The major Canadian and U.S. stock markets remain subject to volatility but continue to offer attractive returns for investors—especially if you buy the top stocks. If you can afford to stay in the market for several years or longer, now is a good time for new buying. We see ETFs as one way for you to profit from the continuing rise, while at the same time cutting your risk.
The best of these funds offers a diversified group of stocks and charge you low management fees. We think you should pass on the following fund for now. But we also recommend a worthy substitute to consider in its place.
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ETFs Guide for Canadian Investors: Find the best way to invest in ETFs with low fees, low risk & high satisfaction.
ISHARES MSCI CANADA INDEX FUND (Symbol EWC; buy or sell through brokers; ca.ishares.com) holds the stocks in the Morgan Stanley Capital International Canada Index.
The fund has a 0.50% MER and gives you a yield of 2.6%. It began trading for investors on March 12, 1996.
The ETF’s top holdings are Royal Bank, 7.4%; TD Bank, 6.1%; Enbridge Inc., 4.3%; CP Rail, 4.0%; CN Rail, 3.8%; Canadian Natural, 3.4%; Bank of Montreal, 3.4%; Bank of Nova Scotia, 3.3%; Shopify, 3.2%; Brookfield Corp., 2.6%; and Suncor Energy, 2.3%.
If you want to own a Canadian index fund, you should instead buy the iShares S&P/TSX 60 Index ETF (see below). You’ll pay about a third as much in management fees, while holding essentially the same stocks.
ETFs: Choose this one instead of iShares MSCI Canada Index Fund for a lower MER
ISHARES S&P/TSX 60 INDEX ETF (Toronto symbol XIU; buy or sell through brokers; ca.ishares.com) is a good low-fee way to buy the top companies listed on the TSX. Specifically, the fund’s holdings represent the S&P/TSX 60 Index. It focuses on the 60 largest, most heavily traded stocks on the exchange.
The ETF began trading on September 28, 1999. Investors pay an MER of just 0.18%. The units give you a 3.4% yield.
The S&P/TSX 60 Index mostly consists of high-quality companies. However, it must ensure that all sectors are represented, so it holds a few companies we would not include.
The quality of the ETF’s holdings should drive your future gains: its top stocks are Royal Bank, 7.7%; TD Bank, 6.3%; Enbridge, 4.5%; CN Rail, 4.2%; CP Rail, 4.2%; Bank of Montreal, 3.7%; Canadian Natural, 3.6%; Scotiabank, 3.5%; and Shopify, 3.3%.
Recommendation in Best ETFs for Canadian Investors: iShares MSCI Canada Index Fund is not recommended.