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In this post, we will be sharing BMO Covered call ETF list. We will be comparing 6 of the most popular ETFs in terms of dividends, MER and historical performance. Covered call ETFs are very popular with Canadian investors. Two reasons push investors towards covered call ETFs:

High dividend yield: thanks to the premiums earned when writing call options, the manager under certain conditions can earn premiums and enhance distributions;

Low volatility. Writing a call option is a conservative strategy aimed at reducing volatility;

Great for passive income: if you’re main objective is to achieve high dividend yields and build passive income, then covered call ETFs are a good option. But, remember the high dividend yield comes at a price which very low growth potential.

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Executive summary

ETF	Objective	Risk/Return Profile
ZWB	Exposure to Canadian banking sector	Lower potential returns, downside protection, income generation
ZWC	Broad-based exposure to Canadian stock market	Moderate potential returns, downside protection, income generation
ZWH	Exposure to US equities with high dividend yields	Moderate to higher risk due to US stocks, downside protection, income generation
ZWP	Exposure to European equities with high dividend yields	Moderate potential returns, downside protection, income generation
ZWK	Exposure to a portfolio of U.S. banks	Moderate potential returns, downside protection, income generation
ZWU	Exposure to global real estate investment trusts	Moderate to higher risk due to US stocks, downside protection, income generation

BMO Covered call ETF list

Name	AUM*	MER
ZWB –BMO Covered Call Canadian Banks	2.6B	0.72
ZWC –BMO CDN High Div Covered Call	1.3B	0.72
ZWP –BMO Europe High Div Cov Call	935M	0.71
ZWH –BMO US High Dividend Covered Call	918M	0.71
ZWK -BMO Covered Call US Banks	230M	0.71
ZWU – BMO Covered Call Utilities	1,6B	0.71

Source: TD Market research, MER: Management Expense Ratio / BMO Covered call ETF list

Performance and dividend yield comparison

Average long term performance – Updated daily – Best Covered Call ETF Canada

Dividend yield comparison

	Div Yld
ZWB	7.14
ZWC	7.15
ZWP	8.05
ZWH	6.64
ZWK	8.04
ZWU	8.45

Source: Yahoo Finance

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ZWB – BMO Covered Call Canadian Banks

The ZWB aims to provide exposure to a portfolio of dividend-paying securities (Canadian Banks), while collecting premiums related to call options. The portfolio is chosen on the basis of the criteria below:

• dividend growth rate, yield and payout ratio and liquidity.

ZWB holdings

Name	Weight
BMO Equal Weight Banks ETF	27.2%
Bank of Montreal	12.9%
Canadian Imperial Bank of Commerce	12.7%
Royal Bank of Canada	12.1%
National Bank of Canada	11.9%
The Toronto-Dominion Bank	11.9%
Bank of Nova Scotia	11.4%

Please visit issuers’ website for up-to-date figures – BMO Covered call ETF list

ZWC –BMO CDN High Div Covered Call

The BMO Canadian High Dividend Covered Call ETF (ZWC) 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 selection methodology uses 4 factors: – Liquidity; – Dividend growth rate; – Yield and payout ratio.

ZWC is an excellent option for conservative investors looking for a steady income and low volatility. It’s tax-efficient because the dividends are all coming from Canadian companies. The financial sector and Energy represents 53% of the total overall sector allocation.

ZWC ETF Holdings

Company Name	Allocation
Canadian National Railway Co	5.4%
BCE Inc	5.2%
TELUS Corp	5.1%
Enbridge Inc	5.0%
Royal Bank of Canada	5.0%
Canadian Imperial Bank of Commerce	4.9%
Bank of Nova Scotia	4.7%
The Toronto-Dominion Bank	4.6%
Manulife Financial Corp	4.3%

Please visit issuers’ website for up-to-date figures

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.

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 visit issuers’ website for up-to-date figures

Geographic allocation

Countries	Weight
Switzerland	23.66%
Germany	24.24%
United Kingdom	18.76%
France	16.72%
Other (multiple countries)	16.62%

Please visit 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 visit 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.

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 visit issuers’ website for up-to-date figures

Geographic allocation

Country	Fund
USA	100.0%

Please visit 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

ZWK -BMO Covered Call US Banks

The BMO Covered Call U.S. Banks ETF (ZWK) is professionally managed by BMO Global Asset Management. The fund has been designed to provide exposure to a portfolio of U.S. banks while earning call option premiums.

The fund invests in 38 US Banks. It’s ideal for investors looking for dividend income. The dividend yield on November 24th was 6.19%!

The fact that the fund uses call options accomplishes two things:

increases the dividend yield;
reduces volatility but also growth potential. So, it’s something to keep in mind.

Weight (%)	Name
5.86%	SIGNATURE BANK/NEW YORK NY
5.58%	CITIZENS FINANCIAL GROUP INC
5.55%	REGIONS FINANCIAL CORP
5.52%	AMERIPRISE FINANCIAL INC
5.52%	M&T BANK CORP
5.46%	SVB FINANCIAL GROUP
5.43%	KEYCORP
5.41%	TRUIST FINANCIAL CORP
5.40%	FIFTH THIRD BANCORP
5.38%	BMO EQUAL WEIGHT US BANKS INDEX ETF

ZWU – BMO Covered Call Utilities

ZWU is another covered call ETF from BMO. It provides exposure to an equal weight portfolio of utilities, telecoms and pipeline companies. The fund manager will enhance yield by issuing options and collectin

ZWU Holdings

Weight (%)	Name
5.92%	BMO EQUAL WEIGHT UTILITIES INDEX
5.44%	PEMBINA PIPELINE
5.29%	TC ENERGY
5.16%	FORTIS INC/CANADA
5.02%	ENBRIDGE
4.87%	BCE
4.70%	TELUS
4.59%	PPL
4.52%	EXELON
4.46%	ROGERS COMMUNICATIONS

Practice example: covered call strategy

An investor has 100 shares of Company A in his portfolio. Company A’s share is worth $ 30. He anticipates a stagnation or a slight drop in its price and he is ready to sell them at the price of 26 $. He decides to sell a call with the following characteristics:

• Exercise price: $ 26 and Maturity: April

• Option price: $ 4 and Quantity: 100

He collects the following amount: 4 x 100 or 400 $ (premium)

Two cases should be distinguished:

CASE 1: Company A’s share price rose above the breakeven point of $ 30.

Break-even point = exercise price + premium = 26 + 4 = 30

The buyer of the option will choose to exercise his right to buy and, as the seller of the call, the seller will have to sell the shares at the strike price.

During this operation:

the seller sold his shares for $ 26, which constitutes an acceptable loss for him.
the seller collected the amount of the premium of $ 4, which helped boost the performance of his investments (yield).

CASE 2: Company A’s share price has fallen below the breakeven point of $ 30.

The buyer of the option will choose not to exercise his right to buy and the seller will not have to sell his shares.

Thanks to this operation, the seller keeps his shares in the portfolio and he collected the amount of the premium which generated an additional return.

In the realm of Exchange-Traded Funds (ETFs), informed decision-making is paramount. In this analysis, we delve into a detailed examination of two prominent players within the Canadian ETF landscape: iShares S&P/TSX 60 Index ETF (TSX:XIC) and Vanguard FTSE Canada All Cap Index ETF (TSX:VCN). These ETFs, each holding significance, beckon investors with the appeal of diversification and potential returns.

Through a thorough evaluation of their strategies, portfolio compositions, and historical performances, we aim to uncover the nuanced differences that characterize these ETFs. Whether you’re an experienced investor refining your portfolio or a newcomer venturing into the world of ETFs, this analysis will provide you comprehensive insights.

What’s an Index ETF

There are several types of Exchange traded funds. Index ETFs are the king of the hill. In fact, the first ever ETF introduced to a North American Exchange was an index ETF. Index ETFs offer exposure to a large number of securities. Their main goal is to acquire, on your behalf, all the securities that constitute a specific index in order to achieve the same return of the tracked index minus the fees.

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Does an index ETF pay dividend?

Indeed, they certainly do. Given that Index ETFs hold all the shares of companies within the index. Any dividends paid by these companies are subsequently distributed.

iShares Core S&P/TSX Capped Composite Index ETF (XIC) – Investment objective

Are you looking to own a slice of the entire Canadian stock market? XIC might be the answer. This fund aims for long-term capital growth by mirroring the performance of the S&P®/TSX® Capped Composite Index after deducting expenses.

XIC brings another compelling reason to the table: low cost. It allows you to participate in the broader market without breaking the bank in terms of fees.

Furthermore, XIC isn’t just another fleeting investment option. It’s designed to serve as a durable, long-term core holding in your portfolio. So, if you’re seeking comprehensive market exposure, minimal costs, and a foundation for the years ahead, XIC could be the ideal contender.

Top holdings

Name	Weight %
ROYAL BANK OF CANADA	5,95
TORONTO DOMINION	5,39
CANADIAN PACIFIC KANSAS CITY LTD	3,48
ENBRIDGE INC	3,36
CANADIAN NATURAL RESOURCES LTD	3,22
CANADIAN NATIONAL RAILWAY	3,21
SHOPIFY SUBORDINATE VOTING INC CLA	3,09
BANK OF MONTREAL	2,84
BANK OF NOVA SCOTIA	2,62
BROOKFIELD CORP CLASS A	2,23

Note: total number of stocks 227

Vanguard FTSE Canada All Cap Index ETF (VCN) – Investment objective

The Vanguard FTSE Canada All Cap Index ETF is on a mission to capture the essence of the Canadian equity landscape. Its goal? To mirror, as closely as possible and before accounting for fees and expenses, the performance of a comprehensive Canadian equity index. This index doesn’t discriminate – it encompasses large, mid, and small-cap publicly traded securities, painting a holistic picture of the Canadian market’s investment returns.

Diving into the specifics, this Vanguard ETF is currently dedicated to tracking the FTSE Canada All Cap Domestic Index, or its future iterations. How does it achieve this? By primarily investing in Canadian stocks spanning a broad spectrum of market capitalizations, ranging from the giants to the emerging contenders.

So, if you’re in search of an ETF that encapsulates the entirety of the Canadian equity landscape and boasts a diversified portfolio of companies, the Vanguard FTSE Canada All Cap Index ETF might be just the investment avenue you’ve been seeking.

Top holdings

Holding Name	% Weight
Royal Bank of Canada	6.43%
Toronto-Dominion Bank	5.61%
Shopify Inc.	3.6%
Canadian Pacific Kansas City Ltd.	3.57%
Enbridge Inc.	3.48%
Canadian National Railway Co.	3.37%
Canadian Natural Resources Ltd.	3.09%
Bank of Montreal	3.09%
Bank of Nova Scotia	2.81%

Note: total number of stocks 176

Market capitalization

Captalization	VCN	XIC
Large	79.3%
Medium	18.5%
Small	2.2%
Total	100.%

Summary XIC vs VCN

Aspect	XIC	VCN
Objective	Seeks to replicate S&P®/TSX® Capped Composite Inde	Seeks to replicate FTSE Canada All Cap Domestic Index
Assets (AUM)	10.67B	5.0B
Portfolio	Large, mid, and small-cap Canadian stocks	Large, mid, and small-cap Canadian stocks
MER	0.06%	0.05%
Duration	Designed as a long-term core holding	Designed as a long-term core holding
Diversification	Wide diversification across market capitalizations	Wide diversification across market capitalizations
Holdings	227	176

XIC vs VCN performance comparison

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Which one should you choose?

Both funds share a similar investment objective, leading to minimal disparities in sector allocation, holdings, and historical performance between XIC and VCN. Given the substantial commonalities, the decision largely hinges on factors such as liquidity and fees. In this context, prioritizing liquidity and lower fees would likely position XIC as the preferred option. However, for those with a strong affinity for Vanguard, VCN remains an excellent selection. It’s important to recognize that either choice effectively fulfills the desired market exposure and can seamlessly integrate within your investment portfolio.

ZWB vs HMAX

Investment Objective

HMAX – Hamilton Canadian Financials Yield Maximizer

HMAX ETF is a new fund offered by Hamilton ETF. The fund invests in the Canadian banking sector. This fund aims to provide an attractive dividend yield (target 13%) using a covered call strategy. The strategy consists of writing call options on (50% of the portfolio) to collect premiums and maximize monthly distributions.

ZWB – BMO Covered Call Canadian Banks

The ZWB ETF aims to provide exposure to a portfolio of dividend-paying securities (Canadian Banks), while collecting premiums related to call options. The portfolio is chosen on the basis of the criteria below:

• dividend growth rate, yield, and payout ratio and liquidity.

Strategy

ETF	% portfolio	Option strategy	Dividend Yield
ZWB	50%	OTM	6-7%
HMAX	50%	ATM	13%*

Covered call strategy – HMAX vs ZWB; *13% is the target yield

ZWB, representing the BMO Covered Call Canadian Banks ETF, allocates 50% of its portfolio to an out-of-the-money (OTM) option strategy. With this approach, ZWB sells OTM call options on 50% of the stocks in its portfolio. The OTM strategy places a cap on the return of the written positions at the option strike price until the option expires. This conservative strategy is designed to provide investors with a dividend yield ranging from 6% to 7%.

On the other hand, we have HMAX, the Hamilton Canadian Financials Yield Maximizer ETF, which also utilizes a covered call strategy but with a different twist. HMAX allocates 50% of its portfolio to an at-the-money (ATM) option strategy. In this case, HMAX sells ATM call options on 50% of the stocks in its portfolio. The ATM strategy entails selling call options with a strike price close to or equal to the current stock price. This aggressive approach aims to target a more substantial dividend yield of 13%.

The table clearly outlines the distinct attributes of each ETF, including their respective portfolio allocations, option strategies, and dividend yields. While ZWB follows a more conservative OTM strategy, offering a moderate dividend yield of 6% to 7%, HMAX embraces a higher-risk ATM strategy, potentially providing investors with an attractive dividend yield of 13%.

What’s the difference between ATM, ITM and OTM options

Table

Strategy	Premium or option price	Risk	Reward
ITM (In the money call option) Stock price > Strike price	High	High	High
OTM (Out of the money call option) Stock price < Strike price	Cheap	Low	Low
ATM (At The Money call option) Stock price = Strike price	Medium	Medium	Medium

The table presents a comparison of different call option strategies based on their premium or option price, as well as the associated risk and reward profiles. These strategies include ITM (In the money call option), OTM (Out of the money call option), and ATM (At The Money call option).

ITM (In the money call option):

When the stock price is greater than the strike price, the call option is considered “in the money.” This strategy offers a higher premium or option price, which means it can be relatively more expensive to purchase. However, the increased premium comes with potentially high risk and high reward. Investors opting for ITM call options are exposed to higher risk due to the substantial investment required upfront. On the other hand, the potential for significant rewards is also high if the stock price continues to rise, making it an attractive choice for those seeking substantial gains.

OTM (Out of the money call option):

When the stock price is lower than the strike price, the call option is considered “out of the money.” The OTM strategy offers call options at a cheaper premium or option price, making it more affordable for investors. However, the risk associated with OTM call options is relatively low. This is because the chances of the option expiring worthless are higher, as the stock price needs to surpass the strike price to become profitable. Consequently, the potential reward is also lower compared to ITM call options.

ATM (At The Money call option):

ATM call options come into play when the stock price is equal to the strike price. This strategy offers a medium-level premium or option price, making it a balanced choice between the high premium of ITM and the low premium of OTM call options. Similarly, the risk and reward profiles are also medium, striking a balance between the potential for gains and the chances of option expiring worthless.

Portfolio allocation – ZWB vs HMAX

ETF	Big Can Banks	Insurance	Asset Management
HMAX	76.4%	14.9%	10%
ZWB	100%	–	–

The table provides a clear breakdown of the asset allocation within two Canadian ETFs: HMAX and ZWB. Both ETFs focus on the financial sector, offering investors exposure to various segments of the industry, including big Canadian banks, insurance companies, and asset management firms.

HMAX (Hamilton Canadian Financials Yield Maximizer ETF):

HMAX allocates its portfolio predominantly to big Canadian banks, accounting for 76.4% of its assets. This heavy concentration in the banking sector reflects the fund’s emphasis on major financial institutions in Canada. Additionally, HMAX allocates 14.9% of its assets to insurance companies, indicating a well-diversified approach within the financial sector. Moreover, HMAX dedicates 10% of its assets to asset management firms, further broadening its exposure to various financial industry segments.

ZWB (BMO Covered Call Canadian Banks ETF):

In contrast to HMAX, ZWB focuses exclusively on big Canadian banks, representing 100% of its asset allocation. This indicates a more concentrated approach within the financial sector, with a sole emphasis on Canadian bank stocks. By exclusively focusing on banks, ZWB aims to provide investors with exposure to this specific segment of the financial industry, offering opportunities for income generation through its covered call strategy.

The semiconductor industry is a critical driver of technological advancements, with applications ranging from consumer electronics to advanced computing systems. For Canadian investors looking to gain exposure to this dynamic sector, the Global X Semiconductor Index ETF (CHPS) is an excellent option. This ETF provides a way to invest in a diversified portfolio of leading semiconductor companies worldwide. Here, we explore the key aspects of CHPS, its performance, and why it might be a suitable addition to your investment portfolio.

Overview of CHPS

Fund Objective: The Global X Semiconductor Index ETF (CHPS) aims to replicate the performance of the Solactive Capped Global Semiconductor Index, net of expenses. The index includes global companies primarily involved in the production and sale of semiconductors and related equipment.

Holdings: CHPS provides exposure to a broad range of semiconductor companies from various countries, offering investors a well-rounded view of the global semiconductor market. Key holdings include industry giants like Broadcom, Intel, and Advanced Micro Devices (AMD).

Expense Ratio: The expense ratio for CHPS is 0.60%, which is competitive given the specialized and global nature of the ETF. This makes it a cost-effective way to gain international exposure to the semiconductor industry.

Why Invest in CHPS?

Global Exposure: CHPS offers exposure to a diverse range of semiconductor companies from around the world. This global perspective allows investors to benefit from growth opportunities in different markets and reduces reliance on any single country’s semiconductor industry.

Growth Potential: The semiconductor industry is at the forefront of technological innovation. Semiconductors are essential components in a wide range of products, from smartphones to electric vehicles and advanced AI systems. As these technologies continue to evolve and expand, the demand for semiconductors is expected to rise, driving growth for companies in this sector.

Diversification: Investing in CHPS provides diversification within the semiconductor sector, reducing the risk associated with investing in individual stocks. By holding a broad range of semiconductor companies, CHPS mitigates the impact of any single company’s performance on the overall investment.

Accessibility: For Canadian investors, CHPS offers a convenient and cost-effective way to gain exposure to the global semiconductor market. Instead of navigating international markets and dealing with foreign exchange issues, investors can buy shares of CHPS to achieve diversified global exposure.

Key Holdings

The Global X Semiconductor Index ETF (CHPS) includes several key players in the semiconductor industry:

Broadcom (AVGO): A leader in both wired and wireless communication technologies.
Intel Corporation (INTC): A major player in the CPU market, essential for personal computers and data centers.
Advanced Micro Devices (AMD): Known for its high-performance processors and graphics cards.

These holdings represent some of the most innovative and influential companies in the global semiconductor sector.

Conclusion

The Global X Semiconductor Index ETF (CHPS) offers investors a robust and diversified way to invest in the semiconductor industry. With its strong performance, competitive expense ratio, and exposure to leading semiconductor companies worldwide, CHPS is an excellent option for those looking to capitalize on the growth of this critical sector. As always, consider your investment goals and risk tolerance before investing.

For more detailed information and to invest in CHPS, visit the Global X ETFs official website.

X, SOXQ, and FTXL can offer a gateway to this exciting sector. Each ETF has its strengths, catering to different investor preferences and objectives. As with any investment, thorough research and consideration of your investment strategy are paramount.

Canadian investors seeking a counterpart to the Vanguard Total Stock Market ETF (VTI) often turn to the Vanguard U.S. Total Market Index ETF (VUN) for its similar investment strategy. Let’s delve deeper into these ETFs, highlighting the indexes they track, their holdings, and the implications of currency on investments (VTI Canada equivalent)

Executive summary

Here’s a concise table summarizing the key differences and similarities between VTI and VUN, tailored for Canadian investors:

Feature	VTI (Vanguard Total Stock Market ETF)	VUN (Vanguard U.S. Total Market Index ETF)
Target Market	U.S. investors	Canadian investors
Index Tracked	CRSP US Total Market Index	CRSP US Total Market Index
Market Exposure	Broad U.S. equity market	Broad U.S. equity market
Holdings	Direct holdings of over 4,000 U.S. stocks	Primarily units of VTI, providing similar exposure
Currency	Traded and valued in USD	Traded in CAD but exposed to USD assets
Currency Risk	Not applicable for U.S. investors	Exposed to CAD/USD exchange rate fluctuations
Currency Hedging	Not applicable	No currency hedging
Investor Base	Primarily U.S. investors	Designed for Canadian investors seeking U.S. market exposure
Trading Platform	U.S. exchanges	Canadian exchanges

Comparison VTI vs VUN – VTI canada equivalent

Indexes Tracked

VTI: This ETF tracks the CRSP US Total Market Index, encompassing over 4,000 stocks across every industry and size segment in the U.S. equity market. It’s a comprehensive representation of the entire U.S. stock market.

VUN: VUN tracks the CRSP US Total Market Index, mirroring VTI’s strategy but catering to Canadian investors. This allows for direct exposure to the same broad range of U.S. stocks.

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Key Features of the CRSP US Total Market Index

Broad Coverage: The index includes both large-cap and small-cap stocks, covering nearly 100% of the U.S. market capitalization. This includes stocks listed on the New York Stock Exchange (NYSE), NYSE MKT, NASDAQ, and other notable exchanges.

Diverse Representation: It represents various sectors and industries, reflecting the diversity of the U.S. economy. This includes technology, healthcare, finance, consumer goods, and many others.

Market Cap Weighted: The index is market-capitalization-weighted. This means that companies with higher market values have a more significant impact on the index’s performance.

Regular Rebalancing: CRSP regularly updates the index to reflect changes in the market, such as new listings, delistings, and corporate actions like mergers and acquisitions. This ensures the index remains an accurate barometer of the U.S. stock market.

Comparison of Holdings

While both VTI and VUN aim to replicate the performance of the CRSP US Total Market Index, there are nuances in their holdings due to their targeted investor base. VTI holds the actual stocks in the index, providing direct exposure to U.S. companies. VUN, on the other hand, primarily holds units of the U.S.-based Vanguard Total Stock Market ETF, effectively making it a “wrap” of VTI for Canadian investors. This structure ensures that VUN investors have similar exposure to the U.S. market as VTI investors, despite the cross-border investment.

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Currency Impact

An important consideration for Canadian investors in VUN is the currency impact. VUN is traded in Canadian dollars (CAD) on Canadian exchanges, but its underlying assets (U.S. stocks) are denominated in U.S. dollars (USD). This creates a currency exposure where the value of VUN can be affected by fluctuations in the CAD/USD exchange rate.

Currency Risk: When the CAD weakens against the USD, VUN’s NAV (Net Asset Value) in CAD terms could increase, and vice versa. This adds an additional layer of volatility and potential return impact unrelated to the underlying stock market performance.

Currency Hedging: Unlike VUN, some Canadian ETFs that invest in U.S. assets employ currency hedging to mitigate the impact of currency fluctuations. However, VUN does not hedge currency risk, which means investors are exposed to the currency movements between CAD and USD.

Conclusion

For Canadian investors, VUN offers a compelling way to gain exposure to the U.S. total stock market, mirroring the investment strategy of VTI. By understanding the indexes these ETFs track, the structure of their holdings, and the implications of currency fluctuations, investors can make more informed decisions. It’s crucial to consider these factors, along with your investment horizon and risk tolerance, when integrating VUN into your portfolio. As always, consider consulting with a financial advisor to tailor your investments to your financial objectives.

What’s an all-in-one ETF

XGRO (iShares Core Growth ETF Portfolio) is all-in-one ETF available on the TSX. All-in-one ETFs are a portfolio professionally managed available for investors in a form of an ETF. It has three main advantages:

easy access to a portfolio so it’s great for DIY investors who would like a handoff approach to investing;
portfolio is rebalanced automatically to maintain the desired allocation;
Good substitute to Robo-advisors such wealthsimple invest (auto-pilot), Questrade porfolios…etc. All-in-one ETF cost less than managed Robo-advisors in terms of fees.

XGRO Investment objective

The Fund seeks to provide long-term capital growth by investing primarily in one or more exchange-traded funds managed by BlackRock Canada or an affiliate that provide exposure to equity and/or fixed income securities.

In essence, when acquiring XGRO, you are acquiring of portfolio of ETFs. 80% of the portfolio is invested in equity ETFs while the remaining 20% is invested in fixed income ETFs. It’s a growth portfolio ideal for investors with long term objective and medium risk tolerance.

Price and Chart

XGRO vs VGRO vs ZGRO

There are two main all-in-one ETFs that have same portfolio breakdown (80% equity and 20% bonds): The Vanguard Growth – VGRO and the BMO Growth – ZGRO.

VGRO and XGRO are neck to neck in terms of performance. VGRO has a slight edge in a 3 years period cumulative performance.

Updated daily – XGRO vs ZGRO vs VGRO

Fees and Morningstar rating

XGRO has a 0.20% management expense ratio. This is the total charge for the fund. Even if XGRO a group of ETFs at once, client will not pay MER for each ETF, the maximum they are charged is the MER of the all-in-one ETF.

Management Fee	0.18%
Management Expense Ratio (MER)	0.20%

Morningstar rating

★★★★

Fees and AUM comparison

XGRO and ZGRO offer the lowest fees at 0.20%. Vanguard’s VGRO is a bit higher at 0.24%. Another factor that could impact your choice is liquidity. Generally speaking, the larger fund the better liquidity it offers to investors. Liquidity determines the difference between bid and ask price when selling or buying. So, it’s an important factor to consider. The largest fund among our three contenders is Vanguards ETF VGRO with over 3 Billion dollars in assets.

Ticker	AUM*	MER
XGRO	1,232	0.20
VGRO	3,229	0.24
ZGRO	130	0.20

*AUM: Asset under management in millions MER: Management expense ratio

XGRO Holdings

Name	Weight
ISHARES CORE S&P TOTAL U.S. STOCK	38.17
ISHARES S&P/TSX CAPPED COMPOSITE	20.63
ISHARES MSCI EAFE IMI INDEX	19.14
ISHS CORE CAD UNIV BND IDX ETF (CA	11.51
ISHARES CORE MSCI EMERGING MARKETS	3.89
iShares Core CAD ST Cor Bd Index	2.90
ISHARES US TREASURY BOND ETF	1.84
ISHARES BROAD USD INVESTMENT G	1.84
USD CASH	0.09
CAD CASH	0.08

XGRO, which stands for the iShares Core Growth ETF, comprises a diverse set of underlying iShares ETFs, each designed to represent distinct asset classes. These allocations provide a comprehensive investment strategy within a single ETF package.

iShares Core S&P Total U.S. Stock (ITOT)

The largest component of XGRO’s portfolio is the iShares Core S&P Total U.S. Stock (ITOT), accounting for 38.17% of its holdings. ITOT grants investors exposure to the entire spectrum of the U.S. stock market, encompassing large, mid, small, and micro-cap stocks. This component offers a broad representation of the American equities market.

iShares S&P/TSX Capped Composite (XIC)

Following closely is the iShares S&P/TSX Capped Composite (XIC), constituting 20.63% of XGRO’s assets. XIC concentrates on Canadian equities, mirroring the S&P/TSX Capped Composite Index, making it a core component for exposure to the Canadian stock market.

iShares MSCI EAFE IMI Index (XEF)

For international diversification, XGRO includes the iShares MSCI EAFE IMI Index (XEF), making up 19.14% of the portfolio. XEF is focused on developed market equities outside of North America, encompassing regions such as Europe, Asia, and Australia.

Other

The fixed-income component of XGRO’s portfolio is primarily represented by the iShares Core CAD Universal Bond Index (XBB), with an allocation of 11.51%. XBB is a Canadian bond ETF that primarily invests in investment-grade fixed-income securities. This inclusion adds stability to the overall portfolio. Incorporating emerging market exposure, XGRO includes the iShares Core MSCI Emerging Markets (IEMG) at 3.89%. IEMG offers access to emerging market equities, including stocks from diverse regions such as Asia, Latin America, and Africa. To complement its bond exposure, XGRO features the iShares Core CAD Short-Term Corporate Bond Index (XSH), accounting for 2.90% of the portfolio. XSH is a Canadian short-term corporate bond ETF, offering a shorter duration compared to XBB.

List of stocks held by XGRO through the basket ETFs it invests in:

Company Name	Allocation
Microsoft Corp	2.0%
Apple Inc	1.9%
Shopify Inc Registered	1.4%
Royal Bank of Canada	1.2%
Amazon.com Inc	1.2%
The Toronto-Dominion Bank	1.1%
Brookfield Asset Management Inc Class A	0.7%
Enbridge Inc	0.7%
Tesla Inc	0.7%
Alphabet Inc Class A	0.7%

XEQT iShares Core Equity ETF Portfolio vs XGRO iShares Core Growth ETF Portfolio

XGRO is generally considered to be less risky than XEQT due to differences in their asset allocations and investment strategies. Here are several key reasons why XGRO is often perceived as a lower-risk option:

Diversification:

XGRO typically follows a more diversified investment approach. While both XEQT and XGRO are all-in-one ETFs, XGRO typically allocates a portion of its holdings to fixed-income securities (bonds) in addition to stocks. This diversification can help cushion the portfolio against extreme market volatility. Bonds are generally less volatile than stocks and tend to provide a stabilizing effect on the overall portfolio.

Lower Equity Exposure:

As you mentioned, XGRO holds 80% of its assets in stocks, whereas XEQT holds 100% in stocks. Stocks are generally riskier and more volatile compared to bonds. Therefore, XGRO’s lower equity exposure reduces the overall risk level of the portfolio.

Risk Mitigation:

XGRO’s asset allocation is designed to provide some level of risk mitigation. During market downturns, the bonds in XGRO can act as a hedge against stock market losses. This can help preserve capital and reduce the impact of market volatility on the portfolio.

Long-Term Stability:

XGRO is often recommended for investors with a lower risk tolerance or those who are closer to their financial goals, such as retirement. Its asset mix is geared towards providing more stability and preserving capital over the long term, making it a suitable choice for conservative investors.

Rebalancing:

Both XEQT and XGRO are managed to maintain their target asset allocations. However, because XGRO has a fixed allocation to bonds, it may experience less frequent and severe fluctuations in its asset mix. This rebalancing can help control risk over time.

see below the holdings for XEQT:

Name	Weight %
ITOT – ISHARES CORE S&P TOTAL U.S. STOCK	46.87
XIC – ISHARES S&P/TSX CAPPED COMPOSITE	24.77
XEF – ISHARES MSCI EAFE IMI INDEX	23.29
IEMG – ISHARES CORE MSCI EMERGING MARKETS	4.83
CAD CASH	0.14
USD CASH	0.10

How can I buy XGRO

Clients have simply to use their banks brokerage websites or independent brokers platform (such as Questrade or Wealthsimple) to acquire the ETF. No need to contact a financial advisor, it’s a product for DIY investors.

XGRO can be held in registered accounts such as RRSP, TFSA or RESP.

Additional source of info

When it comes to investing in international markets, Canadian investors are often faced with the issue of currency risk. Currency risk refers to the fluctuation of exchange rates between currencies, which can significantly impact investment returns. In this article, we’ll examine the pros and cons Hedged vs Unhedged ETF in Canada.

History of the evolution of the Canadian Dollar against the US Dollar

Hedged funds

Currency-hedged funds use hedging strategies to mitigate the impact of currency risk on returns. The idea is to protect investors against adverse exchange rate fluctuations by using futures, options or other financial derivative instruments to offset potential losses.

The advantages and disadvantages of hedge funds

Currency risk minimization

By hedging currency risk, Canadian investors can avoid potential losses caused by exchange rate volatility. This preserves the value of their investments and avoids adverse effects on returns.

Return predictability

Hedged funds offer some stability in terms of returns as exchange rate fluctuations are smoothed out. This can be especially important for investors with short-term goals or looking for some security in their investments.

Ease of management

Hedged funds are generally professionally managed, so investors do not have to monitor hedging strategies actively. This can be advantageous for investors who prefer a more passive approach.

Additional costs

Funds hedged against currency risk often have additional costs related to the hedging strategies in place. These costs can reduce net returns to investors (higher Management Expense Ratio).

Potential loss of earnings

By protecting against adverse exchange rate movements, hedged funds can also limit potential gains when the foreign currency strengthens against the Canadian dollar. Investors may miss opportunities to benefit from foreign currency appreciation.

Funds not covered

These funds do not use currency hedging strategies. Investors who opt for unhedged funds accept currency risk and are exposed to fluctuations in exchange rates.

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The pros and cons of NON-hedged funds

Higher earning opportunities

Unhedged funds do not seek to mitigate currency risk. So they can potentially benefit from favorable fluctuations in exchange rates. Investors may realize additional gains if the foreign currency in which the investment is denominated strengthens against the Canadian dollar.

Increased risk

Fluctuations in exchange rates can significantly impact the returns of investments denominated in a foreign currency. If the foreign currency depreciates against the Canadian dollar, investors may suffer losses in value and lower returns.

Increased volatility

Unhedged funds are often more volatile due to their direct exposure to currency risk. Fluctuations in exchange rates may cause significant movements in the value of foreign assets held in the fund. Therefore, investors should be prepared to accept some volatility in their investments and have an appropriate risk tolerance.

Conclusion

This article examined the pros and cons of currency-hedged and unhedged funds for Canadian investors. Hedged funds offer minimization of currency risk, predictability of returns and ease of management through the use of professional hedging strategies. However, these funds incur additional costs and may limit potential gains in the event of foreign currency appreciation.

On the other hand, unhedged funds offer higher opportunities for gains in the event of foreign currency appreciation. Still, they expose investors to a greater risk of downside losses and increased volatility due to direct exposure. Exchange risk.

Investment Objective of FMAX

FMAX, the Hamilton U.S. Financials Yield Maximizer ETF, aims to generate income by investing in a diversified portfolio of U.S. financial services companies. It combines the potential for capital appreciation with an active covered call strategy to enhance yield and mitigate volatility, making it a compelling option for income-seeking investors. Here’s a full FMAX ETF review.

Strategic Approach to Yield and Volatility

FMAX’s approach involves writing covered call options on its holdings. This method is designed to capture premium income which can increase the fund’s yield. By writing at-the-money options, FMAX targets higher cash premiums compared to out-of-the-money options. However, the strategy is applied to only approximately 30% of the portfolio’s holdings. This allows the remaining 70% of the portfolio the opportunity to appreciate in value, striving for a balance between income and growth.

Benefits of Covered Call Strategies

Covered call strategies, like the one used by FMAX, are popular for their ability to generate income and provide a buffer against minor price declines in the underlying securities. The income from selling call options can offer a cushion during market dips, as the premium income can offset some capital losses.

Risk Considerations

Investing in FMAX involves several risks. Options strategies can limit upside potential since the sold calls cap the growth of the underlying stock at the strike price. In a surging market, this could mean missing out on significant gains. Additionally, the ETF’s focus on the financial sector means that it may be more vulnerable to industry-specific risks, including regulatory changes and economic cycles that disproportionately affect financial companies.

The Role of FMAX in a Portfolio

For investors looking for monthly income and a moderate level of risk, FMAX might be a fitting addition to a diversified portfolio. Its strategy offers a different risk-return profile than owning the stocks outright, potentially making it suitable for those with an intermediate risk tolerance.

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HMAX ETF Review: Hamilton Canadian Financials Yield Maximizer

Tax Efficiency

Investors in FMAX can benefit from its tax-efficient distribution strategy. This is particularly advantageous within an RRSP, where the 15% withholding tax on U.S. dividends does not apply. Holding FMAX in an RRSP can enhance the tax efficiency of the income generated, making it an attractive option for investors seeking to maximize their after-tax returns. This strategic placement within registered accounts can make a significant difference in the long-term growth of an investment portfolio.

No Leverage Utilized

FMAX does not use leverage, which can often amplify losses. By avoiding leverage, the ETF seeks to provide a more stable investment experience.

Accessibility and Flexibility

All Hamilton ETFs, including FMAX, are available for purchase on the Toronto Stock Exchange (TSX). They can be included in various registered accounts like RRSPs and TFSAs, which can offer additional tax benefits.

Setting Up a DRIP

Investors interested in reinvesting their dividends can set up a Dividend Reinvestment Plan (DRIP) by contacting their brokerage. This can compound returns by automatically reinvesting income into additional shares of the ETF.

FMAX Holdings

TICKER	NAME	WEIGHT
BRK/B	Berkshire Hathaway Inc	5.0%
V	Visa Inc	5.0%
JPM	JPMorgan Chase & Co	5.0%
MA	Mastercard Inc	5.0%
BAC	Bank of America Corp	5.0%
WFC	Wells Fargo & Co	5.0%
BX	Blackstone Inc	5.0%
MS	Morgan Stanley	5.0%
SPGI	S&P Global Inc	5.0%
AXP	American Express Co	5.0%
GS	Goldman Sachs Group Inc/The	5.0%
BLK	BlackRock Inc	5.0%
SCHW	Charles Schwab Corp/The	5.0%
PGR	Progressive Corp/The	5.0%
C	Citigroup Inc	5.0%
CB	Chubb Ltd	5.0%
MMC	Marsh & McLennan Cos Inc	5.0%
FI	Fiserv Inc	5.0%
CME	CME Group Inc	5.0%
ICE	Intercontinental Exchange Inc	5.0%

Final Thoughts FMAX ETF review

In conclusion, FMAX represents a nuanced investment product that combines exposure to U.S. financials with an options overlay strategy to enhance yield and manage risk. While it offers several potential benefits, including monthly income and reduced volatility, investors must also consider the associated risks and the possibility of capped upside potential. As with any investment, it’s crucial to align with your financial objectives and risk tolerance. Before making investment decisions, reviewing the latest information on the Hamilton ETFs website and consulting with a financial advisor is advised.

Executive summary – VUN vs VTI

Feature	VTI (Vanguard Total Stock Market ETF)	VUN (Vanguard U.S. Total Market Index ETF)
Target Market	U.S. investors	Canadian investors
Index Tracked	CRSP US Total Market Index	CRSP US Total Market Index
Market Exposure	Broad U.S. equity market	Broad U.S. equity market
Holdings	Direct holdings of over 4,000 U.S. stocks	Primarily units of VTI, providing similar exposure
MER	lower expense ratio, potentially leading to higher long-term returns. MER = 0.03%	higher expense ratio compared to VTI. MER = 0.17%
Currency	Traded and valued in USD	Traded in CAD but exposed to USD assets
Currency Risk	Not applicable for U.S. investors	Exposed to CAD/USD exchange rate fluctuations
Currency Hedging	Not applicable	No currency hedging
Trading Platform	U.S. exchanges	Canadian exchanges

Comparison VTI vs VUN – VTI canada equivalent

What is VUN?

VUN, the Vanguard U.S. Total Market Index ETF, offers a unique opportunity for Canadian investors. It’s a Canadian-listed ETF, specifically designed to track the performance of a broad U.S. stock market index. This makes VUN an attractive option for those looking to invest in a wide range of American companies.

One of the key features of VUN is its listing on the Toronto Stock Exchange, where it trades in Canadian dollars (CAD). This is a significant advantage for Canadian investors, as it eliminates the need for currency conversion from CAD to U.S. dollars (USD). Investing directly in CAD simplifies the investment process, saving both time and the potential costs associated with currency exchange.

For Canadian investors, VUN’s convenience is unmatched. It avoids the complexities of investing in a foreign currency and dealing with the associated exchange rate fluctuations. This ease of investment, combined with the broad market exposure, makes VUN an ideal choice for those seeking a straightforward and effective way to invest in the U.S. stock market.

What is VTI?

VTI, the Vanguard Total Stock Market ETF, stands as a popular choice for investors looking to gain comprehensive exposure to the U.S. stock market. This U.S.-listed ETF tracks the CRSP US Total Market Index, encompassing a wide array of American stocks across various market capitalizations.

A notable aspect of VTI is its listing on American exchanges, where it trades in U.S. dollars (USD). This feature is crucial for Canadian investors to consider, as it involves currency conversion from Canadian dollars (CAD) to USD. While this adds an extra step in the investment process, it also opens up opportunities to directly invest in the U.S. market, which can be particularly appealing for those looking to diversify internationally.

VUN vs. VTI: The Differences

Performance comparison VUN vs VTI

Listing Currency and Exchange:

The difference in the listing currency and exchange of VUN and VTI is a crucial factor for Canadian investors. VUN is listed in Canadian dollars (CAD) on the Toronto Stock Exchange (TSX), offering a straightforward investment process for Canadians. This eliminates the need for currency conversion, avoiding the associated costs and fluctuations in exchange rates. In contrast, VTI is listed in U.S. dollars (USD) on American exchanges. Investing in VTI requires Canadians to convert CAD to USD, incurring currency conversion fees. Additionally, the ongoing fluctuation between CAD and USD can impact the investment’s value and returns.

Tax Considerations:

The tax implications of VTI and VUN are significantly different, especially concerning RRSP accounts. VTI, being a U.S.-listed ETF, is subject to the Canada-U.S. tax treaty. This means that when VTI is held in an RRSP, it benefits from the treaty’s provisions, potentially making it more tax-efficient. The treaty reduces the withholding tax on U.S. dividends, a benefit not applicable to VUN, as it is a Canadian-listed ETF.

Expense Ratios:

VUN MER = 0.17%

VTI MER = 0.03%

VTI generally boasts a lower expense ratio compared to VUN. An expense ratio is an annual fee expressed as a percentage of the fund’s total assets and is deducted from the fund’s assets, affecting its overall return. VTI’s lower expense ratio can make a significant difference in long-term investment returns, as lower costs typically translate to higher net returns for investors.

Dividend Withholding Taxes:

When it comes to dividend withholding taxes in non-RRSP accounts, VTI and VUN differ. For Canadian investors holding VTI in non-RRSP accounts, there’s a U.S. dividend withholding tax. This tax reduces the dividend amount received from the investment. VUN, on the other hand, does not attract U.S. dividend withholding taxes in non-RRSP accounts, as it’s a Canadian-listed ETF. This can be a crucial factor for investors when deciding between the two ETFs, particularly if they plan to hold their investments in taxable accounts.

Which One Should You Choose?

The choice between VUN and VTI depends on several factors:

Currency Preference: If you prefer to trade in CAD and avoid currency conversion, VUN is suitable.
Account Type: For RRSPs, VTI might be the better choice due to tax efficiency.
Cost Considerations: Consider the impact of expense ratios and potential withholding taxes on your investment returns.

Conclusion

Both VUN and VTI offer Canadian investors great ways to invest in the U.S. stock market. Your choice should align with your investment strategy, currency preferences, and account types. As always, it’s important to do your own research and consider consulting with a financial advisor.

Remember, knowledge is power in the world of investing. Stay informed and invest wisely!

Disclaimer: This content is for informational purposes only and is not intended as investment advice.

Canadian investors have a wealth of options when it comes to building a diversified portfolio. Among the myriad of choices, VUN (Vanguard U.S. Total Market Index ETF) and XEQT (iShares Core Equity ETF Portfolio) stand out for their unique features and investment strategies. This post delves into the key differences and potential benefits of each ETF, helping investors make informed decisions based on their financial goals and risk tolerance.

Executive summary VUN vs XEQT

Feature	VUN (Vanguard U.S. Total Market Index ETF)	XEQT (iShares Core Equity ETF Portfolio)
Market Focus	U.S. Equities	Global Equities
Number of Stocks	Over 3,500	Over 9,000
Geographic Exposure	United States	Canada, U.S., Developed and Emerging Markets
Investment Strategy	Tracks CRSP US Total Market Index	Invests in iShares ETFs for global equity exposure
Equity Allocation	100% U.S. Equities	100% Global Equities
Management Expense Ratio (MER)	Low	Low
Risk Profile	Varied due to broad market exposure	Higher, due to all-equity global portfolio
Suitability	Investors bullish on the U.S. market	Investors seeking global diversification and higher risk tolerance
Growth Potential	High, with exposure to innovative U.S. companies	High, with diversified global market exposure
Portfolio Management	Simplified U.S. market investment	Simplified global equity investment through a single transaction

VUN: Diving into the U.S. Market

VUN is designed to track the performance of the CRSP US Total Market Index, encompassing large-, mid-, small-, and micro-cap equity securities in the U.S. This ETF is a solid choice for investors looking to gain broad exposure to the U.S. stock market, benefiting from the growth potential of a wide range of U.S. companies.

Key Features:

Broad Exposure: VUN offers exposure to over 3,500 U.S. stocks, providing a comprehensive snapshot of the U.S. equity market.

Low Fees: With a low management expense ratio (MER), VUN is an economical choice for cost-conscious investors.

Growth Potential: The U.S. market is known for its innovative companies and growth opportunities, making VUN an attractive option for growth-oriented investors.

XEQT: Embracing Global Diversification

XEQT takes a different approach by offering investors an all-equity portfolio that spans global markets, including Canada, the U.S., developed international markets, and emerging markets. This ETF aims to provide long-term capital growth by investing primarily in iShares ETFs, thereby offering a diversified, global equity exposure.

Key Features:

Global Diversification: XEQT provides investors with exposure to over 9,000 stocks worldwide, reducing country-specific risks and taking advantage of global growth opportunities.

All-Equity Portfolio: Targeting 100% equity, XEQT is suitable for investors with a higher risk tolerance and a long-term investment horizon.

Simplified Portfolio Management: By investing in XEQT, investors can achieve a diversified global equity portfolio through a single transaction, simplifying portfolio management.

Choosing Between VUN vs XEQT

The choice between VUN and XEQT boils down to your investment objectives, risk tolerance, and preference for market exposure.

U.S. vs. Global Exposure: If you’re bullish on the U.S. market and prefer concentrated exposure to U.S. equities, VUN might be your go-to. Conversely, if you value global diversification and want to spread your investments across various geographic regions, XEQT could be more aligned with your strategy.

Risk and Return Profile: VUN’s focus on the U.S. market might offer a different risk-return profile compared to XEQT’s global approach. Consider how each ETF fits within your overall risk tolerance and investment goals.

Investment Horizon: Both ETFs are suitable for long-term investors, but your horizon might influence your choice. XEQT’s global diversification might appeal more to those with a very long-term perspective and a belief in global economic growth.

Conclusion

Both VUN and XEQT offer unique advantages to Canadian investors, from VUN’s comprehensive U.S. market exposure to XEQT’s global diversification. When deciding between the two, consider how each aligns with your investment philosophy, risk tolerance, and long-term goals. Remember, the best choice is the one that fits seamlessly into your broader investment strategy, contributing to a well-rounded and resilient portfolio.