investment performance of the FTSE Developed All Cap ex US Index.
2. It provides a convenient way to match the performance of a diversified group of stocks of large-, mid-, and small-cap companies located in Canada and the major markets of Europe and the Pacific region.
3. Follows a passively managed full-replication approach.
VEA ETF Facts
Foreign Large Blend
as of 04/26/2019
Vanguard Equity Index Group
Month End 10 largest holdings Of VEA
|2||Royal Dutch Shell plc|
|3||Samsung Electronics Co. Ltd.|
|4||Roche Holding AG|
|6||Toyota Motor Corp.|
|7||HSBC Holdings plc|
Fund total net assets
Number of stocks
Net assets of 10 largest holdings
|FTSE Developed Markets ETF||0.05%|
|The average expense ratio of similar funds|
Invesco QQQ ETF is ranked in the top 1% tracking the NASDAQ-100 index. Since its formation in 1999, it has demonstrated a history of impressive performance.
Invesco QQQ is an exchange-traded fund based on the Nasdaq-100 Index. The Fund will, under most circumstances, consist of all of the stocks in the Index. The Index includes 100 of the largest domestic and international nonfinancial companies listed on the Nasdaq Stock Market based on market capitalization. The Fund and the Index are rebalanced quarterly and reconstituted annually.
7. Schwab US Dividend Equity ETF (SCHD)
Charles Schwab offers another significant lower cost ETF for family investment. This is among the best American dividend ETFs to explore. If you are keen on turning your portfolio into cash flow, the fund on large companies brings a stable dividend. Retirees seek to earn income from a portfolio without selling often use dividend stock as the main issue.
This means the ETF is passively managed to track the Dow Jones U.S dividend 100 indexes. It charges a very competitive 0.07% expense ratio.
SCHD Fund Highlights
1. A straightforward, low-cost fund offering potential tax-efficiency
2. The Fund’s focused approach can complement a diversified portfolio
3. Tracks an index focused on the quality and sustainability of dividends
4. Invests in stocks selected for fundamental strength relative to their peers, based on financial ratios
Now, that was the list of the Top 7 Best Canadian ETFs to buy in 2020.
All of the choices mentioned above offer something premium and robust annual returns. You are free to pick the one you like and add it to your portfolio for investments.
Also, the S&P Index funds are time tested and always do well over the long horizon of time. So do keep that in mind before making the selection.
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