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

Asset class

Domestic Stock – General

Category

Large Blend

IOV ticker symbol

VOO.IV

Expense ratio

 

0.03%

CUSIP

922908363

ETF advisor

Vanguard Equity Index Group

Top 10 largest holdings of the Vanguard S&P 500 ETF

1Microsoft Corp.
2Apple Inc.
3Alphabet Inc.
4Amazon.com Inc.
5Facebook Inc.
6Berkshire Hathaway Inc.
7JPMorgan Chase & Co.
8Johnson & Johnson
9Procter & Gamble Co.
10Visa Inc.

Characteristics Of Vanguard S&P 500 ETF

Number of stocks
510
Fund total net assets
$500.7 billion
Net assets of 10 largest holdings
23.2%
Foreign holdings

0.5%

Vanguard S&P 500 ETFs Performance 

Vanguard S&P 500 ETF

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

State Street Global Advisors SPDR
 
1/22/1993
 
0.09%
 
$289.14B
 
$15.04B
 
0.00%
 
SPY Portfolio Data
 
$262.27B
 
22.66
 
3.45
 
1.76%
 
12/20/19
 
506
 
SPY Index Data
 
S&P 500
 
Market Cap
 
Committee
 
MSCI USA Large Cap Index
 

SPY

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.

 
Using statistical sampling techniques based on such factors as capitalization, industry exposures, dividend yield, price/earnings (P/E) ratio, price/book (P/B) ratio, and earnings growth to attempt to replicate the returns of the Fidelity U.S. Total Investable Market Index using a smaller number of securities. Lending securities to earn income for the fund.

FZROX Fund’s Top 10 Holdings

1. MICROSOFT CORP

2. APPLE INC

3. AMAZON.COM INC

4. FACEBOOK INC CL A

5. BERKSHIRE HATHAWAY INC CL B

6. JPMORGAN CHASE & CO

7. ALPHABET INC CL C

8. ALPHABET INC CL A

9. JOHNSON & JOHNSON

10. PROCTER & GAMBLE CO

4. iShares Russell 2000 ETF (IWM)

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

The iShares Russell 2000 ETF seeks to track the investment results of an index composed of small-capitalization U.S. equities.

IWM

IWM Fund Key Facts

  • Net Assets – USD 46,418,231,748

  • Size of Fund (Millions)  – USD 46,418.23

  • Base CurrencyUSD

  • Share Class launch date22/May/2000

  • Asset ClassEquity

  • DomicileUnited States

  • Benchmark IndexRussell 2000 Index

 IWM Portfolio Characteristics
  • Shares Outstanding –  285,200,000

  • Number of Holdings – 1,981

  • Benchmark Level – USD 8,250.27

  • Total Net Assets – USD 46,418,231,747.63

  • Benchmark TickerRU20INTR

  • Distribution Yield – 1.29%

  • Fiscal Year-End – 01/Jul/2019

  • P/E Ratio – 17.56

  • P/B Ratio – 2.05

 IWM FUND Fees
 
Management Fee0.19
Acquired Fund Fees and Expenses0.00
Foreign Taxes and Other Expenses0.00
Gross Expense Ratio0.19
 

Management Fee 

0.19

Acquired Fund Fees and Expenses 

0.00

Foreign Taxes and Other Expenses

0.00

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

Asset class
International/Global Stock
Category
Foreign Large Blend
IOV ticker symbol

 
VEA.IV
Expense ratio
as of 04/26/2019

0.05%

CUSIP
921943858
ETF advisor
Vanguard Equity Index Group

Month End 10 largest holdings Of VEA 

1Nestle SA
2Royal Dutch Shell plc
3Samsung Electronics Co. Ltd.
4Roche Holding AG
5Novartis AG
6Toyota Motor Corp.
7HSBC Holdings plc
8Unilever
9SAP SE
10AstraZeneca plc

VEA Characteristics

Fund total net assets
$118.1 billion
Number of stocks
3960
Net assets of 10 largest holdings
10.0%

VEA Expenses

ExpenseExpense Ratio
FTSE Developed Markets ETF0.05%
The average expense ratio of similar funds

1.01%

 

 

VEA

6. Invesco PowerShares QQQ

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.

QQQ

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

SCHD

Conclusion

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. 

If you found this article useful, please share it on social media and help spread the word. 

Please let me know your thoughts and comments below. 

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Sagar Sridhar

Sagar Sridhar Is a Personal Finance Blogger from Toronto, Canada. He is a Computer Science Engineer by profession and works in IT Industry. What started as a hobby, quickly turned into serious blogging and income. In this blog, Sagar passionately writes articles about Personal Finance, DIY Investing, Retirement, Stocks & ETFs, Frugal Living and much more. Do visit about page to know more about him. If you would like to get in touch, you can do so by emailing him at [email protected] and he'll get back to you at the earliest.

2 thoughts on “Top 7 Canadian ETFs You Should Own In 2020

  • The title of this post is “Top Canadian ETFs” and #3 FZROX is not an ETF (it’s a mutual fund) and Canadians can’t buy US mutual funds.

    Reply

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