Launched in 2011, the Vanguard Canadian Aggregate Bond Index (VAB ETF) 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.
In the realm of financial markets, the dynamics of bonds in the face of rising interest rates are crucial to understand. While bond prices may experience declines in such scenarios, their appeal lies in the reliability of interest payments and the eventual return of capital upon maturity. Bond Exchange-Traded Funds (ETFs) offer an intriguing alternative, combining low-cost benefits with diversified exposure to the bond market. However, unlike individual bonds, ETFs lack a fixed maturity date.
Designed with long-term investors in mind, bond ETFs provide a cost-effective solution, delivering competitive yields that surpass the returns from keeping funds in idle cash. The strength of these ETFs lies in their ability to navigate various interest rate cycles, offering a dynamic approach to bond investing. Diversification is a key advantage, spreading risk across a portfolio of bonds and enhancing stability compared to holding individual bonds.
While individual bonds assure a fixed return of capital, bond ETFs present a more flexible and diversified strategy. This makes them particularly appealing to investors with extended time horizons, seeking a balance between regular income, potential capital appreciation, and risk mitigation through diversification. In essence, the choice between individual bonds and bond ETFs hinges on the investor’s goals, risk tolerance, and preference for a dynamic or fixed approach to capital deployment.
The BMO Equal Weight US Banks Index (ZBK ETF) is index fund that invests primarily in the US banking sector. It’s ideal for long term investors who are bullish on the US banking sector. Index ETFs are quite popular mainly because of their low fees and straightforward investment strategy.
The manager of the fund builds a portfolio designed to replicate, to the extent possible, the performance of the Solactive Equal Weight US Bank Index, net of expenses. The Fund invests in and holds the Constituent Securities of the Index in the same proportion as they are reflected in the Index.
Methodology used by Solactive Equal Weight US Bank Index
The index includes companies that fulfill the following criteria:
Current constituent of the Solactive US Broad Market Index.
For new index constituents there must be a minimum market capitalization of at least USD. 10 billion, for current index constituents the minimum market capitalization must be at least USD 7.5 billion.
Minimum Average Daily Value Traded of USD 10 million (past 3 months).
Must be a Commercial Banks or a Savings Institutions
The Solactive Equal Weight US Bank Index is a financial index that measures the performance of banks listed on major US stock exchanges. It is an equal-weighted index, which means that each stock in the index is given equal weighting, regardless of its market capitalization. This differs from market capitalization-weighted indices, where stocks with larger market capitalizations have a greater influence on the index’s performance.
Current market conditions (US banking sector)
The collapse of Silicon Valley Bank (SVB) in mid-March highlights the dangers of aggressive central bank interest rate hikes. SVB’s main problem was its large holding of long-duration bonds, which lost value as bond yields rose in 2022. This has little to do with the bank failures that occurred during of the 2008 financial crisis. These were mainly due to losses on mortgage-backed securities.
The Fed’s new term funding program should prevent the SVB’s problems from circulating on other banks, but the episode highlights the dangers caused by rapid monetary tightening.
In this post, we will review a popular index ETF on the TSX: the Ishares S&P TSX 60 Index ETF (XIU Stock). We will first explain what’s an index ETF. Then, we will discuss XIU’s historical performance, fees and holdings. Finally, we will compare XIU against similar ETFs.
There are several types of ETFs. Index ETFs are the king of the hill. The first-ever ETF introduced to a North American Exchange was an index ETF. Index ETFs offer exposure to many securities and sometimes to a whole stock exchange at a meager cost. Their main goal is to acquire, on your behalf, all the securities that constitute a specific index to achieve the same return of the tracked index minus the fees.
Advantage of Index ETFs
One significant advantage of owning an index ETF is low fees. The manager is simply replicating the index’s performance either by acquiring directly or indirectly (using derivatives) the constituents of the index. There is no additional effort involved in the selection process, thus no need to generously compensate the portfolio manager.
Does an index ETF pay dividend?
Yes they do. Since Index ETFs holds all shares of companies part of the index, if these companies pay dividends then a dividend will be distributed. See below the performance table, the dividend yield is included.
Index definition
S&P/TSX Capped Composite Index (Index)
includes over 200 top-ranked Canadian stocks, representing approximately 95% of the Canadian equity market. Constituent securities must pass minimum float-adjusted and liquidity screens to qualify and maintain membership in the Index. Index weights are capped at 10% of the Index’s float-adjusted market capitalization and are reviewed quarterly.
An index constituted of the 60 largest companies in the Toronto Stock Exchange
XIU Stock Investment objective
iShares S&P/TSX 60 Index ETF as its’ name implies, it’s a fund that is constituted with the 60 largest companies that are members of the TSX. It’s the most popular ETF in Canada with 10 Billion dollars in Assets. This ETF is representative of the Canadian economy which is dominated by the Energy and Financial sector as you can see below n the sector allocation table.
The number of holdings for the ETF is 60. It has the highest MER in the list but this did not really impact its long term performance in comparison with the other funds.
XIU Stock historical performance
Updated daily – XIU Stock
XIU Stock 52 weeks high and low
How to pick the Best ETF that fits your need?
Diversification
The purpose of diversification is to minimize risk. XIC stock is the most diversified index ETFs with over 200 holdings. Next comes XIU with 60 holdings.
Taxation
Both XIC and XIU distribute taxable Canadian dividends. There is no difference in terms of tax impact.
If you are looking for an ETF that tracks the S&P60 index with no dividend distribution, then take a look at HXT. The latter is structured so that all income distributions are deferred. No dividend distribution means no tax.
Liquidity
There are two aspects to consider:
liquidity of holdings: XIU comes on top as its holdings are made up of the 60 largest Canadian companies listed on the Toronto Stock Exchange; the liquidity of the ETF (average difference between the price ‘Bid’ and ‘Ask’ or what is commonly called the ‘spread’): Both XIU and XIC offer great liquidity.
XIU Holdings
Name
Weight (%)
ROYAL BANK OF CANADA
7.76
TORONTO DOMINION
6.24
ENBRIDGE INC
4.51
CANADIAN PACIFIC RAILWAY LTD
4.24
CANADIAN NATIONAL RAILWAY
4.18
BANK OF MONTREAL
3.63
BANK OF NOVA SCOTIA
3.46
CANADIAN NATURAL RESOURCES LTD
3.45
SHOPIFY SUBORDINATE VOTING INC CLA
3.26
BROOKFIELD CORP CLASS A
2.59
Please consult issuers’ website for up-to-date data
Please consult issuers’ website for up-to-date data
How can I buy an index ETF?
It’s the same process as buying a stock. You need simply to access the online website of your broker and place the order using the ticker/symbol of the ETF
Who are the main issuers of ETFs in Canada?
BMO Asset Management
Claymore Investments
BlackRock Inc (iShares)
Horizons ETFs Management
Vanguard Investments Canada Inc.
Why should I consider buying an index ETF?
The quick answer is diversification. Assume you have 5,000 $, you can’t buy a lot of stocks with that amount (may be 4 or 5). Also, you will incur fees to trade them. Your portfolio will be certainly too dependent on a performance of 1, 2 …or even 5 sectors that your stocks are in. If you buy with that 5,000 $ an ETF that tracks let’s say the TSX/S&P 60, it basically means you just bought share in 60 of the largest companies that are trading in the stock exchange in Canada. It’s clearly a powerful tool to diversify your portfolio with a small amount of money.
Video XIC vs XIU
In this post, we will review a popular index ETF on the TSX: the Ishares Core S&P TSX Capped Composite (XIC Stock). We will first explain what’s an index ETF. Then, we will discuss XIC’s historical performance, fees and holdings. Finally, we will compare XIC against similar ETFs.
There are several types of ETFs. Index ETFs are the king of the hill. The first-ever ETF introduced to a North American Exchange was an index ETF. Index ETFs offer exposure to many securities and sometimes to a whole stock exchange at a meager cost. Their main goal is to acquire, on your behalf, all the securities that constitute a specific index to achieve the same return of the tracked index minus the fees.
Advantage of Index ETFs
One significant advantage of owning an index ETF is low fees. The manager is simply replicating the index’s performance either by acquiring directly or indirectly (using derivatives) the constituents of the index. There is no additional effort involved in the selection process, thus no need to generously compensate the portfolio manager.
Does an index ETF pay dividend?
Yes they do. Since Index ETFs holds all shares of companies part of the index, if these companies pay dividends then a dividend will be distributed. See below the performance table, the dividend yield is included.
Index definition
S&P/TSX Capped Composite Index (Index)
includes over 200 top-ranked Canadian stocks, representing approximately 95% of the Canadian equity market. Constituent securities must pass minimum float-adjusted and liquidity screens to qualify and maintain membership in the Index. Index weights are capped at 10% of the Index’s float-adjusted market capitalization and are reviewed quarterly.
An index constituted of the 60 largest companies in the Toronto Stock Exchange
XIC Stock Investment objective
Seeks long-term capital growth by replicating the performance of the S&P®/TSX® Capped Composite Index, net of expenses. XIC invests in 219 Canadian companies. XIC has a very low MER 0.06% in comparison to XIU at 0.18%.
The Ishares Core S&P TSX Capped Composite ETF is dominated by Energy and Financial companies.
Please consult issuers’ website for up-to-date data
How to pick the Best ETF that fits your need?
Diversification
The purpose of diversification is to minimize risk. XIC stock is the most diversified index ETFs with over 200 holdings. Next comes XIU with 60 holdings.
Taxation
Both XIC and XIU distribute taxable Canadian dividends. There is no difference in terms of tax impact.
If you are looking for an ETF that tracks the S&P60 index with no dividend distribution, then take a look at HXT. The latter is structured so that all income distributions are deferred. No dividend distribution means no tax.
Liquidity
There are two aspects to consider:
liquidity of holdings: XIU comes on top as its holdings are made up of the 60 largest Canadian companies listed on the Toronto Stock Exchange; the liquidity of the ETF (average difference between the price ‘Bid’ and ‘Ask’ or what is commonly called the ‘spread’): Both XIU and XIC offer great liquidity.
How can I buy an index ETF?
It’s the same process as buying a stock. You need simply to access the online website of your broker and place the order using the ticker/symbol of the ETF
Who are the main issues of ETFs in Canada?
BMO Asset Management
Claymore Investments
BlackRock Inc (iShares)
Horizons ETFs Management
Vanguard Investments Canada Inc.
Why should I consider buying an index ETF?
The quick answer is diversification. Assume you have 5,000 $, you can’t buy a lot of stocks with that amount (may be 4 or 5). Also, you will incur fees to trade them. Your portfolio will be certainly too dependent on a performance of 1, 2 …or even 5 sectors that your stocks are in. If you buy with that 5,000 $ an ETF that tracks let’s say the TSX/S&P 60, it basically means you just bought share in 60 of the largest companies that are trading in the stock exchange in Canada. It’s clearly a powerful tool to diversify your portfolio with a small amount of money.
In today’s ever-evolving financial landscape, investors are constantly seeking opportunities to maximize returns while managing risk. One investment vehicle that has gained popularity and attention in recent years is the Covered Call Exchange-Traded Fund (ETF). These innovative investment instruments have garnered interest for their unique approach to generating income and managing market volatility. In this comprehensive overview, we delve into the world of Covered Call ETFs, exploring what they are, how they work, their advantages, risks, and considerations for investors.
Understanding Covered Call ETFs
What Is a Covered Call?
A covered call is an options trading strategy where an investor who owns a specific underlying asset, such as stocks, sells a call option on that asset. In essence, the investor is “covering” their position with the call option. By selling this call option, the investor receives a premium, which provides additional income. In return, the investor agrees to potentially sell the underlying asset at a predetermined strike price if the call option is exercised by the buyer.
What Are Covered Call ETFs?
Covered Call ETFs employ this options trading strategy on a portfolio of underlying assets, such as stocks or an index. These ETFs aim to generate income for investors by selling call options while holding the underlying assets. The premiums collected from selling these options contribute to the fund’s income distribution, which is typically distributed to investors on a regular basis, such as monthly or quarterly.
How Covered Call ETFs Work
To grasp the mechanics of Covered Call ETFs, let’s break down the process step by step:
Portfolio Selection: The ETF manager selects a basket of underlying assets that the ETF will hold. This portfolio can consist of individual stocks or an index, depending on the fund’s investment objective.
Option Writing: The ETF manager writes (sells) call options on the underlying assets held in the portfolio. These options have specific strike prices and expiration dates.
Premium Collection: By selling these call options, the ETF collects premiums from option buyers. These premiums add to the fund’s income.
Income Distribution: The income generated from selling call options is typically distributed to investors in the form of dividends or distributions. This income can provide investors with a regular source of cash flow.
Risk Management: The covered call strategy helps manage risk by partially offsetting potential losses in the underlying assets. If the market price of the asset drops, the premium received from selling the call option provides a cushion.
Exercising Options: If the call options are exercised by the buyers (i.e., they choose to buy the underlying asset at the strike price), the ETF may need to sell the asset at the predetermined strike price.
Advantages of Covered Call ETFs
Income Generation: One of the primary advantages of Covered Call ETFs is their ability to provide a consistent stream of income. This can be particularly appealing to income-oriented investors seeking regular cash flow from their investments.
Risk Mitigation: The covered call strategy offers a degree of downside protection. The income generated from selling call options can help offset potential losses in the underlying assets, providing a safety net during market downturns.
Enhanced Total Return: By combining income generation with the potential for capital appreciation from the underlying assets, Covered Call ETFs aim to deliver an enhanced total return compared to traditional ETFs.
Diversification: Covered Call ETFs typically hold a diversified portfolio of assets, reducing the risk associated with individual stock holdings. This diversification can enhance risk-adjusted returns.
Transparency: Like traditional ETFs, Covered Call ETFs offer transparency regarding their holdings and strategy, allowing investors to make informed decisions.
Risks and Considerations
While Covered Call ETFs offer several advantages, they are not without their risks and considerations:
Cap on Upside: The primary trade-off of the covered call strategy is that it limits the potential for substantial capital appreciation. If the market experiences a significant rally, investors may miss out on some of the gains.
Option Exercise: If the call options are exercised, the ETF may be required to sell the underlying assets at the strike price, potentially missing out on further upside if the assets continue to appreciate.
Income Variability: The amount of income generated by Covered Call ETFs can fluctuate depending on market conditions and the premiums received from selling options. Income is not guaranteed and may vary from one period to another.
Costs: Investors should be mindful of management fees and expenses associated with ETFs. These costs can impact overall returns.
Interest Rate Risk: Covered Call ETFs may be sensitive to changes in interest rates, which can affect the cost of option premiums and the attractiveness of the strategy.
How had Covered call ETF’s performed historically?
In historical contexts characterized by bear markets, range-bound markets, and moderate bull markets, a covered call strategy has typically demonstrated the ability to outperform its underlying securities. However, during robust bull markets, when the underlying securities experience frequent rises beyond their strike prices, covered call strategies have historically exhibited slower growth. Nevertheless, even in these bullish phases, investors typically realize moderate capital appreciation alongside the accrual of dividends and call premiums.
HMAX -Hamilton Canadian Financials Yield Maximizer
Conclusion
Covered Call ETFs offer a unique approach to income generation and risk management in the world of investments. These funds can be valuable tools for income-oriented investors seeking regular cash flow while still participating in the equity market.
However, it’s crucial for investors to carefully consider their objectives, risk tolerance, and investment horizon when evaluating Covered Call ETFs. These funds have distinct characteristics and trade-offs that may or may not align with an individual’s financial goals.
As with any investment, due diligence is essential. Understanding the fund’s strategy, reviewing its historical performance, and assessing its fees are all critical steps in making an informed investment decision. Moreover, consulting with a financial advisor can provide valuable guidance tailored to your specific circumstances.
In a world where generating income and managing risk are paramount, Covered Call ETFs have carved out a unique niche. For those who value both income and risk management, these ETFs may offer an intriguing solution to consider within a diversified investment portfolio.
Intro
DXG ETF is a 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. Around 70% of the funds holdings are invested in US companies.
Should you buy DXG
Aspect
Details
Advantages
Diversification Strategy
Combination of index and actively managed ETFs for portfolio risk mitigation.
Market Exposure
Provides exposure to both US and international markets.
Volatility
Low Beta (0.84) indicates lower volatility compared to the overall market.
Sector Diversification
Offers a well-rounded investment approach.
Disadvantages
Tax Implications
Withholding taxes due to international market investments.
Alternative Options
Index ETFs may be more cost-effective for exclusive US market exposure (lower MER).
Dividend Distributions
Lacks monthly or quarterly distributions; dividends are either reinvested or paid annually.
Considering the merits of purchasing DXG, several advantages and disadvantages warrant attention. On the positive side, the combination of index and actively managed ETFs presents a compelling strategy for diversification, effectively mitigating portfolio risk. DXG emerges as an attractive choice for investors seeking exposure to both US and international markets simultaneously, underscored by its 5-star rating on Morningstar. Notably, the fund has outperformed both peers in its category and the MSCI world index, showcasing its competitive edge. With a commendably low Beta of 0.84, DXG exhibits lower volatility compared to the overall market, enhancing its appeal. Additionally, the fund boasts sector diversification, contributing to a well-rounded investment approach.
However, potential downsides include the taxation implications of investing in international markets, leading to withholding taxes. For those seeking exclusive exposure to the US market, alternative options such as index ETFs may be more cost-effective due to lower Management Expense Ratio (MER). Moreover, DXG lacks monthly or quarterly dividend distributions, with dividends either reinvested or paid annually, a factor investors should consider based on their income preferences.
Are you looking to amplify your investment returns? 2x and 3x Leveraged Exchange-Traded Funds (ETFs) might be your ticket to potentially higher gains. This article delves into the mechanics, benefits, risks, and strategies associated with these powerful investment tools, guiding both US and Canadian investors through the complex world of leveraged ETFs.
What Are 2x and 3x Leveraged ETFs?
Leveraged ETFs are investment vehicles that use financial derivatives and debt to magnify the returns of an underlying index. A 2x leveraged ETF aims to double the daily performance of its index, while a 3x leveraged ETF strives to triple it. These ETFs reset daily, targeting short-term traders who wish to capitalize on daily market movements.
How Do Leveraged ETFs Work?
Using derivatives like futures, options, and swap agreements, leveraged ETFs amplify the daily return of an index. If the index rises by 1%, a 2x ETF aims to rise by 2%, and a 3x ETF by 3%. It’s crucial to note that this amplification applies daily, leading to potential compounding effects when held for more than one day.
The Appeal of Leveraged ETFs
Leveraged and inverse ETFs offer the potential for enhanced returns, attracting investors looking for significant gains in a short period. These ETFs use financial derivatives and debt to amplify the returns of an underlying index. While the promise of increased returns is alluring, it’s crucial to understand that these products are typically best suited for short-term strategies. They are particularly suited for traders who monitor daily market movements closely and have a solid grasp of the risks involved.
Market adaptability is another key advantage. Whether the market sentiment is bullish or bearish, leveraged and inverse ETFs provide tools that can adapt to various investment strategies. For bullish markets, leveraged ETFs aim to deliver multiples of the daily performance of the index they track. Conversely, in bearish markets, inverse ETFs seek to profit from a decline in the value of an underlying index.
However, it’s crucial for investors, especially those in the Canadian market, to approach these ETFs with caution. The risks associated with these products are significantly higher due to their complex nature and the potential for rapid losses. They are not typically recommended for long-term investment strategies due to their volatility and the impact of daily market fluctuations on their performance. Understanding these aspects is vital for anyone considering leveraged or inverse ETFs as part of their investment portfolio. As always, conducting thorough research and possibly consulting a financial professional are advisable steps before investing in these high-risk products.
Risks and Considerations
Volatility and the compounding effect are critical aspects to understand when considering leveraged ETFs. These funds aim to provide amplified returns of an underlying index, but this same mechanism greatly increases risk, especially in volatile markets. Volatility can significantly affect the performance of these ETFs due to the compounding effect. This means that daily returns are reinvested, and thus, gains or losses are magnified over time. In stable market conditions, this can lead to substantial growth, but during turbulent times, it can result in severe and rapid losses.
The daily reset feature is another crucial factor. Leveraged ETFs reset their leverage daily, meaning they aim to deliver the multiple of the index’s daily returns, not its long-term performance. This mechanism can cause the ETF’s performance to deviate substantially from the expected long-term returns of the underlying index, especially in volatile markets. This makes them unsuitable for long-term investments.
Lastly, higher fees are a notable downside. Leveraged ETFs often incur higher expense ratios compared to traditional ETFs. These fees can eat into potential returns, especially over longer periods. The combination of compounding effects, daily reset, and higher fees makes leveraged ETFs complex financial instruments that require a thorough understanding and cautious approach, particularly for investors in the Canadian market looking to manage risks effectively.
Strategies for Using 2x and 3x Leveraged ETFs
Leveraged ETFs are particularly designed for short-term trading due to their daily reset mechanism. They are adept at capitalizing on daily market movements, making them an attractive tool for traders who are closely monitoring market trends and looking to make quick, short-term gains. However, due to their complex structure and the risks associated with leverage, they require a deep understanding of market dynamics and timing.
These ETFs can also serve as hedging instruments. Investors may use them to protect against losses in other parts of their portfolio or to profit from market downturns. For instance, an inverse ETF might be used to hedge against market declines, effectively allowing investors to seek positive returns when their other investments are losing value. This can be a strategic way to manage risk, especially during times of market uncertainty.
Despite these potential advantages, it’s crucial to limit exposure to leveraged ETFs. Their high-risk nature, due to leverage and daily resetting, makes them unsuitable as a significant portion of a long-term investment portfolio. Wise investors often use them sparingly, as part of a diversified strategy, to manage and mitigate overall risk. This cautious approach helps in safeguarding the portfolio against the unpredictable swings often associated with these high-stake instruments. For Canadian investors, considering the proportion of investment in leveraged ETFs is crucial in maintaining a balanced and risk-mitigated portfolio.
Investing in Leveraged ETFs: A Guide
Before investing, consider the following:
Understand the Product: Ensure you fully grasp how leveraged ETFs work, including their daily reset and compounding effects.
Assess Risk Tolerance: They are suitable for investors comfortable with high risk and capable of closely monitoring their investments.
Consider Investment Horizon: Align your investment with your short-term market views and investment goals.
Seek Professional Advice: Especially if you’re new to leveraged ETFs, consulting with a financial professional can be invaluable.
Popular leveraged ETFs in US and Canada
When looking into leveraged ETFs, it’s important to consider offerings from various markets. In Canada and the United States, several providers offer 2x and 3x leveraged ETFs. Here are some examples from both countries:
United States
Direxion Daily S&P 500 Bull 3X Shares (SPXL): Aims to provide 3x the daily performance of the S&P 500 Index.
ProShares UltraPro QQQ (TQQQ): Seeks to deliver 3x the daily results of the NASDAQ-100 Index.
Direxion Daily Financial Bull 3X Shares (FAS): Targets 3x the daily performance of the Russell 1000 Financial Services Index.
ProShares Ultra S&P500 (SSO): Seeks to provide 2x the daily performance of the S&P 500.
Canada
Horizons BetaPro S&P/TSX 60 Bull Plus ETF (HXU): Aims to deliver 2x the daily performance of the S&P/TSX 60 Index.
Horizons BetaPro NASDAQ-100 Bull Plus ETF (HQU): Seeks to provide 2x the daily performance of the NASDAQ-100 Index.
BetaPro S&P 500 VIX Short-Term Futures™ 2x Daily Bull ETF (HVU): Offers 2x the daily performance of the S&P 500 VIX Short-Term Futures Index.
Horizons BetaPro S&P/TSX Capped Financials Bull Plus ETF (HFU): Targets 2x the daily performance of the S&P/TSX Capped Financials Index.
Conclusion
2x and 3x leveraged ETFs offer an exciting, albeit risky, opportunity for investors looking to amplify their returns on short-term market movements. They can significantly enhance gains but also come with the potential for amplified losses, especially in volatile markets. Understanding these instruments’ intricacies, their proper use cases, and your own risk tolerance is crucial before considering them as part of your investment strategy. Whether you’re in the US or Canada, these powerful tools require a combination of knowledge, vigilance, and strategic planning to navigate effectively. Remember, with great power comes great responsibility — handle with care and consideration.
I
In today’s investment landscape, All-in-One ETFs have become a staple for investors seeking diversified portfolios with a single purchase. Among these, iShares Core Equity – XEQT and Vanguard All-Equity – VEQT stand out as popular choices. In this post, we’ll dive deep into a comparative analysis of these two prominent ETFs: iShares Core Equity – XEQT and Vanguard All-Equity – VEQT. We’ll explore their historical performance, management fees, and asset allocation to help you understand how they fit into a long-term investment strategy.
All-in-One ETFs, also known as “wrapper” or “multi-asset” ETFs, are designed to offer a complete portfolio in a single ETF. They invest in a collection of other ETFs, providing exposure to a wide range of asset classes, including stocks and bonds across various geographic regions and sectors. This approach simplifies portfolio construction and management for investors, offering a diversified investment with just one trading decision.
XEQT vs VEQT Full comparison
Portfolio of holdings
VEQT (Vanguard All-Equity ETF Portfolio): VEQT diversifies its holdings across four Vanguard Canada ETFs. It’s exclusively invested in Canadian dollar-denominated ETFs, providing a blend of U.S., Canadian, and other global equities.
Vanguard FTSE Developed All Cap ex North America Index ETF (VIU)
18.91%
Vanguard FTSE Emerging Markets All Cap Index ETF (VEE)
7.12%
XEQT (iShares Core Equity ETF Portfolio): XEQT holds a selection of iShares ETFs, including both Canadian and U.S. dollar-denominated funds. The ETF primarily targets U.S., developed international, and emerging markets.
iShares ETFs
Proportion
iShares Core S&P Total U.S. Stock Market ETF (ITOT)
In terms of currency denomination, VEQT exclusively invests in Canadian-denominated ETFs. This approach offers a streamlined currency experience, reducing the currency risk associated with foreign exchange fluctuations for Canadian investors. On the other hand, XEQT includes U.S. dollar-denominated ETFs such as ITOT. This aspect of XEQT allows for broader currency exposure, which might appeal to investors looking to benefit from the diversification and potential gains from U.S. currency movements.
Market Exposure
Regarding market exposure, VEQT and XEQT differ in their geographic emphasis. VEQT tends to overweight Canadian equities and emerging markets. This focus might appeal to investors who are looking for more exposure to the Canadian market and growth potential in emerging economies. Conversely, XEQT leans more heavily towards developed markets outside of Canada. This allocation strategy provides a different balance in geographical exposure, potentially attracting investors who wish to increase their investment in more stable, developed international markets.
Indexing Strategy
Finally, the indexing strategy between VEQT and XEQT shows distinct approaches. VEQT is aligned with FTSE indices for its international holdings, and the Vanguard U.S. Total Market Index ETF (VUN) uses the CRSP Total U.S. Market Index. This strategy might affect the specific stocks and sectors included in the ETF. In contrast, XEQT employs a combination of S&P and MSCI indices for its underlying holdings. This diverse indexing approach can lead to slight variations in stock selection and regional weighting compared to VEQT. These differences in indexing strategies can be a significant consideration for investors focused on specific index performance or sector allocation.
Methodology
VEQT and XEQT, two ETFs, differ mainly in their criteria for portfolio allocation and management. VEQT exhibits a moderate home-country bias by allocating 30% to Canadian equities, aiming to reduce volatility, improve tax efficiency, and lower currency risk for Canadian investors. The remaining 70% of VEQT follows world market cap weights, adjusting as the global market composition changes. In contrast, XEQT allocates fixed weights, with 25% in Canada, 45% in the U.S., 25% in developed, and 5% in emerging markets. Both ETFs allow some discretion in rebalancing, but if significant market changes occur, both VEQT and XEQT are likely to adjust their allocations accordingly.
XEQT vs VEQT – Historical performance
XEQT vs VEQT – Allocation and MER
%
MER
Equity
Bonds
VEQT
0.24
100%
0%
XEQT
0.20
100%
0%
MER (Management Expense Ratio) and allocation comparison
XEQT has a lower MER. The difference is not that significant though. Both ETFs are all equity ETFs with 100% allocation.
XEQT vs VEQT – Price, AUM and Dividend yield
%
Div Yld
VEQT
1.23
XEQT
1.53
Dividend yield
XEQT and VEQT have the same number of holdings and both offer similar dividend yield and liquidity.
Geographic allocation comparison
XEQT
Fund
United States
43.79
Canada
24.00
Japan
5.88
United Kingdom
3.75
France
2.75
Switzerland
2.53
Australia
2.08
Germany
2.02
China
1.72
Netherlands
1.20
VEQT
Fund
United States of America
42.5%
Canada
30.2%
Japan
4.5%
United Kingdom
3.1%
China
2.5%
XEQT and VEQT are both globally diversified ETFs offered by Vanguard Canada, but they have some differences in their geographic allocation.
XEQT has a more diversified allocation among countries with its top 3 allocations being United States (43.79%), Canada (24.00%), and Japan (5.88%). XEQT also has exposure to a broad range of countries, including France, Switzerland, Australia, Germany, and the Netherlands, which are not included in VEQT’s top allocations.
VEQT, on the other hand, has a higher allocation to Canada (30.2%) and the United States (42.5%), and has smaller allocations to Japan (4.5%) and the United Kingdom (3.1%). Additionally, VEQT includes exposure to China (2.5%), which is not included in XEQT’s top allocations.
Overall, both ETFs provide broad exposure to global markets, but their geographic allocations differ slightly. Investors may choose to invest in one or the other based on their personal preferences, risk tolerance, and investment goals.
VEQT Vanguard All-Equity invests in four different ETFs managed by Vanguard. These ETFs are highly diversified and aim to capture the whole US and Canadian Market. The indexes used by Vanguard seem to offer a better coverage than those used iShares.
If we take a look at the Canadian market, Vanguard is using the FTSE Canada All Cap Index, whereas iShares is relying on the S&P/TSX Capped Composite. I personally prefer the FTSE Canada All Cap Index; I don’t see the advantage of using a capped index.
Vanguard’s VEQT invests more in emerging markets than XEQT iShares Core Equity (7.3% vs 4.6%). This further confirm Vanguard’s VEQT offers more diversification.
Considering all the above, I personally would opt for VEQT!
Additional sources of info
In this article, we’ll delve into 15 top monthly dividend stocks in Canada, renowned as “Dividend Aristocrats.” These are stalwarts of the TSX, offering consistent monthly dividends to shareholders, making them ideal for generating steady passive income. You’ll notice a significant presence of REITs (Real Estate Investment Trusts) in this list, reflecting their popularity in the monthly dividend space. For each entity, we will detail crucial information like dividend yield, payout ratio, and historical performance.
The “Canadian Dividend Aristocrats” are part of an esteemed index managed by Standard and Poors, known as the S&P Canadian Dividend Aristocrats. To qualify, companies must have increased their dividends for at least five consecutive years. For those interested in exploring the entire roster of these prestigious stocks, we’ll direct you to the comprehensive list of Canadian Dividend Aristocrats.
If you are asking yourself, what is the typical profile of a dividend aristocrat stock? I have listed some common characteristics below:
Dividend aristocrats tend to dominate their industry
• The vast majority are companies that are well established in their sector. They manage to generate significant profits thanks to their comfortable position against the competition. They also sometimes operate in regulated markets such as electric utilities with almost no competition;
Safe heaven during turbulent times
• “Dividend aristocrats” are sometimes considered by the financial market as safe havens in the event of a market correction or decline. Indeed, dividend aristocrats are generally less volatile than the market, and there are less targeted by speculators;
Strong financial statements
• “Dividend aristocrats” will tend to have a better financial situation in terms of liquidity than the rest of the market. Their levels of liquidity or debt are generally better than the rest of the market;
Limited growth but there are exceptions
• In general, dividend aristocrats are mature businesses. That is, the growth potential is quite limited. However, some companies can pay dividends and invest in their growth. Usually, the dividend payout ratio is a good indicator. If the rate is low, it means the business is saving some money to grow. Business with high dividend pay out ratio have no financial resources left to grow.
The dividend payout ratio is the amount of dividend distributed by a company divided by the total earnings. For example, a company makes a profit of $ 100 and pays $ 40 in dividends. Its payout ratio is 40%.
If the ratio is high, the company pays almost all of its profits in dividends. There will be little money left in the coffers to innovate or expand to new markets;
It is preferable to invest in a company where the dividend payout ratio is low or medium. The reasoning is that these companies will have money set aside to invest in new projects and thus create growth;
Another variation of payout ratio (Trailing div / Earnings) is the payout ratio to cash (Div / Free cash flows). Earnings can be easily manipulated, so analysts use the payout ratio to cash to assess the safety of dividends better. The website ‘Marketbeat‘ provides the payout ratio to cash for Canadian stocks.
Focus on total return
When one wishes to invest in a dividend-paying stock, it is essential to pay attention to its performance and growth potential. The most common mistake is to invest in stocks with high dividend yields. This strategy is risky. Here’s why :
• A stock can pay a high dividend yield, but is it sustainable? Some companies have a payout ratio that is close to and even exceeds 100%. They manage to post desirable dividend yields, but if we look at the growth prospects, it’s almost nil;
• Investors sometimes shun companies for lack of growth potential or actual risk of lower revenues in the future. These companies experience a drop in the price of their shares, and this causes the dividend yield to become abnormally high. Sooner or later, these businesses will have to cut their dividend.
Monthly dividend stocks Canada (Aristocrats)
The most important measure to evaluate dividend aristocrats’ stocks is without a doubt the dividend streak. It’s simply the number of years, in a row, that the company has increased its dividends.
Note: SGR-UN, AQN, KEY, ONEX and GR.UN were removed from the list of Canadian Dividend Aristocrats as of April 2023.
Dividend yield, Pay out ratio and P/E ratio
Monthly dividend stocks Canada – updated daily
The yield is a measure of the amount of dividends paid out by a company relative to its stock price. A higher dividend yield may be attractive to investors seeking income, but it may also indicate that the company is paying out a large proportion of its earnings as dividends, which could limit its ability to reinvest in the business.
Payout ratio measures the percentage of a company’s earnings that are paid out as dividends. A high payout ratio may indicate that the company is prioritizing dividends over reinvestment, which could limit growth prospects.
P/E ratio is a valuation ratio that measures the price of a stock relative to its earnings per share. A high P/E ratio may indicate that investors have high expectations for future growth, while a low P/E ratio may indicate that investors have lower expectations or concerns about the company’s future prospects.
Monthly dividend stocks Canada
SIS – Savaria Corp
A Global Leader in Accessibility Solutions
Savaria Corporation, with a market capitalization of $1 billion, is a global leader in the accessibility industry. The company specializes in designing, manufacturing, distributing, and installing a wide array of accessibility equipment, catering to the needs of elderly and physically challenged individuals worldwide.
Savaria’s product portfolio is extensive, including solutions such as stairlifts for both straight and curved stairs, vertical and inclined wheelchair lifts, as well as elevators designed for residential and commercial use. This comprehensive range of offerings ensures that Savaria can meet the diverse needs of its customers.
Expanding Horizons
Beyond accessibility equipment, Savaria extends its product line to encompass pressure management products for the medical market, medical beds tailored for long-term care facilities, and specialized medical equipment for the safe handling of patients, such as ceiling lifts and slings. The company also engages in vehicle conversions and adaptations for personal and commercial purposes, further diversifying its reach.
Investor Appeal as a Dividend Aristocrat
Savaria stands out as a Canadian Dividend Aristocrat, reflecting its commitment to shareholder value. With an impressive five-year dividend growth rate of 12.2%, the company offers investors an attractive monthly dividend yield of 3.5%. While the current payout ratio is relatively high at about 83% of adjusted earnings, Savaria’s potential for growth in the coming years could facilitate a reduction in this ratio, making it a more comfortable proposition.
Unlocking Value: Analyst Consensus
Market analysts have set a 12-month price target of $19.50 for Savaria stock, which represents a significant discount of 24% from its current trading price of $14.78 per share. This potential upside of nearly 32% underscores Savaria’s appeal as an investment opportunity, particularly in light of the growing demand for accessibility solutions amid an aging global population. Additionally, the company’s commitment to dividend growth adds another layer of appeal for income-focused investors. Savaria is poised to continue its leadership in the accessibility industry, offering investors a promising combination of growth potential and income generation.
GRT-UN Granite REIT
Granite REIT (GRT-UN) is a Canadian-based real estate investment trust specializing in industrial properties, including warehouses and logistics and distribution centers. A significant strength of Granite REIT is its high-quality portfolio of assets, strategically located in key markets in North America and Europe. This positioning allows it to serve a broad range of tenants, including many multinational corporations. The trust benefits from the growing demand for industrial and logistics spaces, driven by e-commerce and global trade, ensuring a stable and often growing income stream.
However, Granite faces challenges typical to the industrial real estate sector. Market fluctuations can impact the industrial sector differently than residential or commercial spaces, with shifts in global trade policies or economic downturns affecting demand. Its international presence, while a strength, also exposes it to currency risk and varying regulatory environments. Additionally, as with all real estate investments, it is sensitive to interest rate changes, which can affect financing costs. Despite these challenges, Granite’s focus on essential and high-demand real estate, along with its robust tenant base, provides a resilient and promising investment structure.
Allied is a leading owner, manager and developer of data centers and centrally located urban workspaces.
Assets
Allied Properties holds a portfolio of assets strategically located in major Canadian cities, which I consider favorable from a geographical standpoint. During the pandemic, the company managed to increase its cashflows, surpassing pre-pandemic levels, demonstrating its resilience. The majority of Allied’s portfolio consists of urban workspaces and offices, which could be of interest to investors who anticipate a faster return to office environments for businesses.
It’s important to note that unlike RioCan, which has a diversified portfolio including residential and commercial retail, Allied’s focus is primarily on office buildings and data centers. Additionally, Allied Properties has a track record of increasing its dividend for 11 consecutive years, which may be appealing to income-oriented investors.
Risks
However, there are factors to consider. The increasing adoption of hybrid work arrangements in the business world may have an impact on the real estate sector overall. Furthermore, rising costs, including financing expenses, have the potential to affect profit margins. The 2023 results, while solid, indicated the influence of rising interest expenses on the company’s financial performance. On a positive note, Allied strategically completed a significant asset sale, alleviating some pressure on its balance sheet.
In conclusion, Allied Properties offers an interesting investment opportunity with its central urban assets and strong cashflow rebound. Nevertheless, investors should remain cautious and monitor the evolving workplace trends and the potential challenges associated with rising costs in the real estate sector. Allied’s commitment to dividend growth and its focused portfolio should be considered when evaluating it as an investment option.Ass
Exchange Income Corporation (EIF) is a diversified, acquisition-oriented company focused on opportunities in aerospace, aviation, and manufacturing sectors, primarily in North America. A significant strength lies in its diversified portfolio of companies, which helps mitigate risk and allows for steady revenue streams, particularly from its aerospace and aviation services that often include long-term contracts. The company’s strategic acquisitions have historically expanded its market presence and driven growth.
However, EIF’s weaknesses include exposure to industry-specific risks. The aerospace and aviation sectors are highly susceptible to economic cycles and regulatory changes, which can impact demand for its services. Additionally, these sectors are capital-intensive, requiring continual investment in technology and equipment to remain competitive. Global economic volatility, such as fluctuating fuel prices or currency exchange rates, also poses challenges. Despite these concerns, EIF’s focus on niche markets with high barriers to entry and its strong history of dividend payments showcase its resilience and strategic planning.
First National Financial (FN)
First National Financial Corporation (FN) is one of Canada’s largest non-bank lenders, offering a wide array of residential and commercial mortgages. A significant strength of First National is its strong reputation and established position in the Canadian mortgage market, which has allowed for a stable and diverse client base. The company’s innovative approach to mortgage servicing and underwriting, along with its efficient online platform, enhances customer experience and operational efficiency.
On the downside, as a financial institution, First National is sensitive to interest rate fluctuations and regulatory changes in the housing market. Changes in mortgage rules or economic downturns can affect borrowing and lending patterns, potentially impacting revenues. Additionally, intense competition from banks and other non-bank lenders could pressure profit margins. While First National has a robust risk management framework, its focus on the Canadian real estate market does expose it to regional economic shifts and property market corrections.
Canadian Apartment Properties (CAR.UN)
Canadian Apartment Properties REIT, known as CAPREIT (CAR.UN), is a prominent Canadian real estate investment trust specializing in apartment buildings, townhouses, and land lease communities. A key strength is its diverse portfolio, offering a wide range of residential properties across Canada, which helps mitigate risks associated with regional market fluctuations. This diversification is bolstered by its consistent performance in occupancy rates and rent growth, contributing to stable revenue streams.
However, CAPREIT faces certain weaknesses. As with many in the real estate sector, it is sensitive to interest rate changes. Rising rates can increase borrowing costs, impacting profitability. Additionally, the company is subject to regulatory changes in the housing market, including rent control laws that can limit income growth. The reliance on the Canadian market also exposes it to specific economic and geographical risks. Despite these challenges, CAPREIT’s strategic portfolio and management have historically navigated market conditions effectively.
Interrent REIT (IIP.UN)
InterRent REIT (IIP.UN) is a growth-oriented real estate investment trust focused on increasing shareholder value through the acquisition and management of properties primarily within the multi-residential sector. A major strength of InterRent is its strategic growth approach, concentrating on expanding its portfolio in high-growth urban markets, which has historically led to robust income growth and capital appreciation. The company’s effective property management strategies aim to enhance the value of its assets and optimize operational efficiencies, contributing to a strong occupancy rate and stable cash flows.
However, InterRent faces typical industry-related weaknesses. Its focus on multi-residential properties means it is susceptible to market fluctuations, including changes in occupancy rates and rent controls that can limit income growth. The real estate market is also affected by broader economic factors, such as interest rate hikes, which can increase borrowing costs and affect profitability. Despite these challenges, InterRent’s commitment to portfolio quality and geographic diversification within Canada helps it maintain a resilient operational structure.
Parkland Corporation (PKI)
Parkland Corporation is a leading marketer of fuel and petroleum products. Investors have benefited from steadily rising dividends for 9 consecutive years.
One of its key strengths is its diversified business model, which includes retail fuel locations, commercial and wholesale operations, and supply arrangements, allowing for multiple revenue streams. The company’s extensive distribution network and strategic acquisition practices have historically driven growth and expanded market presence.
However, Parkland also faces certain challenges. The company operates in a highly competitive and regulated market, with fluctuations in global oil prices directly impacting costs and profitability. Its operations are capital intensive, requiring continual investment in infrastructure and compliance with environmental regulations. Additionally, as a fuel distributor, it is susceptible to shifts in consumer demand, particularly with increasing environmental concerns and the transition towards renewable energy sources. Despite these challenges, Parkland’s commitment to expanding its convenience retail offerings and growing its renewable energy segments illustrates its adaptability and focus on long-term sustainability.
CT REIT (CRT.UN)
CT REIT, a real estate investment trust, owns and manages retail properties in Canada. It has maintained a dividend streak of 9 years, delivering consistent income to investors.
CRT.UN focuses on retail properties, largely anchored by Canadian Tire, which is a significant tenant. A major strength of CT REIT is the long-term, stable lease agreements with Canadian Tire, providing a reliable income stream. The quality and location of its properties, often in prime retail spots, add to its appeal and stability. The REIT’s conservative leverage and strong affiliation with Canadian Tire offer financial stability and growth opportunities through property development and acquisitions.
However, CT REIT’s focus on retail properties, particularly with a significant tenant like Canadian Tire, presents concentration risks. Changes in the retail landscape, consumer habits, or the financial health of its primary tenant can impact its performance. The retail sector is also vulnerable to economic downturns, affecting occupancy rates and rental income. Additionally, as with many REITs, it is sensitive to interest rate fluctuations, which can affect borrowing costs and capital expenses. Despite these challenges, CT REIT’s strategic management and strong tenant relationships provide a solid foundation for navigating the retail real estate sector.
Chartwell Retirement Res (CSH.UN)
Chartwell Retirement Res operates senior living and long-term care facilities. While it has a relatively shorter dividend streak of 6 years, it has been a reliable income generator.
Chartwell is one of the largest operators in the Canadian senior living sector, focusing on retirement and long-term care facilities. A significant strength is its extensive portfolio of properties across various regions, providing a diversified revenue base. The aging population in Canada suggests a growing demand for senior living options, positioning Chartwell to capitalize on this demographic trend. The company’s focus on providing a range of services from independent living to assisted living and long-term care caters to various needs, enhancing its marketability.
However, Chartwell faces challenges inherent in the healthcare and residential care industry. Operational costs are high, including staffing, maintenance, and regulatory compliance, which can impact margins. The sector is highly regulated, and changes in government funding or regulations can affect profitability. Additionally, the sensitivity to economic downturns can impact occupancy rates and the ability of residents to afford services. Despite these potential issues, Chartwell’s established presence and focus on quality care and community living provide a solid foundation within the growing senior care market.
SmartCentres REIT (SRU.UN)
SmartCentres REIT specializes in retail real estate and operates shopping centers and other retail properties. With 7 consecutive years of dividend increases, it offers both income and growth potential.
A key strength is its strong tenant base, with Walmart as a major anchor, providing a stable and predictable income stream. The trust’s focus on value-oriented retail properties strategically located in prime areas ensures high foot traffic and tenancy demand, contributing to its overall occupancy and financial stability. SmartCentres’ ability to adapt by diversifying into mixed-use developments also illustrates its commitment to growth and resilience.
However, SmartCentres faces challenges typical of the retail real estate sector. The evolving retail landscape, driven by e-commerce and changing consumer preferences, poses risks to traditional brick-and-mortar retail spaces. The concentration in retail might limit flexibility compared to more diversified REITs. Additionally, economic downturns can impact consumer spending and retail health broadly, potentially affecting occupancy rates and rents. Despite these concerns, SmartCentres’ strategic partnership with Walmart and focus on community-centric mixed-use developments provide a strong base to navigate the changing retail environment.
Badger Infrastructure Sol (BDGI)
Badger Infrastructure Solutions provides non-destructive excavation services. While its dividend streak is 6 years, it has shown commitment to rewarding shareholders with regular payouts.
A major strength of Badger is its specialized service, which is critical in infrastructure development, maintenance, and utility work, providing a niche market with less competition. The company’s extensive fleet and geographic reach across North America offer scalability and accessibility to various markets, enhancing its customer base and operational flexibility.
However, BDGI faces certain industry-specific challenges. Its services are closely tied to the health of construction, infrastructure, and utilities sectors, making it susceptible to economic cycles and capital spending in these areas. Regulatory changes and environmental considerations can also impact operational practices and costs. Moreover, while specialized, the market for hydrovac services is competitive, and maintaining technological edge and operational efficiency is crucial. Despite these challenges, Badger’s established reputation, commitment to safety, and operational expertise position it as a key player in the excavation and infrastructure service industry.
Video – Monthly Dividend Stocks Canada
Introduction:
Wealthsimple has become a familiar name in the Canadian financial scene, offering an effortless approach to investing through its Managed Investing service. This service is ideal for a range of investors, from beginners to those with busy lifestyles. Let’s delve into Wealthsimple Managed Investing, its features, fee structure, and the various portfolio options available.
What is Wealthsimple Managed Investing?
Wealthsimple Managed Investing is a robo-advisor service automating investment management. It uses algorithms to create and maintain a diversified portfolio based on your risk tolerance and investment goals. The service is designed for a “set it and forget it” investment strategy.
Key Features of Wealthsimple Managed Investing:
Automated Portfolio Management: Ensures your portfolio is consistently rebalanced and adjusted.
Diversified Investments: Spans across a range of asset classes, including stocks and bonds.
Low Fees: Offers a competitive fee structure, enhancing long-term returns.
User-Friendly Interface: Accessible through an intuitive app and website.
Socially Responsible Options: Provides portfolios focused on socially responsible investing.
Fee Disclosure:
Wealthsimple’s investment management fees are tiered based on net deposits:
Under $99,999: 0.50% fee on AUM.
Above $100,000: Reduced fee of 0.40% on AUM.
Portfolio Types:
Classic portfolios
Wealthsimple’s Classic Portfolio stands out as a versatile investment option, catering to a wide range of investor preferences and objectives. This portfolio is characterized by its diversity and growth orientation, featuring a mix of investments with varied geographic exposures. A significant focus is placed on lower volatility stocks, which aim to provide stability. Additionally, the inclusion of riskier government bonds and gold is a strategic move, optimized to enhance performance during economic downturns.
Another notable aspect of this portfolio is its tax optimization. Wealthsimple employs an automatic selection of tax-efficient Exchange-Traded Funds (ETFs), designed to enhance returns at tax time. This feature can be particularly appealing to investors looking to maximize their after-tax returns. Moreover, the Classic Portfolio offers risk-appropriate options tailored to individual investor profiles.
These range from conservative choices, focusing on high-interest options, to more aggressive, high-growth strategies that are equity-heavy. Such versatility ensures that investors can find a fit that aligns with their risk tolerance and investment goals, making the Classic Portfolio a comprehensive choice for a broad spectrum of investors.
Socially Responsible Investing:
Socially Responsible Investing (SRI) is gaining traction among investors who are increasingly conscious of how their investments impact the world. Wealthsimple offers a portfolio that aligns with this ethos, adhering to certain standards and exclusions. Notably, the funds in this portfolio are in line with the International Energy Agency (IEA) Sustainable Development Scenario and the goals of the Paris Agreement, emphasizing a commitment to environmental sustainability.
Ethical exclusions are also a key feature of this portfolio; for instance, it excludes the top 25% of carbon emitters from each industry. Additionally, there’s an emphasis on corporate governance, with a requirement for companies to have a minimum of either 25% or three women on their boards. Wealthsimple has also developed proprietary Exchange-Traded Funds (ETFs) like WSRI and WSRD, focusing on environmental and social impacts. Balancing this, the Wealthsimple Green Bond ETF (WSGB) supports global green initiatives, providing investors with a diversified approach to SRI. This portfolio reflects a blend of ethical considerations and investment strategies, catering to those who wish to invest responsibly while seeking financial growth.
Faith-Based Investing (Hallal):
Wealthsimple’s Shariah-compliant fund, known as WSHR, offers a unique investment opportunity for those looking to adhere to Islamic financial principles. This fund is not only certified but also regularly audited to ensure its compliance with these principles. A key aspect of its adherence to Shariah law is the restriction on income sources. Companies included in the WSHR fund derive less than 5% of their income from sources considered prohibited under Islamic law.
This ensures that investments align with ethical and religious standards. To maintain this level of compliance, the fund undergoes rigorous and regular reviews. These include quarterly compliance reviews and biannual audits, which are essential for ensuring the fund’s ongoing adherence to Shariah law. This approach allows investors to participate in financial markets while staying true to their religious and ethical beliefs, offering a harmonious blend of faith and finance.
ETFs used by Wealthsimple’s Managed Investing
Wealthsimple crafts each of its portfolios with 8-10 selected ETFs, sourced from a variety of investment firms. The portfolios include a diverse range of ETFs, each holding a mix of stocks and bonds aligned with their specific investment goals. Below is an insight into some of the ETFs incorporated within Wealthsimple’s strategies:
Wealthsimple offers tailored support to its users through various channels. Customers can reach out via live chat, telephone, or email to get assistance tailored to their needs. This level of customer service ensures that individuals can receive help in a manner that suits them best, whether they have queries about their portfolio or need guidance on navigating the platform.
Conclusion:
Wealthsimple’s Managed Investing in Canada offers a straightforward, low-maintenance path into investing, suitable for a range of investor profiles. It’s important to consider how it aligns with your financial goals, risk tolerance, and investment preferences. Remember, diversification and understanding your investment choices are key to a successful investment strategy.
Disclaimer: This post is for educational purposes only and should not be taken as financial advice. Always consult with a financial advisor before making investment decisions.
