One of the most popular high interest ETFs in Canada is CSAV CI High Interest Savings ETF. In this post, we will discuss CSAV’s objective, Fees and historical performance. We will also compare CSAV with similar ETFs.
What’s a High interest savings ETF?
High interest savings ETF are financial instruments designed to give investors a means to save capital while earning a competitive interest rate. Furthermore, they can provide investors with better returns than typical savings accounts or money market funds (while maintaining a high level of liquidity and safety, one of their main benefits).
High interest savings ETFs are often seen as relatively low-risk investments, in contrast to stocks or other types of investments.
CSAV investment objective
CSAV is relatively low risk investment suitable for investors looking for an alternative to high interest deposit accounts.
You can click on the ticker of each ETF to visit the issuer’s website. Please note the dividend yield shown on the issuers’ websites corresponds to the forward dividend yield. The latter is a projection based on the last dividend paid.
The trailing dividend yield shown in the table above is the dividend yield calculated using the dividend paid in the last 350 days.
GIC vs High interest saving ETFs
Investment Option
GIC
High-Interest Savings ETF
Type of Investment
Low-risk
Low to moderate risk
Return
Guaranteed fixed rate of return
Potentially higher rate of return
Term
Typically 1 to 5 years
No fixed term
Interest Rate
Typically higher than savings accounts
Varies depending on market conditions
Risk
Very low risk
Higher risk than GICs
Guarantee
Guaranteed by the issuing institution
No guarantee of return
Suitability
Suitable for risk-averse investors
Suitable for those seeking higher returns with moderate risk toleranc
Difference between Forward and Trailing dividend yield
Forward dividend yield and trailing dividend yield are both measures of a company’s dividend payout to its shareholders, but they differ in the time period used to calculate them.
Trailing dividend yield is calculated based on the dividends paid over the past 12 months, divided by the current stock price. It provides an indication of how much a company has paid out in dividends over the past year, relative to its current stock price.
Forward dividend yield, on the other hand, is calculated based on the expected dividends that will be paid out in the future, divided by the current stock price. It provides an indication of how much a company is expected to pay out in dividends over the next 12 months, relative to its current stock price.
The main difference between the two is that forward dividend yield is a projection of what is expected to happen in the future, whereas trailing dividend yield is based on actual historical data. As a result, forward dividend yield can be more speculative and less reliable than trailing dividend yield.
Investors may use both measures in combination to get a more complete picture of a company’s dividend payout.
Technology plays a fundamental role in driving innovation and transforming industries in today’s rapidly evolving world. Capitalizing on the technology sector’s growth potential can be a prudent strategy for an investor. One way to achieve this exposure is by allocating a portion of your portfolio to Technology Exchange-Traded Funds (ETFs). This article discusses the best Technology focused ETFs available in Canada. We will also cover two of the most popular Technology ETF in the US.
Advantages of owning a Technology ETF
Diversification and Risk Mitigation
Allocating to Technology ETFs provides diversification benefits, as they typically hold a basket of tech stocks from various sub-sectors. By spreading your investments across multiple companies, you reduce the impact of any stock’s performance on your portfolio. The tech industry encompasses various sectors, such as software, hardware, e-commerce, and biotechnology, offering diverse growth opportunities. This diversification helps mitigate risk and shields your portfolio from potential volatility in individual technology stocks.
Capitalizing on Growth Potential
Technology ETFs offer an opportunity to tap into the growth potential of the tech sector. With advancements like artificial intelligence, cloud computing, and the Internet of Things (IoT) driving innovation, technology companies have a strong growth trajectory. By allocating to Technology ETFs, you position yourself to benefit from this growth, as the ETFs hold a diversified portfolio of tech stocks well-positioned to capitalize on industry trends and disruptive technologies.
Access to Expertise and Research
Investing in Technology ETFs allows you to leverage the expertise of professional fund managers and their research capabilities. These managers are responsible for selecting and managing the underlying portfolio of tech stocks within the ETF. They conduct in-depth analysis, monitor industry trends, and make informed investment decisions on behalf of the fund. By investing in a Technology ETF, you gain exposure to their research-driven investment strategies, benefiting from their knowledge and experience in the tech sector.
Convenience and Cost Efficiency
Technology ETFs offer convenience and cost efficiency to investors. This especially true for Index ETFs tracking the Nasdaq 100.
Potential for Dividends and Income
Some Technology ETFs also offer the potential for dividends and income. While the technology sector is often associated with growth stocks, certain companies pay dividends. By investing in dividend-focused Technology ETFs, you can benefit from both capital appreciation and regular income generation, enhancing the total return of your portfolio.
Why most Technology ETFs track the Nasdaq 100?
The NASDAQ-100 is an index that represents the performance of the top 100 non-financial companies listed on the NASDAQ stock exchange. It is one of the most widely followed stock market indices and includes companies from various sectors such as technology, consumer services, healthcare, and more.
The NASDAQ-100 is known for its heavy weighting towards technology companies, which has earned it the reputation of being a technology-focused index. Many of the world’s largest and most innovative technology companies, such as Apple, Microsoft, Amazon, and Alphabet (Google), are included in the index.
The index is market capitalization-weighted, meaning that the companies with the largest market values have a greater influence on its performance. This gives investors exposure to leading companies in the technology and other sectors, making it an attractive benchmark and investment option.
The NASDAQ-100 has historically shown strong growth and has been driven by the rapid advancement of technology and the increasing reliance on technology in various aspects of our lives. However, it’s important to note that investing in the NASDAQ-100 carries risks, especially during times of market volatility or sector-specific downturns.
Overall, the NASDAQ-100 provides investors with an opportunity to track and invest in a diverse range of leading technology and non-financial companies, making it a popular choice for those seeking exposure to the growth potential of the tech sector and other innovative industries.
VGT – Vanguard Information Technology Index Fund (US)
The fund invests in information technology companies.
It invests in growth and value stocks across different market capitalizations.
The goal is to track the performance of the MSCI US Investable Market Index (IMI)/Information Technology 25/50. It aims to replicate the target index, which consists of stocks from large, mid-size, and small U.S. companies in the information technology sector.
The objective of the TEC ETF in Canada is to provide investors with exposure to the performance of the technology sector. By investing in the TEC ETF, investors have the opportunity to participate in the growth and potential returns of technology companies. These companies operate in various areas within the technology sector, including software, hardware, internet, telecommunications, and other related industries.
The TEC ETF seeks to offer investors exposure to both established companies and emerging players in the sector.
TXF invests in an an equal weight basis in a portfolio of equity securities of at least the 25 largest technology companies measured by market capitalization listed on a North American stock exchange. The fund uses a covered call strategy to both:
Lower volatility
Increase distributions. This fund pays a quarterly cash distribution which included both dividends and premiums earned by issuing call options.
The companies included in the portfolio of the ETF may be changed based on the Portfolio Manager’s opinion about how easily their stocks and call options can be bought or sold. The decision is made by considering the market value of these companies.
XIT seeks long-term capital growth by replicating the performance of the S&P/TSX Capped Information Technology Index, net of expenses. The index tracked includes exclusively Canadian companies. In total, this ETF invest in 24 Canadian technology stocks. There is a 25% cap put in place to avoid over exposure to a particular stock.
HTA is an ETF that invests in an equally weighted portfolio of 20 large-cap technology companies (globally). In order to generate an enhanced monthly distribution yield, an active covered call strategy is engaged.
Covered call strategies are great as they generate additional income for investors (in the form of premiums). The strategy is somewhat conservative and aims at preserving the capital invested primarily. On the other hand, the strategy limits potential growth.
The iShares PHLX Semiconductor ETF (SOXX) is a popular investment choice for those looking to gain exposure to the semiconductor industry. This ETF aims to track the performance of the PHLX Semiconductor Sector Index, which includes companies primarily involved in the design, distribution, manufacture, and sale of semiconductors. Below, we explore the key aspects of SOXX, its performance, and why it might be a suitable addition to your investment portfolio.
Overview of SOXX
Fund Objective: The primary objective of the iShares Semiconductor ETF (SOXX) is to provide investment results that correspond generally to the price and yield performance, before fees and expenses, of the PHLX Semiconductor Sector Index.
Holdings: The ETF comprises a diversified portfolio of semiconductor companies, including well-known names like NVIDIA, Intel, and Texas Instruments. This broad exposure helps mitigate the risk associated with investing in individual stocks.
Expense Ratio: The expense ratio for SOXX is 0.46%, which is relatively low considering the specialized nature of the fund. This makes it a cost-effective way to invest in the semiconductor sector.
Why Invest in SOXX?
Growth Potential: The semiconductor industry is at the heart of technological advancements. Semiconductors are essential components in a wide range of devices, from smartphones to advanced computing systems. As technology continues to evolve, the demand for semiconductors is expected to rise, driving growth for companies in this sector.
Diversification: Investing in SOXX provides exposure to a broad range of companies within the semiconductor industry. This diversification reduces the risk associated with investing in individual stocks, as the performance of the ETF is not overly reliant on any single company.
Accessibility: ETFs like SOXX offer an easy and cost-effective way for investors to gain exposure to international semiconductor companies. Instead of buying individual stocks, investors can purchase shares of SOXX to gain a diversified exposure to the sector.
Historical Performance: SOXX has demonstrated strong historical performance, reflecting the overall growth of the semiconductor industry. Its past returns indicate its potential for future growth, making it an attractive option for investors looking to capitalize on the semiconductor boom.
The iShares Semiconductor ETF (SOXX) includes several key players in the industry:
NVIDIA (NVDA): A leading designer of GPUs, critical for gaming, AI, and data centers.
Intel Corporation (INTC): A dominant force in the CPU market, providing processors for personal computers and servers.
Texas Instruments (TXN): Known for its analog and embedded processing products, which are vital for various electronic devices.
These holdings represent some of the most innovative and influential companies in the semiconductor sector.
Conclusion
The iShares Semiconductor ETF (SOXX) offers investors a robust and diversified way to invest in the semiconductor industry. With its strong performance, low expense ratio, and exposure to leading semiconductor companies, SOXX is an excellent option for those looking to benefit from the growth of this critical sector. As always, consider your investment goals and risk tolerance before investing.
In this post, we will compare the best Canadian REITsETF available in Canada. First, we will discuss the benefits of owning this type of investments. Then, for each ETF, we will provide the fund’s objective, MER, holdings, historical performance and dividend distribution.
What’s a REIT
Real Estate Investment Trusts (REITs) are specialized companies that engage in owning, operating, or financing properties that generate income. These trusts have a diverse range of investments, encompassing various types of properties. This includes apartment buildings, data centers, hotels, medical facilities, offices, retail centers, cell towers, and warehouses.
While REITs can be privately held, the majority are publicly traded entities. This accessibility allows investors to easily purchase shares of real estate investment trusts on the Toronto Stock Exchange. Canadian REITs have garnered popularity for several compelling reasons.
Firstly, they provide a means of diversification in an investment portfolio. The unique nature of real estate assets typically shows a low correlation with other asset classes, making them a valuable addition. Furthermore, REITs are often seen as a natural hedge against inflation. Lastly, they offer a steady and stable source of income. The bulk of REIT revenues is derived from rent payments from tenants occupying their buildings and properties. This form of income tends to be more stable than revenues from other commercial activities, adding to the attractiveness of REITs as an investment option.
What’s an REIT ETF
It’s an exchange trader fund that invests primarily in a portfolio of REITs. The manager of the ETF can either track a REIT index, pursue an active strategy or a mix of both.
Canadian REITs ETF are great as they offer a low cost way to get exposure to large number of REITs. The holder of a REIT ETF can benefit from diversification which lowers the overall risk.
What to look for in a REIT ETF
When looking for the Best Canadian REITs ETF, please make sure to check for the criteria’s below:
Sector allocation matters in REIT ETF. Investors should check whether the ETF invests in various sectors. The idea is to avoid REITs that are overly exposed to one type of properties. Generally speaking, a mix of industrial, retail and residential is appreciated.
The performance of these ETFs shows a range of outcomes, with some experiencing growth and others witnessing declines, particularly in the short term. ZRE.TO and VRE.TO have demonstrated resilience with stronger returns, positioning them as potentially more stable choices. Conversely, RIT.TO, MREL.TO, and XRE.TO have encountered more significant obstacles, as reflected by their negative YTD returns and subdued average annual returns.
The challenges faced by these ETFs often stem from their sensitivity to interest rates and the specific nature of the assets they hold. Interest rate sensitivity is a crucial factor for REITs; as rates rise, the financing costs for properties can increase, leading to reduced profits and, consequently, lower returns for investors. This sensitivity can particularly impact ETFs like RIT.TO, MREL.TO, and XRE.TO, which have shown negative performance in the short term.
Another challenge is the lack of diversification in the types of assets held by these REITs. Some may concentrate heavily in specific types of properties or geographic locations, making them more vulnerable to sector-specific downturns or regional economic shifts. This lack of diversification can lead to increased volatility and risk, contributing to the challenges and lower returns observed in some of the ETFs. When considering investment, the broader economic environment, interest rate forecasts, and the specific asset composition of the REIT should be carefully evaluated to understand potential performance and risks.
1- VRE – Vanguard FTSE CDN Capped REIT Index ETF
VRE Seeks to track the performance of the FTSE Canada All Cap Real Estate Capped 25% Index (before fees and expenses). It provides exposure to Canadian large-, mid-, and small-cap stocks in the Real Estate industry.
Vanguard FTSE CDN Capped REIT Index ETF has the lowest MER among the ETFs selected for this post.
Please consult issuers’ website for the most up-to-date data
Sector allocation
Sector
Fund
Retail REITs
23.2%
Office REITs
19.6%
Real Estate Services
18.1%
Residential REITs
17.7%
Diversified REITs
9.0%
Industrial REITs
7.7%
Real Estate Holding and Development
4.6%
Total
100.0%
Please consult issuers’ website for the most up-to-date data
VRE ETF Distribution
Distribution frequency: Monthly
Adj. Amount
Ex-Div Date
Record Date
Pay Date
Declare Date
0.0672
12/28/2023
12/29/2023
1/8/2024
12/20/2023
0.0672
11/30/2023
12/1/2023
12/8/2023
11/23/2023
0.0672
10/31/2023
11/1/2023
11/8/2023
10/24/2023
0.0672
9/28/2023
10/2/2023
10/10/2023
9/22/2023
0.0672
8/31/2023
9/1/2023
9/11/2023
8/24/2023
0.0672
7/31/2023
8/1/2023
8/9/2023
7/24/2023
0.0672
6/30/2023
7/4/2023
7/11/2023
6/23/2023
2- ZRE – BMO Equal Weight Reits Index ETF
ZRE is an index fund that tracks the Solactive Equal Weight Canada REIT Index. It invests in Canadian securities that fall within the Real Estate Investment Trust sector. Each security in the Index is allocated a fixed weight rather than a market capitalization weight. This is the largest REITS ETF by asset under management with 1.3 Billion.
Please consult issuers’ website for the most up-to-date data
ZRE ETF Holdings
Weight (%)
Name
4.98%
WPT INDUSTRIAL REAL ESTATE INVESTMENT TRUST
4.96%
SUMMIT INDUSTRIAL INCOME REIT
4.76%
CROMBIE REAL ESTATE INVESTMENT TRUST
4.63%
SMARTCENTRES REAL ESTATE INVESTMENT TRUST
4.63%
RIOCAN REAL ESTATE INVESTMENT TRUST
4.61%
INTERRENT REAL ESTATE INVESTMENT TRUST
4.61%
CHARTWELL RETIREMENT RESIDENCES
4.59%
MINTO APARTMENT REAL ESTATE INVESTMENT TRUST
4.58%
CHOICE PROPERTIES REAL ESTATE INVESTMENT TRUST
4.57%
H&R REAL ESTATE INVESTMENT TRUST
Please consult issuers’ website for the most up-to-date data
MREL – Middlefield REIT Index plus ETF
IDR has been designed to provide investors with low-cost exposure to the global real estate sector through a combination of indexing and active portfolio management.
65% of the funds’ assets are invested in the Canadian market (34% in the United states and 2% International).
Canadian Apartment Properties REIT SmartCentres Real Estate Investment Trust First Service Corp RioCan Real Estate Investment Trust Granite Real Estate Investment Trust Prologis Inc First Capital Real Estate Investment Trust Welltower Inc Colliers International Group Inc WPT Industrial Real Estate Investment Trust
(As of March 31, 2021)
IDR ETF Sector allocation
Name
Weight %
Industrial REITs
24.4
Retail REITs
19.5
Residential REITs
18.6
Real Estate Services
7.9
Specialized REITs
6.9
Healthcare REITs
6.7
Office REITs
5.9
Diversified REITs
4.4
Asset Management & Custody Banks
2.9
Hotels, Resorts & Cruise Lines
2.8
Please consult issuers’ website for the most up-to-date data
RIT – CI First Asset Canadian REIT ETF
RIT is an actively managed portfolio comprised primarily of securities of Canadian real estate investment trusts, real estate operating corporations and entities involved in real estate related services. Up to 30% of the Fund’s assets may be invested in foreign securities.
Please consult issuers’ website for the most up-to-date data
Sector allocation
Type
Fund
Retail REIT’s
32.24
Residential REIT’s
24.26
Industrial REIT’s
18.27
Diversified REIT’s
11.64
Office REIT’s
10.18
Health Care REIT’s
3.26
Cash and/or Derivatives
0.16
Please consult issuers’ website for the most up-to-date data
Disclaimer
The data on this website is for your information only. It does not constitute investment advice, or advice on tax or legal matters. Any information provided on this website does not constitute investment advice or investment recommendation nor does it constitute an offer to buy or sell or a solicitation of an offer to buy or sell shares or units in any of the investment funds or other financial instruments described on this website. Should you have any doubts about the meaning of the information provided herein, please contact your financial advisor or any other independent professional advisor.
HXT Stock: Investment objective
As a Canadian investor evaluating HXT, anticipate an investment strategy meticulously designed to replicate the performance of the S&P/TSX 60™ Index (Total Return), net of expenses. This ETF strategically aligns with the large-cap segment of the Canadian equity market, offering a comprehensive snapshot of its dynamics.
The allure for investors lies in the advantages of an index approach. HXT employs a systematic method, mirroring the Index’s movements, thereby providing a passive investment avenue. This approach brings forth inherent cost efficiencies, as it minimizes the need for active management and associated fees.
Furthermore, by choosing HXT, investors gain exposure to a diversified portfolio of large-cap stocks, mitigating company-specific risks. This diversification aligns with a prudent risk management strategy, particularly pertinent in the ever-evolving landscape of the Canadian equity market.
The S&P/TSX 60™ Index is a benchmark meticulously crafted to gauge the performance of the large-cap segment within the Canadian equity market. Comprising 60 of the most prominent and liquid stocks listed on the Toronto Stock Exchange, this index reflects the pulse of the nation’s corporate giants.
The S&P/TSX 60™ Index, with its focus on the largest and most liquid stocks in the Canadian equity market, offers several distinct advantages that set it apart from other options.
Advantages
Stability through Large Caps: The concentration on large-cap stocks inherently brings a level of stability. These companies are often well-established, with proven track records and financial strength. This can be appealing to investors seeking a degree of reliability and lower volatility in their portfolio.
Quality Stocks: Large-cap stocks in the S&P/TSX 60™ are typically leaders in their respective industries. These companies often exhibit characteristics such as stable earnings, strong fundamentals, and a history of successful performance. This focus on quality can be attractive to investors looking for a long-term, fundamentally sound investment strategy.
Liquidity: Given that the S&P/TSX 60™ Index includes some of the most actively traded stocks on the Toronto Stock Exchange, it ensures high liquidity. This liquidity can be advantageous for investors, as it facilitates ease of buying and selling shares without significantly impacting market prices.
Simplicity: The index’s focus on the top 60 stocks simplifies the investment process for those who prefer a straightforward approach. It’s a concentrated portfolio that allows investors to easily grasp the core holdings without delving into a multitude of smaller companies.
Historical performance – HXT vs XIU, XIC, VCN and ZCN
Examining the net assets of the listed Canadian ETFs provides valuable insights into their scale and investor confidence. XIU.TO stands out with the highest net assets at $10.94B. XIC.TO follows closely with $8.49B, showcasing a robust presence in the market. ZCN.TO holds $7.02B in net assets, indicating a significant investment pool. VCN.TO, with $5.48B, and HXT.TO, with $3.31B, exhibit slightly smaller but still substantial asset bases.
In this post, we’ll go over the best growth ETFs offered by BMO. Our analysis focuses on long-term performance. Only ETFs with a sustained historical performance over a period of 5 years were considered. For each ETF, we will analyze strategy, performance, management fees and volatility.
Source: TD Market research , MER: Management expense ratio is the total charges charged by the fund including administration and management fees. Beta (60 months): is a measure of volatility. The higher the Beta, the more risky the title. A Beta of 1 means the stock has the same volatility as the market.
BMO’s Best Equity ETFs highlight ZQQ (BMO Nasdaq 100 Equity) as the top performer over the last decade, primarily attributed to the dominance of FAANG stocks (Facebook, Amazon, Apple, Netflix, and Google), which collectively constitute nearly a third of the Nasdaq 100. ZQQ boasts the highest annualized average performance over a 5-year span, coupled with a modest volatility of 1.28. This makes ZQQ particularly attractive for long-term investors seeking a well-performing portfolio of high-quality securities with substantial growth potential. Notably, ZQQ provides excellent exposure to the technology sector in its sector allocation.
ZQQ has assets under management of $ 1.57 billion. It is one of the most popular funds in Canada.
ZUQ (BMO MSCI US High Quality) and ZGQ (BMO MSCI World High Quality) have showcased strong performances, sharing a common stock selection methodology. Unlike traditional index replication, these funds implement a pre-selection process, specifically choosing securities based on criteria related to yield and liquidity. Both ZUQ and ZGQ are well-suited for long-term equity investments, offering diversified portfolios. Their risk/return ratio is attractive, marked by a Beta of less than 1.
ZSP and ZSP-U (BMO S&P 500 Index ETF) emerge as the top choices for investors seeking low-cost index funds. Tracking the S&P 500 Index, a robust representation of the US economy, these ETFs stand out for their minimal management fees. ZSP is unhedged against currency risk, while ZSP-U is exclusively purchasable in US dollars. The decision between hedged, unhedged, or US dollar funds hinges on individual expectations regarding exchange rates, with long-term impacts on exchange losses or gains typically proving minimal.
ZBK (BMO Equal Weight US Banks) provides exposure to the US banking sector, albeit with a Beta of 1.47 over the past 5 years, indicating a volatility level almost one and a half times higher than the market. With assets under management totaling $880 million, ZBK remains a significant player in this segment.
ZID (BMO Indian Equities) focuses on Indian companies, offering a valuable avenue for diversification within an existing portfolio by tapping into the potential of a promising emerging market. While relatively smaller in size with $107 million in assets under management, ZID provides investors with exposure to the opportunities presented by the Indian market.
BMO Nasdaq 100 Equity Hedged to CAD seeks to replicate, to the extent possible, the performance of an index of securities of companies listed on the NASDAQ, net of expenses. ZQQ ranks first in our ranking of the best BMO ETFs to hold for long term.
The ZQQ is hedged for currency risk.
The Nasdaq-100 is one of the world’s leading large-cap growth indices. It includes 100 of the largest national and international non-financial companies listed on the Nasdaq by market capitalization.
This index is dominated by companies in the technology sector.
The BMO MSCI USA High Quality seeks to replicate, to the extent possible, the performance of the MSCI USA Quality Index, net of expenses. The index is 100% invested in the United States.
The fund selects the securities according to the criteria below:
The BMO MSCI World High Quality ETF seeks to replicate, to the extent possible, the performance of the MSCI All Country World High Quality Index, net of expenses. ZGQ is a global ETF. While ZUQ invests mainly in the American market.
The fund selects the securities according to the criteria below:
The BMO Indian Equity ETF provides exposure to the Indian market which is one of the most promising emerging markets. The fund acquires certificates (ADRs) from major Indian companies listed on the Toronto, London and New York stock exchanges (NYSE and NASDAQ).
The BMO Equal Weight US Banks ETF has been designed to replicate, to the extent possible, the performance of the Solactive Equal Weight US Bank Index, net of expenses. The Fund invests and holds the constituent securities of the index in the same proportion as that reflected in the index.
ZBK’s sector allocation is 100% in the financial sector.
The BMO S&P 500 ETF seeks to replicate, to the extent possible, the performance of the S&P 500 Index, net of expenses. ZSP invests in the constituent securities of the index and holds these securities in a proportion equal to that which they represent in the index.
ZSP-U is a Canadian ETF however it only trades in US $.
ZSP is a Canadian ETF that trades in Canadian $ and is not hedged against currency risk.
ZSP-U vs ZSP which one to choose
If you are uncertain between a hedged, unhedged or US $ ETF, please refer to the table below:
Scenario 1: Value of Canadian $ appreciated
Scenario 2: Value of Canadian $ depreciated
Non hedged ETF
Index return Minus foreign exchange loss
Index return Plus foreign exchange gains
Hedged ETF
Index return
Index return
US $ ETF
Index Return The investor chooses when to convert
Index Return The investor chooses when to convert
S.P. 500 Index
The S&P 500 Index, or the Standard & Poor’s 500 Index, is a market-capitalization-weighted index of the 500 largest publicly-traded companies in the U.S.
The S&P 500 is an excellent index because most of its constituents are large established US corporations. It’s well diversified across various sectors of the US economy. The index is widely regarded as the best gauge of large-cap U.S. equities. It can be easily used to express an opinion on the US economy in general. In other words, if you are bullish on the performance of the American economy in the long term, it’s probably the best index for you.
ZSP-U Portefeuille
Weight (%)
Name
Sector
5.98%
APPLE INC
Information Technology
5.54%
MICROSOFT CORP
Information Technology
2.30%
AMAZON.COM INC
Consumer Discretionary
1.73%
BERKSHIRE HATHAWAY INC
Financials
1.63%
ALPHABET INC
Communication Services
1.57%
UNITEDHEALTH GROUP INC
Health Care
1.46%
JOHNSON & JOHNSON
Health Care
1.45%
ALPHABET INC
Communication Services
1.42%
EXXON MOBIL CORP
Energy
1.23%
JPMORGAN CHASE & CO
Financials
BMO investorline review
BMO Bank of Montreal offers a wide variety of different ETFs. It is in fact one of the largest issuers of exchange-traded funds in Canada. BMO’s brokerage service is offered under the BMO InvestorLine.
According to the Milliondollarjourney website, BMO investorline offers several advantages:
BMO investorline pros
• Best broker / bank;
• One of the best brokerage platform;
• App on phone is one of the best in the market;
• BMO is a major bank in Canada;
• Multiple resources to educate clients;
BMO investorline Cons
• Relatively high transaction costs compared to online brokers such as Questrade and Qtrade
RBNK ETF is a dividend ETF ideal for investors looking for both growth and dividend in the Canadian banking industry. The RBC Canadian Bank Yield Index Exchange seeks to replicate the Solactive Canada Bank Yield Index. The latter is focused only on the Canadian banking industry. This ETF is more suited for long term investors with medium to high risk tolerance.
The Solactive Canada Bank Yield Index follows the price changes of the six biggest Canadian banks. Each company’s weight in the index is based on how much it pays in dividends, which is updated regularly. To be included in the index, a company needs to have a certain value in the stock market. If there aren’t enough qualifying companies, the six largest ones are picked based on their stock market value.
The selected companies are ranked by their indicated dividend yield, and the two companies with the highest yield receive a weight of 1/4. The third and fourth companies each receive a weight of 1/6, and the remaining two companies each receive a weight of 1/12.
– Total return: Though the focus here is on the dividend yield, you have to keep in mind the total return. The profit or loss we make on any investment combines both dividend income and capital gain or loss. Looking at the long-term performance of the fund is crucial. An ETF that provides a good capital appreciation with a high dividend yield is preferable.
–Diversification: A diversified ETF is always a safer option. Some high yield ETFs are sector-specific (Financials, Energy or Gold). The ones focused on Energy and Gold have had an inferior long-term performance and carry high volatility risk.
–Volume and liquidity of the ETF. The higher the asset under management, the lower the trading costs of the ETF (difference between the bid and ask price).
In today’s exploration, we’ll delve into the Vanguard FTSE Global All Cap ex Canada Index ETF, better known as VXC. This ETF is a gateway for Canadian investors to access international markets, excluding Canada. Let’s unpack the specifics of VXC, including its composition, benefits, and key figures like the number of stocks, MER, and capitalization details.
VXC ETF at a Glance
VXC, offered by Vanguard, is designed to mirror the FTSE Global All Cap ex Canada Index. It includes a vast array of stocks from both developed and emerging markets across the globe, barring Canadian ones. Here’s a closer look at its characteristics:
Number of Stocks: 11,453, offering wide-ranging exposure across different sectors and countries.
Management Expense Ratio (MER): 0.22%, ensuring a cost-effective investment solution for those seeking global exposure.
Portfolio Composition VXC ETF
The ETF’s portfolio is well-diversified, not just by geography but also by market capitalization:
Large Cap: 67.96%
Medium/Large Cap: 3.92%
Medium Cap: 13.83%
Such diversification ensures that investors have significant exposure to established companies while still capturing the growth potential of medium-sized enterprises.
Geographic Breakdown
VXC’s investments span across various regions, providing a balanced mix of developed and emerging markets:
North America: 62.74%
Europe: 16.24%
Pacific: 10.91%
Emerging Markets: 9.84%
This geographic distribution helps mitigate risks associated with any single region.
Sector Allocation
The fund’s sector allocation further highlights its diversity, with significant investments in high-growth areas:
Technology: 24.36%
Consumer Discretionary: 14.24%
Industrials: 14.06%
Financials: 13.59%
Health Care: 11.06%
This sectoral spread ensures that investors are well-positioned to benefit from growth across a broad spectrum of industries.
With its broad international exposure, low costs, and diverse portfolio, VXC is an attractive option for Canadians looking to invest globally. As always, consider how VXC fits into your broader investment strategy and ensure it aligns with your financial goals.
Keep following for more insights that make the complex world of finance more accessible and manageable. Happy investing!
Q&A
What ETFs are in VXC?
VXC doesn’t contain other ETFs; it directly holds a diverse range of individual stocks from global markets, excluding Canada.
Is VXC a good ETF?
VXC can be a good choice for investors seeking broad global exposure and diversification outside of Canada, with a low-cost structure.
What does VXC track?
VXC tracks the FTSE Global All Cap ex Canada Index, representing a wide array of stocks from developed and emerging markets, excluding Canadian stocks.
In this post, we will be reviewing the 10 best dividendETF in Canada. We included in our list all ETFs whether they invest in Canadian, American or Global markets. We compared these ETFs based on the dividend yield, performance over a 5 years period and volatility. For each ETF, we provide the funds’ objective and holdings. Finally, we will also discuss tax implications for holding Canadian ETFs that invest globally.
Source: TD Market research, AUM Asset under management, MER Management expense ratio
– XDVIshares Canadian Select Dividend Index is the most popular dividend ETF in Canada with over 1.7 B in assets. While, XEIIshares S&P TSX Comp High Div Index and VDY Vanguard FTSE CDN High Dividend Yld Index stand out with their low MER.
– Most of the popular dividend ETFs in Canada are invested in Canadian companies. In fact, Canadian dividend ETFs are great but they tend to be over exposed to the Energy and Financial sector due to the nature of the Canadian economy. Please review below the sector allocation for each ETF to get a better picture.
Table 2: Best Dividend ETFs: Performance comparison
– ZWP BMO Europe High Dividend Covered Call ETF and ZWC BMO CDN High Dividend Covered Call ETF both use covered calls strategy. They both pay a little bit over 6% in dividend which is great. But, investors should know that a portion of these payouts are dividends, the other portion are options’ premiums. In fact, because both of these ETFs write covered calls dynamically, they generate additional income through option premiums in certain conditions.
This strategy overall has a negative impact on the performance of these ETFs. When you are writing covered calls, you are in essence giving up on the upside potential of the stocks you own with the purpose of preserving capital. ZWC had a better performance than ZWP.
– FIE is an excellent choice in terms of dividend yield (close to 6%). Also, it has a great performance. The only drawbacks are its allocation (100% in the Canadian financial sector) and its relatively high MER.
– VDY Vanguard FTSE CDN High Dividend Yield Index has overall the best characteristics for a dividend ETF (yield around 4%, great performance, Beta lower than 1 and low MER especially VDY) . VDY is over exposed to the Canadian Financial and Energy sector. XEI from iShares is also another great option.
– VGG Vanguard US Dividend Appreciation is a great option if you are to looking for dividend from US based companies. This an ideal investment in a registered account to avoid the 15% withholding tax.
Considering volatility, performance and MER, my number one choice for a the best canadian dividend ETF would VDY from Vanguard. It has a low MER and a lower volatility than the market. It offers an interesting yield and a great performance for its category. My second choice would be XEI from iShares.
FIE Ishares CDN Financial Monthly Income is a excellent choice if you are bullish on the financial sector and don’t mind higher volatility than average.
ZWP BMO Europe High Dividend Covered Call ETF and ZWC BMO CDN High Dividend Covered Call ETF offer high dividend yield. On the other hand long term performance is not there. The covered call strategy seem to impact negatively long term performance. As I mentioned above, Performance should be the first criteria when selecting a dividend ETF.
How to choose the best dividend ETF
Performance and sector allocation
It’s a no brainer. Performance matters when selecting the best dividend ETF. A steady performance indicate the portfolio includes quality stocks such as Bluechips. But, one need to keep an eye on volatility and sector weighting. Regarding volatility, you want an interesting performance with the lowest possible volatility. This insures you are maximizing your returns for the risk you are taking.
Sector weighting is as important too. You need to understand where your money is invested and your portfolio’s overall exposure. Having a balanced portfolio across various industries is critical to reduce risk.
Yield
I can’t stress enough. Total return is more important than dividend yield. This is true for stocks and ETFs. A dividend yield is an annual percentage calculating the amount received by the investor for a year. It does not take in consideration capital loss or appreciation. So, you could own an investment that has a positive dividend yield and a negative total return.
If income generation is paramount to you. You need to select first ETFs that have high total returns. Then within these ETFs identify the ones that pay a steady and decent dividend overtime.
Volatility
We use the 5 years Beta as a measure of volatility. A beta of 1 mean your investment is as risky as the overall market. When selecting an investment, the desired Beta is the lowest possible.
Tax implications for Global ETFs
There are so many possible structures for an ETF. Below, we will discuss mainly three common structures:
Type 1: Canadian ETFs that invest in US or international stocks directly. There is 15% withholding tax that will impact the fund’s return;
Type 2: Canadian ETFs that invest in US ETFs which invests in US stocks. There is 15% withholding tax that will impact the fund’s return;
Type 3: Canadian ETFs that invest in US listed ETFs which invest in international stock. This is the structure that’s the least interesting for investors from a taxation perspective. 2 Taxes will be applied by the foreign country first and then the US.
XDV is the first in our list of Best dividend ETFs in Canada. The iShares Canadian Select Dividend Index ETF provides long-term capital growth by investing in 30 high yielding Canadian companies in the Dow Jones Canada Total Market Index.
XDV dividend ETF Holdings and sector allocation
Company Name
Allocation
Canadian Imperial Bank of Commerce
8.7%
Bank of Montreal
6.4%
Canadian Tire Corp Ltd Class A
6.3%
Royal Bank of Canada
6.2%
BCE Inc
5.0%
TC Energy Corp
4.8%
Labrador Iron Ore Royalty Corp
4.7%
Bank of Nova Scotia
4.6%
The Toronto-Dominion Bank
4.3%
National Bank of Canada
4.2%
Please consult issuers’ website for up to date data
Sector Classs
% Allocation
Financial Services
55.5%
Comm. Services
11.7%
Utilities
11.5%
Please consult issuers’ website for up to date data
DXG – Dyn Ishares Active Global Dividend ETF
The second ETF in our list of best dividend ETF in Canada is a global ETF. DXG is an actively managed fund. The fund invests primarily in a diversified portfolio of equity securities of businesses located around the world that pay or are expected to pay a dividend or distribution. These securities are selected actively based on size, profitability and liquidity. 56% of the funds holdings are invested in US companies, this is why it’s part of our list of the best US Dividend ETFs in Canada.
This ETF is ideal for investors seeking a dividend income from an international basket of large caps. The fund is well diversified across a variety of sectors mainly Technology, Industrials, Consumer discretionary and Health care.
DXG Dividend ETF Holdings
Company Name
Allocation
Ashtead Group PLC
6.2%
Hoya Corp
5.8%
LVMH Moet Hennessy Louis Vuitton SE
5.7%
Facebook Inc Class A
5.4%
Capital One Financial Corp
5.2%
Alphabet Inc Class A
5.2%
Salesforce.com Inc
4.9%
NVIDIA Corp
4.8%
Edwards Lifesciences Corp
4.7%
CanadaBNP Paribas Act. Cat.A
4.3%
Please consult issuers’ website for up to date data
Sector breakdown
Type
Fund
United States
62.3
International
35.8
Please consult issuers’ website for up-to-date figures
Sector breakdown
Sector
% Allocation
Financial Services
21.7%
Technology
17.8%
Consumer Cyclical
15.0%
Comm. Services
10.5%
Please consult issuers’ website for up-to-date figures
XEI – iShares Core S&P/TSX Composite High Dividend Index ETF
This ETF objective is to replicate the performance of the S&P/TSX Composite High Dividend Index ETF. The fund’s objective is long term capital growth by investing in Canadian companies operating across diversified sectors. XEI pays a monthly dividend income which can be appealing for investor who are looking for a frequent payout.
Please consult issuers’ website for up to date data
Sector allocation
Sector
% Allocation
Financial Services
29.7%
Energy
26.6%
Comm. Services
14.1%
Utilities
12.4%
Please consult issuers’ website for up to date data
VDY – Vanguard FTSE Canadian High Dividend Yield Index ETF
FTSE Canadian High Dividend Yield Index ETF tracks the performance of the FTSE Canada High Dividend Yield Index, which consists of Canadian stocks having a high dividend yield. Due to the nature of the Canadian market, this fund has large portion of its investment portfolio in Energy and Financials.
VDY Dividend ETF holdings
Company Name
Allocation
Royal Bank of Canada
14.2%
The Toronto-Dominion Bank
12.0%
Enbridge Inc
8.1%
Bank of Nova Scotia
7.5%
Bank of Montreal
6.5%
Canadian Imperial Bank of Commerce
4.9%
TC Energy Corp
4.7%
BCE Inc
4.5%
Canadian Natural Resources Ltd
4.2%
Please consult issuers’ website for up to date data
Please consult issuers’ website for up to date data
ZWP – BMO Europe High Dividend Covered Call ETF
The BMO Europe High Dividend Covered Call ETF (ZWP) has been designed to provide exposure to a dividend focused portfolio. These dividend paying companies are selected based on:
dividend growth rate,
yield,
payout ratio and liquidity.
What’s unique about this ETF is that it uses covered calls to protect against downside risk. This being said, the covered call strategy provides limited downside protection. Also, when you write a covered call, you give up some of the stock’s potential gains. These ETFs will tend to have a higher yield and a lower performance.
ZWP Dividend ETF Holdings
Company Name
Allocation
Roche Holding AG
4.0%
Nestle SA
4.0%
Novartis AG
4.0%
GlaxoSmithKline PLC
4.0%
Sanofi SA
3.8%
TotalEnergies SE
3.7%
Unilever PLC
3.7%
Enel SpA
3.7%
Please consult issuers’ website for up to date data
Geographic allocation
Countries
Weight
Switzerland
23.66%
Germany
24.24%
United Kingdom
18.76%
France
16.72%
Other (multiple countries)
16.62%
Please consult issuers’ website for up-to-date figures
Sector allocation
Type
Fund
Information Technology
6.22
Industrials
12.18
Consumer Discretionary
11.56
Consumer Staples
11.78
Health Care
16.56
Financials
14.79
Materials
9.48
Communication
8.10
Energy
3.89
Utilities
3.66
Please consult issuers’ website for up-to-date figures
CDZ – S&P/TSX Canadian Dividend Aristocrats Index Fund
The S&P/TSX Canadian Dividend Aristocrats includes only large companies that are part of the TSX and who have increased their dividend consistently for at least 5 years period. This fund has been around for a while now.
CDZ Dividend ETF holdings
Company Name
Allocation
Keyera Corp
3.2%
SmartCentres
3.0%
Pembina Pipeline Corp
2.9%
Enbridge Inc
2.9%
Canadian Natural Resources Ltd
2.5%
Power Corporation of Canada
2.5%
Fiera Capital Corp
2.2%
Exchange Income Corp
2.2%
Great-West Lifeco Inc
2.2%
Please consult issuers’ website for up to date data
Sector allocation
Type
Fund
Financials
28.33
Energy
14.88
Industrials
11.80
Real Estate
10.93
Utilities
10.77
Consumer Staples
7.03
Communication
6.47
Materials
3.51
Consumer Discretionary
3.25
Health Care
1.92
Please consult issuers’ website for up-to-date figures
FIE – Ishares CDN Fin Monthly Income
Ishares CDN Fin Monthly Income seeks to maximize total return and to provide a stable stream of monthly cash distributions. FIE has a high exposure to the financial sector.
Please consult issuers’ website for up to date data
Sector allocation
Type
Fund
Banks
44.96
Insurance
30.24
Diversified Financials
8.48
Energy
5.01
Utilities
4.50
Real Estate
2.81
Telecommunications
1.12
Transportation
0.73
Food & Staples Retailing
0.57
Cash and/or Derivatives
0.41
Please consult issuers’ website for up-to-date figures
VGG – Vanguard US Div Appr and VGH – U.S. Dividend Appreciation Index ETF (CAD-hedged)
VGG is index fund (passively managed). The fund currently seeks to track the performance of the NASDAQ US Dividend Achievers Select Index. The latter is comprised of a select group of securities with at least ten consecutive years of increasing annual regular dividend payments.
Index funds can be great especially from an MER perspective. VGG offers an exposure to large number of established US corporations, mostly Bluechips such as Microsoft, Walmart…etc.
VGG Dividend ETF Holdings
Company Name
Allocation
Microsoft Corp
4.5%
JPMorgan Chase & Co
3.9%
Johnson & Johnson
3.8%
UnitedHealth Group Inc
3.3%
Visa Inc Class A
3.2%
The Home Depot Inc
3.1%
Procter & Gamble Co
3.0%
Comcast Corp Class A
2.3%
Please consult issuers’ website for up-to-date figures
Geographic allocation
Country
Fund
USA
100.0%
Sector allocation
Sector
Fund
Industrials
21.8%
Consumer Discretionary
16.6%
Health Care
15.4%
Financials
13.9%
Technology
13.0%
Consumer Staples
10.3%
Utilities
3.8%
Basic Materials
3.0%
Telecommunications
2.2%
Other
0.0%
Real Estate
0.0%
Energy
0.0%
Total
100.0%
Please consult issuers’ website for up-to-date figures
ZWH – BMO US High Dividend Covered Call ETF
ZWH has been designed to provide exposure to a dividend focused portfolio, while earning call option premiums. The underlying portfolio is yield-weighted and broadly diversified across sectors. The Fund utilizes a rules-based methodology that considers the following criteria:
dividend growth rate,
yield,
payout ratio,
liquidity.
What’s unique about this ETF is that it uses covered calls to protect against downside risk. This being said, the covered call strategy provides limited downside protection. Also, when you write a covered call, you give up some of the stock’s potential gains. These ETFs will tend to have a higher yield and a lower performance.
ZWH Dividend ETF Holding
Company Name
Allocation
Apple Inc
4.2%
Microsoft Corp
4.2%
Coca-Cola Co
4.1%
AbbVie Inc
4.1%
The Home Depot Inc
4.1%
Procter & Gamble Co
4.1%
Pfizer Inc
4.0%
Please consult issuers’ website for up to date data
Geographic allocation
Country
Fund
USA
100.0%
Please consult issuers’ website for up-to-date figures
Sector allocation
Sector
Fund
Information Technology
22.61%
Industrials
8.39%
Consumer Discretionary
10.06%
Health Care
12.40%
Financials
15.50%
Materials
4.36%
Communication
9.58%
Consumer Staples
7.35%
Energy
3.86%
Utilities
3.84%
Real estate
2.05%
Please consult issuers’ website for up-to-date figures
Disclaimer
The data on this website is for your information only. It does not constitute investment advice, or advice on tax or legal matters. Any information provided on this website does not constitute investment advice or investment recommendation nor does it constitute an offer to buy or sell or a solicitation of an offer to buy or sell shares or units in any of the investment funds or other financial instruments described on this website. Should you have any doubts about the meaning of the information provided herein, please contact your financial advisor or any other independent professional advisor.
What is a bond ETF?
In the world of Canadian income investing, a bond ETF takes center stage. This exchange-traded fund zeroes in on building a diverse portfolio of bonds. Picture bonds as IOUs—investors lending to governments or corporations. When you invest in a bond ETF, it’s like snagging shares of a fund that holds a mix of different bonds. In this post, we will cover all questions concerning Bond ETFs and present the Best Bond ETFs in Canada.
Why do income-focused investors love bond ETFs? Well, it’s all about the dual magic of income and diversification. These ETFs offer a ticket to a wide array of bonds, spreading the risk net across various issuers and maturity timelines. You can find bond ETFs tailoring their focus to different bond indices, whether it’s government bonds, corporate bonds, municipal bonds, or bonds with specific maturity ranges. Perfect for the savvy Canadian income investor looking to navigate the bond market without diving into individual bonds.
Short term or Long term maturity Bond ETFs, which one to choose?
Characteristic
Short Maturity Bond ETFs
Long Maturity Bond ETFs
Duration of Bonds
Typically 1 to 5 years
Often exceeds 10 years
Interest Rate Sensitivity
Less sensitive to rate changes
More sensitive to rate changes
Risk Profile
Lower risk, more stable
Higher risk, greater volatility
Income Yield
Lower yields
Higher yields
Investor Profile
Capital preservation, lower risk
Income-seeking, higher risk tolerance
Suitability in Rising Rates
Preferred due to lower sensitivity
May result in higher losses due to sensitivity
Investors choose between short and long maturity bond ETFs based on their risk preferences, income needs, and views on interest rate movements. Short-term bonds offer stability and lower risk, while long-term bonds may provide higher yields but come with increased interest rate sensitivity.
Bonds, essentially debt securities, are subject to market fluctuations, particularly in the face of changing interest rates. When interest rates rise, the prices of existing bonds tend to decrease. This is because newly issued bonds offer higher yields, making existing lower-yielding bonds less attractive. This price volatility can be unsettling for some investors.
However, the attractiveness of bonds lies in their regular interest payments, often referred to as coupon payments, and the promise of the return of the principal amount at maturity. These characteristics provide a level of stability and predictability, offering investors a stream of income and a known redemption value at the end of the bond’s term.
Now, enter bond exchange-traded funds (ETFs). These are investment funds that hold a portfolio of bonds, providing investors with a convenient way to gain exposure to the bond market. Bond ETFs offer several advantages, including low costs and diversification. The low costs result from the fund structure and the fact that ETFs typically track an index rather than relying on active management.
Diversification is another key benefit of bond ETFs. By holding a variety of bonds in their portfolio, these funds spread risk, reducing the impact of the poor performance of any single bond. This diversification can enhance the stability of returns compared to holding individual bonds.
However, it’s crucial to note that bond ETFs lack a maturity feature. Unlike holding an individual bond until maturity and receiving the principal amount back, ETFs do not have a fixed maturity date. This characteristic means that investors won’t necessarily receive the face value of the bonds in the ETF when they sell their shares.
Bond ETFs are particularly well-suited for long-term investors who are looking for a balance between regular income, potential capital appreciation, and a degree of risk mitigation through diversification. By providing exposure to a broad range of bonds, these ETFs can navigate various interest rate environments, potentially outperforming the returns of keeping funds in idle cash over the long term.
In essence, while individual bonds come with the promise of a fixed return of capital, bond ETFs offer a dynamic and diversified approach to bond investing, making them an attractive option for investors with a longer time horizon.
ZAG ETF Review – BMO Aggregate Bond Index
BMO Aggregate Bond Index ETF (ZAG) is a prominent player in the Canadian investment landscape, managing a substantial $6,279 million in assets. Renowned for its expansive size and liquidity, ZAG strategically allocates its holdings across Canadian federal and provincial government bonds, as well as investment-grade corporate bonds, providing investors with a broad market exposure.
With a targeted weighted average duration of approximately 7.4 years, ZAG exhibits a balanced strategy that considers potential returns while managing interest rate risk. The fund’s notable characteristics include a high dividend yield of 3.56% and an impressively low Management Expense Ratio (MER) of 0.09%, making it an attractive option for investors seeking both income generation and cost efficiency.
Underlining its commitment to quality, ZAG maintains an exceptional credit rating, with 89% of its assets invested in bonds rated A or better. Government entities dominate the fund’s portfolio, with the federal government representing 37% of assets and provincial governments at 34%. This strategic allocation contributes to the fund’s stability and reliability.
XBB ETF Review – iShares Core Canadian Universe Bond Index ETF
iShares Core Canadian Universe Bond Index ETF (XBB) tracks the FTSE Canada Universe Bond Index, offering a diverse portfolio of high-quality Canadian bonds. With a 7.5-year average duration, XBB has a slightly higher expense ratio than ZAG but maintains cost-effectiveness. Strong in credit quality, it yields 3.01%, ranking mid-tier among Canadian bond ETFs.
XBB shines in credit quality, allocating a significant 39% of assets to AAA-rated bonds.
VAB ETF Review – Vanguard Canadian Aggregate Bond Index ETF
Launched in 2011, the Vanguard Canadian Aggregate Bond Index ETF (VAB) is a standout in the Canadian bond market, amassing nearly $4 billion in assets. This ETF employs a passive strategy, tracking the Bloomberg Global Aggregate Canadian Float Adjusted Bond Index and investing in investment-grade bonds across Canada. What sets VAB apart is its low 0.09% Management Expense Ratio (MER), an impressive 3.55% distribution yield, and a commitment to excellent credit quality. Notably, VAB’s MER is tied for the lowest on this list. The fund’s weighted average duration aligns with its counterparts at 7.4 years, providing a balanced approach.
XSB ETF Review – iShares Core Canadian Short Term Bond Index ETF
iShares Core Canadian Short Term Bond Index ETF (XSB) excels as a Canadian bond ETF, tracking the FTSE Canada Short Term Overall Bond Index with a 3-year average maturity. Its short-term focus shields against losses in rising rates, evident in 2022. With a low 2.48% yield, XSB is a resilient, low-cost, and income-focused choice for long-term investors.
For income-focused investors in Canada, bond ETFs bring several advantages to the table. These pros encompass diversification benefits, enhanced liquidity, ease of trading on the Canadian stock exchanges, and potentially lower costs compared to managing individual bonds. Bond ETFs also provide a streamlined avenue to access various segments of the Canadian bond market, such as government, corporate, and municipal bonds. The transparency in ETF holdings and the ability to trade throughout the day align well with the preferences of income-seeking investors.
Bond ETF Cons for Canadian Income Investors:
While bond ETFs hold appeal, it’s imperative for Canadian income investors to be aware of potential drawbacks. These cons may involve sensitivity to interest rate fluctuations, impacting bond prices. Market volatility can also influence the value of the ETF. Notably, bond ETFs might not suit investors with specific needs tied to individual bond maturity dates. A thorough understanding of these cons is crucial for income investors in Canada to make informed decisions.
Should Canadian Income Investors Consider Bond ETFs?
Determining the suitability of bond ETFs for Canadian income investors hinges on factors like investment objectives, risk tolerance, and investment horizon. Bond ETFs can be an attractive option for those seeking income, diversification, and relative stability in their portfolios. However, considering Canada’s economic landscape, including interest rate expectations and market dynamics, is essential. Evaluating the pros and cons, within the context of individual circumstances, will guide Canadian income investors in deciding whether bond ETFs align with their income-focused investment strategy.
