Investing in covered call ETFs can generate income while maintaining exposure to the stock market. The JPMorgan Equity Premium IncomeETF (JEPQ) and the Global X NASDAQ 100 Covered Call ETF (QYLD) are two prominent options. Here’s a clear and concise guide to help you decide which ETF is better suited for your investment goals.
Executive summary
Feature
JEPQ
QYLD
Issuer
JPMorgan
Global X
Underlying Index
Proprietary strategy aligned with Nasdaq 100
NASDAQ-100 BuyWrite V2 Index
Expense Ratio
0.35%
0.60%
Dividend Yield
Approx. 7-8%
Approx. 10-12%
Holdings
U.S. large cap growth stocks
Primarily tech stocks (NASDAQ-100)
Covered Call Strategy
Out-of-the-money (OTM) options on a portion of the portfolio
At-the-money (ATM) options on the entire portfolio
Risk and Volatility
Lower, seeks less volatility than Nasdaq 100
Higher due to concentration in tech stocks
Capital Appreciation
Aims to provide capital appreciation potential
Limited potential for capital appreciation
Approach
Data science-driven investment approach
Index tracking with covered calls
Total Return Potential
Higher due to capital appreciation and income combination
Primarily income-focused, lower total return potential
Analysis
Both JEPQ and QYLD offer unique benefits tailored to different investment goals. However, when it comes to investing, focusing solely on income without considering total return can be detrimental in the long run. Total return, which includes both income and capital appreciation, is essential for ensuring that your investment grows over time.
Why Total Return Matters
Total return is a critical measure of an investment’s performance. It accounts for both the income generated from dividends or interest and the capital gains achieved through the appreciation of the investment’s value. By focusing on total return, investors can ensure their portfolio not only generates income but also grows in value, helping to outpace inflation and meet long-term financial goals.
JEPQ: Balancing Income and Growth
If you’re looking for an investment strategy that balances income and growth while maintaining lower volatility, JEPQ is likely the better choice. Here’s why:
Balanced Strategy: JEPQ provides a steady income stream through dividends while also offering the potential for capital appreciation. This dual approach ensures that your investment can grow over time, enhancing total return.
Diversified Portfolio: JEPQ invests in large-cap U.S. growth stocks across various sectors, reducing the risk associated with concentration in a single industry. This diversification helps stabilize returns and mitigates the impact of sector-specific downturns.
Cost-Effective: With a lower expense ratio of 0.35%, JEPQ is more cost-effective, allowing more of your investment to work for you. Lower fees mean higher net returns over the long term.
Lower Volatility: JEPQ aims to deliver returns with less volatility compared to the Nasdaq 100. This makes it a more stable investment, suitable for investors who are risk-averse or nearing retirement.
Data-Driven Approach: JEPQ uses a proprietary, data-driven investment strategy to maximize risk-adjusted returns. This sophisticated approach helps in constructing a portfolio that balances risk and reward effectively.
QYLD: High Income, Higher Risk
QYLD might be suitable if your primary goal is to generate high current income and you are willing to accept higher risk and limited growth potential. Here are the key points to consider:
High Dividend Yield: QYLD generates a substantial dividend yield, typically around 10-12%, by selling at-the-money (ATM) covered call options on the NASDAQ-100 index. This strategy maximizes income but limits the potential for capital appreciation.
Tech Concentration: QYLD is heavily concentrated in tech stocks, which can lead to higher volatility. While tech stocks can offer strong growth, their performance can be more unpredictable, adding to the investment’s risk.
Higher Expenses: With an expense ratio of 0.60%, QYLD is more expensive than JEPQ. Higher fees can erode net returns, particularly in a low-growth environment.
Limited Capital Appreciation: The use of ATM options caps the upside potential of the portfolio, meaning that while QYLD provides high income, it sacrifices the possibility of significant capital gains.
Making the Right Choice
When deciding between JEPQ and QYLD, it’s important to align your choice with your investment goals and risk tolerance.
Choose JEPQ if:
You seek a balanced approach with both income and potential for capital growth.
You prefer a diversified portfolio that reduces risk and volatility.
You are cost-conscious and prefer a lower expense ratio.
You want to invest in a fund that uses a data-driven approach to maximize risk-adjusted returns.
You prioritize total return and want to ensure your investment grows over time.
Choose QYLD if:
You prioritize high current income and are less concerned about capital growth.
You are comfortable with higher risk and volatility associated with a tech-heavy portfolio.
You understand that the use of ATM options limits the potential for capital appreciation.
You are willing to pay a higher expense ratio for a strategy that maximizes income generation.
Conclusion
Both JEPQ and QYLD have their advantages, but understanding the importance of total return is crucial for long-term investment success. Sacrificing potential growth for higher income can limit your portfolio’s overall performance. Therefore, for most investors, JEPQ’s balanced approach to income and growth, along with its lower volatility and cost-effectiveness, makes it a compelling choice.
QYLD, with its high income potential, may appeal to those seeking immediate cash flow and willing to accept higher risks and limited growth.
Consider your financial goals, risk tolerance, and investment strategy before making a decision. Prioritizing total return ensures your investment grows over time, providing both income and capital appreciation.
Invest wisely and stay informed! If you have any questions or want to learn more, feel free to leave a comment below.
Investing in the stock market can be overwhelming, especially when choosing the right exchange-traded funds (ETFs). Today, we’ll compare two popular ETFs: JEPQ and QQQ. Both target the tech sector but have different strategies and benefits. Let’s break down their features to help you make an informed decision.
JEPQ focuses on generating income through a combination of dividends and options premiums. Its strategy involves investing in Nasdaq-100 stocks and selling call options to earn additional income. This approach aims to provide a steady stream of income while also targeting long-term capital appreciation. By actively managing the portfolio and employing a covered call strategy, JEPQ seeks to reduce volatility and offer more stability to investors who prioritize income.
QQQ (Invesco QQQ Trust):
QQQ, on the other hand, focuses on tracking the performance of the Nasdaq-100 Index. This ETF is passively managed to mirror the index, which includes 100 of the largest non-financial companies listed on Nasdaq. The primary objective of QQQ is to match the performance of the Nasdaq-100 Index, providing investors with exposure to leading tech companies. This makes QQQ an attractive option for those seeking long-term capital appreciation. The passive management strategy of QQQ results in a lower expense ratio, making it a cost-effective choice for growth-focused investors comfortable with higher volatility.
Both JEPQ and QQQ offer unique benefits tailored to different investment goals, with JEPQ emphasizing income and stability, while QQQ targets growth and capital appreciation.
Which One Should You Choose?
JEPQ (JPMorgan Nasdaq Equity Premium Income ETF) is an excellent option if you’re seeking steady income and prefer lower volatility. It focuses on generating income through dividends and options premiums. The ETF actively manages its portfolio with a covered call strategy, which helps in providing consistent income. With a high dividend yield of 8.77%, JEPQ is designed for income-focused investors. This makes it particularly appealing if you’re looking for a reliable income stream while also aiming for long-term capital appreciation. Additionally, JEPQ tends to be more stable during bear markets, offering some protection against downturns.
QQQ (Invesco QQQ Trust), on the other hand, is ideal if your primary goal is growth and you are comfortable with higher risk. QQQ passively tracks the performance of the Nasdaq-100 Index, which includes 100 of the largest non-financial companies listed on Nasdaq. This means it offers exposure to some of the leading tech companies. Although it has a lower dividend yield of 0.60%, QQQ has higher potential returns due to its focus on growth. The expense ratio for QQQ is also lower at 0.20%, making it a cost-effective choice for long-term investors. QQQ performs exceptionally well in bull markets, capturing the full upside of tech stock growth.
In summary, choose JEPQ if you prioritize income and stability, and opt for QQQ if you seek growth and can handle more volatility. Your decision should align with your financial goals and how much risk you’re willing to take.
Performance Comparison
Conclusion
Both JEPQ and QQQ offer unique benefits suited to different investment goals. JEPQ provides a balanced approach with a focus on income, while QQQ offers growth potential by tracking the Nasdaq-100 Index. Consider your investment objectives, risk tolerance, and income needs when choosing between these ETFs.
Remember, it’s always a good idea to consult with a financial advisor to ensure your investment choices align with your financial goals. Happy investing!
Feel free to share your thoughts or ask questions in the comments below. If you found this comparison helpful, consider subscribing to our newsletter for more insights on ETFs and other investment topics.
The list of Canadian ”Dividend Aristocrats” stocks is managed by the firm Standard and Poors. The index is titled the S&P Canadian Dividend Aristocrats. It requires a minimum of 5 years of successive dividend increases, which is low compared to the minimum 25 years for the US version of the index. You can check out our article on America’s Dividend Aristocrats here by sector. For this post, we will share the list of Canadian “dividend aristocrats” stocks that have increased their dividends for at least five consecutive years! All these stocks are Canadian companies listed on the TSX.
The list below is a good start for any dividend investor to pick from the best dividend stocks. The list is organized by sector and includes the dividend yield and the number of consecutive dividend increases (in years). Besides, we also have growth statistics: – five-year growth of revenues and five years growth of dividends.
Why invest in 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.
Full list of Canadian Dividend Aristocrats July 2024
DGR Streak stands for Dividend Growth Rate Streak. It refers to the number of consecutive years a company has increased its dividend payments to shareholders. A longer DGR streak indicates a strong history of consistent dividend growth, which is often a sign of a company’s financial health and commitment to returning value to its shareholders.
In this post, we will delve into the realm of the Best Growth ETF in Canada and explore those that have demonstrated remarkable performance over the past 5 years. By analyzing historical data, we can gain insights into the ETFs that have successfully navigated market fluctuations and exhibited consistent growth. However, it’s important to note that past performance does not guarantee future results, and conducting thorough research and considering other factors is crucial before making any investment decisions.
The table highlights the top-performing ETFs in Canada over the past 5 years. It’s evident that the technology sector has been a dominant force in delivering strong returns during this period. In fact, several ETFs related to the technology sector have shown remarkable growth, with returns exceeding 100%. Indeed, this performance reflects the growing influence and profitability of technology companies in today’s markets.
Overall, the table underscores the significance of technology-related ETFs and the importance of sector-specific and quality-driven strategies in achieving substantial returns over the past 5 years. However, as with any investment, past performance is not indicative of future results, and investors should conduct thorough research and consider their financial goals and risk tolerance before making investment decisions.
HQU BETAPRO NASDAQ 100 2X DL BL ETF NEW SHS ETF
HQU aims to double (200%) the daily performance of the NASDAQ-100 Inde in Canadian dollars. The fund uses uses leverage, making it riskier than other funds. This means that for a single day, it seeks to achieve returns of +200% or -200% of its Referenced Index. However, over longer periods or during times of high volatility, the ETF’s performance may differ significantly from that of the Referenced Index, which could be in either direction.
To manage currency risks, any gains or losses in U.S. dollars resulting from the ETF’s investments will be converted back to Canadian dollars.
Investors considering this ETF should be aware of its daily monitoring requirements. They need to also carefully read the prospectus to fully understand its features before investing.
NNRG NINEPOINT ENERGY FUND
NNRG ETF invests primarily in mid-cap companies involved directly or indirectly in the exploration, development, production and distribution of oil or gas and other related activities in the energy and resource sector.
NNRG is an active ETF. The fund does not replicate an index. On the contrary, the portfolio manager selects stocks that best fit the funds’ stated objective. NNRG is suited for investment with high-risk tolerance.
The fund invests mainly in Canadian companies.
HXQ HORIZONS NASDAQ 100 INDEX ETF
HXQ seeks to replicate, to the extent possible, the performance of the NASDAQ-100® Index.
The NASDAQ-100® Index includes 100 of the largest domestic and international nonfinancial companies listed on The NASDAQ Stock Market.
HXQ.U HORIZONS NASDAQ 100 INDEX ETF USD
HXQ seeks to replicate, to the extent possible, the performance of the NASDAQ-100® Index. The NASDAQ-100® Index (Total Return) includes 100 of the largest domestic and international nonfinancial companies listed on The NASDAQ Stock Market.
Note: This fund trades in US dollars
ZNQ BMO NASDAQ 100 EQUITY INDEX ETF
BMO Nasdaq 100 Equity Index ETF has been designed to replicate the performance of a NASDAQ listed companies index.
TEC TD GLOBAL TECHNOLOGY LEADERS INDEX ETF
The TD Global Technology Leaders Index ETF aims to mirror the performance of a global equity index that tracks mid- and large-cap tech companies worldwide. More precisely, It seeks to replicate the Solactive Global Technology Leaders Index (CA NTR) or a potential successor. To achieve its goal, the fund managers plan to invest in a selected subset of securities from the relevant index. TEC fund manager may also explore other securities for exposure. Additionally, TEC can hold cash or equivalents to meet its obligations.
XIT ISHARES SP TSX CAPPED INFO TECH IDX ETF
XIT seeks long-term capital growth by replicating the performance of the S&P/TSX Capped Information Technology Index, net of expenses. The index tracked includes exclusively Canadian companies. In essence, this ETF invest in 24 Canadian technology stocks. In addition, there is a 25% cap put in place to avoid over exposure to a particular stock.
Top Ten Holdings
Ticker
Name
Weight (%)
CSU
CONSTELLATION SOFTWARE INC
27.05
SHOP
SHOPIFY SUBORDINATE VOTING INC CLA
21.97
GIB.A
CGI INC
20.28
OTEX
OPEN TEXT CORP
9.30
DSG
DESCARTES SYSTEMS GROUP INC
6.06
KXS
KINAXIS INC
3.07
CLS
CELESTICA INC
2.70
BB
BLACKBERRY LTD
2.47
LSPD
LIGHTSPEED COMMERCE INC
1.86
ENGH
ENGHOUSE SYSTEMS LTD
0.96
XQQ ISHARES NASDAQ 100 INDEX ETF
iShares NASDAQ 100 Index ETF (CAD-Hedged) is an exchange traded fund that seeks to track the performance of the NASDAQ-100 Currency Hedged CAD Index.
HSU BETAPRO SP500 2X DAILY BULL ETF
The investment objective of the BetaPro S&P 500 2x Daily Bull ETF (HSU) is to provide daily investment results, before fees, expenses, distributions, brokerage commissions, and other transaction costs, that endeavor to correspond to two times (200%) the daily performance of the S&P 500 Index. It is important to note that this ETF is designed for short-term investment purposes and not as a long-term investment due to the compounding of daily returns. Investors in HSU should have a high risk tolerance, as the use of leverage increases both potential gains and potential losses.
ZQQ BMO NASDAQ 100 HEDGED TO CAD INDEX ETF
The investment objective of the BMO NASDAQ 100 Hedged to CAD Index ETF (ZQQ) is to replicate, to the extent possible, the performance of the NASDAQ 100 Index, net of expenses. This ETF aims to provide Canadian investors with exposure to the performance of the NASDAQ 100 Index, while mitigating the currency exchange risk between the U.S. dollar and the Canadian dollar. By hedging the currency, ZQQ seeks to provide returns that are more closely aligned with the Index’s performance without the added impact of currency fluctuations.
Weight (%)
Name
8.77%
MICROSOFT CORP
7.49%
APPLE INC
6.32%
NVIDIA CORP
5.23%
AMAZON.COM INC
4.84%
META PLATFORMS INC
4.42%
BROADCOM INC
2.49%
ALPHABET INC
2.43%
TESLA INC
2.41%
ALPHABET INC
2.35%
COSTCO WHOLESALE CORP
Archive
FCUQ FIDELITY U S HIGH QUALITY INDEX ETF UNIT SER L (CAD)
Investing in the Fidelity U.S. High Quality Index ETF presents a compelling opportunity for investors seeking single-factor exposure to companies with robust balance sheets and more stable cash flows when compared to the broader U.S. equity market.
In addition, this ETF employs an outcome-oriented approach that aims to deliver long-term outperformance, making it an attractive addition to any investment portfolio. By providing access to high-quality companies, it acts as an efficient complement to a well-diversified portfolio.
Top ten holdings
APPLE INC
MICROSOFT CORP
NVIDIA CORP
CONOCOPHILLIPS
TEXAS PACIFIC LAND CORP
TESLA INC
EOG RESOURCES INC
MAGNOLIA OIL + GAS CORP A
PROCTER + GAMBLE CO/THE
COCA COLA CO/THE
Total number of holdings
97
Top ten holdings aggregate
33.9%
QQC.F INVESCO NASDAQ 100 INDEX ETF
If you’re looking for exposure to some of the largest non-financial companies listed on The Nasdaq Stock Market based on market capitalization, the XQQ ETF might be a suitable investment option. The XQQ ETF seeks to provide long-term capital growth by replicating the performance of the NASDAQ-100 Currency Hedged CAD Index, net of expenses.
XIT ISHARES SP TSX CAPPED INFO TECH IDX ETF
XIT seeks long-term capital growth by replicating the performance of the S&P/TSX Capped Information Technology Index, net of expenses. The index tracked includes exclusively Canadian companies. In essence, this ETF invest in 24 Canadian technology stocks. In addition, there is a 25% cap put in place to avoid over exposure to a particular stock.
Small-cap ETFs offer a compelling opportunity for Canadian investors seeking to diversify and energize their portfolios. For those willing to accept some additional risk in pursuit of greater growth potential than large-caps, here’s a breakdown of the best small-cap focused ETFs available in Canada.
Executive summary
What is a Small-Cap?
Before we dive into ETFs, let’s understand what a small-cap is. Simply put, these are companies with a smaller market capitalization (the total price of all their shares) compared to well-established, large corporations. Small-caps might represent growing companies, innovative niche industries, or businesses based in emerging markets.
Why Invest in Small-Cap ETFs?
Small-cap ETFs offer savvy investors the chance to tap into the exciting growth potential and unique benefits that smaller companies provide. Here’s why you should consider adding them to your portfolio:
Unlock Higher Growth: Small-cap companies often have more room for rapid expansion compared to their well-established, large-cap counterparts. This translates into the potential for greater returns on your investment.
Diversify and Mitigate Risk: By investing in an ETF focused on small-caps, you spread your investments across a wider range of companies. This diversification helps reduce the impact of any single stock or sector underperforming.
Gain Exposure to the Future: Many innovative and disruptive companies start out as small-caps. Small-cap ETFs give you the chance to invest in emerging industries like cutting-edge technology, medical breakthroughs, and other sectors poised for substantial growth.
Key Criteria for Selecting Small-Cap ETFs:
Choosing the right small-cap ETF goes beyond simply finding companies with room to grow. To maximize your returns and ensure a smooth investment experience, pay careful attention to these crucial factors:
Expense Ratio: The Price of Management Even small fees add up over time, directly impacting your profits. Actively seek out small-cap ETFs with low expense ratios. A small difference in fees can make a big difference to your bottom line in the long run.
Assets Under Management (AUM): A Measure of Liquidity A large AUM generally means the ETF has a high trading volume. This increased liquidity makes it easier to buy and sell shares quickly and efficiently, which is especially important in the small-cap market.
Index Strategy: The Roadmap for Your Investment Before you invest, understand the specific index the small-cap ETF tracks. Are you focused on a specific country like Canada or the US? Do you want a broad market focus or something targeting a specific sector? Make sure the ETF’s strategy aligns with your investment goals.
Top Small-Cap ETFs in Canada
Historical performance
XSU – iShares U.S. Small Cap Index ETF
This ETF provides investors with broad exposure to a vast range of smaller U.S. companies. Its competitive expense ratio ensures your investment dollars go further, maximizing potential returns. The focus on the U.S. small-cap market allows investors to tap into the growth potential of smaller, more dynamic companies within the United States.
XCS – iShares S&P/TSX SmallCap Index ETF
XCS focuses on smaller companies within the Canadian market. This focus on the domestic market makes it a great choice for investors seeking diversification within Canada’s borders. By investing in Canadian small-caps, investors have the chance to participate in the growth of innovative and emerging companies within their own market.
ZSML – BMO S&P U.S. Small Cap Index ETF
ZSML is a cost-effective way to participate in the U.S. small-cap market, boasting one of the lowest expense ratios in its category. This low-cost structure means more of your investment works for you. Additionally, ZSML offers good liquidity, making it easy to buy and sell shares on the market, allowing for flexibility within your portfolio.
FCGS.U / FCGSF – Fidelity Global Small Cap Opportunities Fund
This exchange-traded fund offers investors a unique opportunity to invest in small-cap companies from around the world. Its global focus provides diversification across various international markets. The fund’s active management strategy means a professional fund manager aims to outperform its benchmark index, potentially leading to higher returns for investors.
Choosing the Best ETF for You
Choosing the Best ETF for You
With several excellent small-cap ETFs available, finding the right match comes down to your personal financial goals and preferences. Here are the key factors to consider:
Your Risk Tolerance: Your appetite for risk is crucial in selecting a small-cap ETF. If you prioritize stability and security, focusing on the Canadian market with XCS might be a better fit. However, if you’re comfortable with some additional volatility in exchange for potentially higher returns, the U.S.-focused options (XSU or ZSML) could be more appealing.
Your Investment Horizon: Small-cap stocks often have the most potential for growth over longer periods. If you’re investing with a multi-year or even multi-decade timeframe in mind, the added volatility of small-caps can smooth out, potentially leading to substantial returns. Short-term investors might find large-cap ETFs more suitable.
The Importance of Fees: Every dollar paid in fees reduces your overall returns. Over time, even small differences in expense ratios can make a significant impact on your portfolio’s growth. Prioritize ETFs with low fees, like ZSML, to maximize the potential of your investment.
Final Word
Adding small-cap ETFs to your portfolio can provide excellent diversification and growth opportunities. Thoroughly research, assess your risk tolerance, and select the ETF that aligns best with your financial goals.
Let me know if you have further questions or would like an in-depth analysis of any specific ETF!
In this post, we will be comparing two popular Canadian Index ETFs: XIU Ishares S&P TSX 60 Index vs XIC Ishares Core S&P TSX Capped Composite index. Fisrt, we will discuss the difference at the index level. Then, a full comparison of key metrics: Volatility, Management Expense Ratio, Historical performance and Dividend yield.
An Exchange Traded Fund (ETF) is a type of investment fund traded on stock exchanges, much like stocks. Among the various types of ETFs, Index ETFs are particularly notable. They were the first kind of ETF introduced to North American exchanges. Index ETFs offer investors exposure to a broad range of securities, often encompassing entire markets, at a low cost. Their primary objective is to replicate the performance of a specific index by holding all the securities within that index, aiming to match its return minus any fees.
Do Index ETFs Pay Dividends?
Yes, Index ETFs do pay dividends. Since they hold shares of companies included in the index they track, any dividends paid by those companies are passed on to the ETF shareholders. You can see the dividend yield reflected in the performance table of the ETF.
Index Definitions
S&P/TSX Capped Composite Index
This index includes over 200 of the top-ranked Canadian stocks, representing about 95% of the Canadian equity market. To be included and remain in the index, securities must meet minimum float-adjusted and liquidity criteria. The weights of the constituents are capped at 10% of the index’s float-adjusted market capitalization, and these weights are reviewed quarterly.
S&P/TSX 60
This index comprises the 60 largest companies listed on the Toronto Stock Exchange, offering a snapshot of the most significant players in the Canadian market.
In summary, Index ETFs are a cost-effective way to gain diversified exposure to a wide array of securities, including potential dividend income, by tracking specific market indices.
ETFs selected for the analysis (XIC vs XIU)
Name
AUM in M
MER
Ishares S&P TSX 60 Index – XIU
10,730
0.18
Ishares Core S&P TSX Capped Comp – XIC
8,610
0.06
XIU vs XIC (Performance)
Performance comparison – XIU vs XIC updated daily
Comparison volatility – XIU vs XIC
Name
Beta 5 yrs
Morningstar rating
XIU
0.92
5 Stars
XIC
0.98
4 Stars
XIU vs XIC
XIU has the lowest volatility. This is probably due the fact that its’ holdings are exclusively large Canadian companies. Large companies tend to be more stable than the overall market. The other ETFs have a beta of 1 which is not surprising since they track a more global market index.
How to pick the Best ETF that fits your need?
Diversification
The goal of diversification is to minimize risk by spreading investments across various assets. The XIC is the most diversified among index ETFs, with over 200 holdings. Following it is the XIU, which has 60 holdings.
Taxation
Both XIC and XIU distribute taxable Canadian dividends, resulting in similar tax implications for investors. However, if you prefer an ETF that tracks the S&P/TSX 60 Index without dividend distributions, consider the HXT. This ETF is structured to defer all income distributions, meaning no dividend distribution and, consequently, no immediate tax liability.
Liquidity
Liquidity can be assessed in two ways:
Liquidity of Holdings: XIU stands out as it includes the 60 largest Canadian companies listed on the Toronto Stock Exchange.
Liquidity of the ETF: This is measured by the average spread between the ‘Bid’ and ‘Ask’ prices. Both XIU and XIC offer excellent liquidity in this regard.
Management Fees
Among the mentioned ETFs, XIU has the highest management expense ratio (MER) at 0.18%.
Video
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.
In this article, we’ll go over the best Canadian Dividend ETFs. To be clear, we are interested here in exchange-traded funds that invest exclusively in Canadian companies. From a tax standpoint, the ETFs are more beneficial since ETFs that invest in non-Canadian companies are subject to withholding tax on any distribution of dividends. We started by selecting the 16 most popular ETFs in this category. Next, we compared these ETFs based on several criteria (strategy, div yield, and MER). For each ETF, we also provide the objective and the holdings.
Executive summary
Strategies adopted by Canadian Dividend ETFs
Portfolio managers can adopt a variety of strategies to generate income. There are four trends on the market:
Diversified Dividend ETFs
These ETFs are the most common. They invest in the best Canadian companies in terms of dividend yield and growth potential. These funds invest your money in several sectors of the economy. However, due to the nature of the Canadian economy, it’s not surprising to see these funds dominated by the banking and energy sector.
Preferred shares ETFs
These ETFs invest in preferred shares issued by the most prominent Canadian companies. A preferred share is a hybrid product between common stock and a bond. It’s similar to a bond because the issuer agrees to pay an agreed-upon yield. However, preferred shareholders benefit very little from the appreciation in the market value of the issuing company. Generally speaking, preferred equity ETFs will have a high dividend yield but a meager growth potential.
Dividend ETFs using Call Options
These ETFs write call options on the securities held in their portfolio for two main objectives: 1- to protect themselves in the event of a significant drop in the value of the securities held and 2- to collect the premiums and thus enhance distributions. These funds are very popular in Canada despite the poor long-term performance they generate.
Bank ETFs
These ETFs invest in the largest Canadian banks. It’s both a sector play and a dividend income strategy.
In my opinion, XDV iShares Canadian Select Dividend Indx and VDY FTSE Canadian High Dividend Yield Indx are the best Canadian diversified dividend ETFs.
They combine low volatility, attractive returns, and good performance. VDY has a Morningstar Rating of 5 Stars and a low MER 0.21%!
Diversified Canadian Dividend ETFs are better in terms of long-term performance than their competitors below.
Best Canadian Dividend Preferred Share ETF
Comparison between Horizons HPR, BMO ZPR, and iShares CPD
In terms of performance, the above ETFs are very close, with a slight lead for HPR Horizons Active
My favorite is BMO’s ZPR, though, because its management fee is lower at 0.50% versus 0.60% for HPR. ZPR is more diversified than HPR, which remains dominated by the banking sector. Thanks to the rate reset feature, ZPR should offer more stability.
Best Dividend ETF with a Covered Call Option Strategy
Comparison between ZWB BMO Covered Call Canadian Banks and ZWC – BMO CDN High Div Covered Call
Bank of Montreal offers two very popular ETFs in this category: ZWB and ZWC. ZWB invests mainly in the banking sector, while ZWC is more diversified. What’s unique about these ETFs is that they use covered calls to protect against downside risk.
The covered call strategy provides limited downside protection. Also, when you write a covered call, you give up some of the stock’s potential gains. These ETFs will tend to have a higher yield and a lower performance. In a nutshell, a covered call ETF will outperform its competitors in corrections and underperform in a market rally. I find this strategy to be well suited when used on a low volatility basket of securities.
In terms of dividend yields, ZWB and ZWC are both unbeatable (approx. 6%). By analyzing long term historical performance, ZWB has had a better long-term performance than ZWC.
Please note covered call ETFs are more and more popular and new ETFs are now available from Harvest, Horizons and Hamilton. You can review the posts below for more info and I also encourage you to visit issuers’ websites:
Canadian Banks are known for their financial strength. Their Dividends are attractive and stable. FIE Ishares CDN Fin Mthly Income and RBNK RBC CDN Bank Yield Index are both great choices. If you want exposure to the Canadian banking industry focusing on earning dividends, these ETFs will undoubtedly answer your goals. Both pay a relatively stable monthly dividend.
RBNK has a lower MER than FIE. In terms of performance, RBNK offers a better total return than FIE. The only catch is that RBNK is probably less liquid than FIE. The latter (FIE) has assets under management of over 900 Million dollars while RBNK is relatively a small fund of only 119 Million.
How to choose a good dividend ETF
– Total return: Though the focus here is on the dividend yield, you have to keep in mind the total return. The profit or loss we make on any investment combines both dividend income and capital gain or loss. Looking at the long-term performance of the fund is crucial. An ETF that provides a good capital appreciation with a high dividend yield is preferable.
–Diversification: A diversified ETF is always a safer option. Some high yield ETFs are sector-specific (Financials, Energy or Gold). The ones focused on Energy and Gold have had an inferior long-term performance and carry high volatility risk.
–Volume and liquidity of the ETF. The higher the asset under management, the lower the trading costs of the ETF (difference between the bid and ask price).
–Management expense ratio.
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%
Consult issuers’ website for up-to-date data
ZPR – BMO Laddered Pref Share ETF
The BMO Laddered Preferred Share Index ETF (ZPR) has been designed to replicate, to the extent possible, the performance of the Solactive Laddered Canadian Preferred Share 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.
HPR – Horizons Active Pref Share ETF
The investment objective of the Horizons Active Preferred Share is to provide dividend income while preserving capital by investing primarily in preferred shares of Canadian companies. The ETF may also invest in preferred shares of companies located in the United States and fixed income securities of Canadian and U.S. issuers. The ETF, to the best of its ability, seeks to hedge its non-Canadian dollar currency exposure to the Canadian dollar at all times. HPR is a popular ETF and has asset under management in excess of 1 Billion dollars.
XDV – iShares Canadian Select Dividend Index ETF
XDV seeks long-term capital growth by replicating the performance of the Dow Jones Canada Select Dividend Index, net of expenses.
Name
Weight
Canadian Imperial Bank of Commerce
8.5%
Canadian Tire Corp Ltd Class A
6.8%
Bank of Montreal
6.3%
Labrador Iron Ore Royalty Corp
6.2%
Royal Bank of Canada
6.0%
BCE Inc
4.7%
TC Energy Corp
4.7%
Bank of Nova Scotia
4.7%
The Toronto-Dominion Bank
4.3%
National Bank of Canada
3.9%
Consult issuers’ website for up-to-date data
CPD – Ishares S&P TSX CDN Pref
Seeks to replicate the S&P/TSX Preferred Share Index, net of expenses.
XEI – iShares Core S&P/TSX Composite High Dividend Index ETF
This ETF objective is to replicate the performance of the S&P/TSX Composite High Dividend Index ETF. The fund’s objective is long term capital growth by investing in Canadian companies operating across diversified sectors. XEI pays a monthly dividend income which can be appealing for investor who are looking for a frequent payout.
XEI portfolio
Name
Weight
Enbridge Inc
5.2%
Royal Bank of Canada
5.1%
Canadian Natural Resources Ltd
5.1%
The Toronto-Dominion Bank
5.0%
BCE Inc
5.0%
Suncor Energy Inc
4.9%
TC Energy Corp
4.8%
Bank of Nova Scotia
4.8%
Nutrien Ltd
4.5%
Bank of Montreal
4.0%
Consult issuers’ website for up-to-date data
VDY – Vanguard FTSE Canadian High Dividend Yield Index ETF
FTSE Canadian High Dividend Yield Index ETF tracks the performance of the FTSE Canada High Dividend Yield Index, which consists of Canadian stocks having a high dividend yield. Due to the nature of the Canadian market, this fund has large portion of its investment portfolio in Energy and Financials.
VDY holdings
Name
Weight
Royal Bank of Canada
14.1%
The Toronto-Dominion Bank
12.5%
Enbridge Inc
7.9%
Bank of Nova Scotia
7.7%
Bank of Montreal
6.5%
Canadian Imperial Bank of Commerce
4.9%
TC Energy Corp
4.7%
BCE Inc
4.4%
Canadian Natural Resources Ltd
4.1%
Manulife Financial Corp
3.7%
Consult issuers’ website for up-to-date data
CDZ – S&P/TSX Canadian Dividend Aristocrats Index Fund
The S&P/TSX Canadian Dividend Aristocrats includes only large companies that are part of the TSX and who have increased their dividend consistently for at least 5 years period. This fund has been around for a while now.
CDZ holdings
Name
Weight
Keyera Corp
3.4%
SmartCentres
3.0%
Pembina Pipeline Corp
2.8%
Enbridge Inc
2.8%
Canadian Natural Resources Ltd
2.5%
Power Corporation of Canada
2.4%
Fiera Capital Corp
2.3%
Great-West Lifeco Inc
2.1%
BCE Inc
2.1%
Canadian Imperial Bank of Commerce
2.1%
Consult issuers’ website for up-to-date data
FIE – Ishares CDN Fin Mthly Income
Ishares CDN Fin Monthly Income seeks to maximize total return and to provide a stable stream of monthly cash distributions. FIE has a high exposure to the financial sector.
Invesco Canadian Dividend Index ETF seeks to replicate the performance of the NASDAQ Select Canadian Dividend Index. Don’t be confused with NASDAQ, the companies are 95% Canadian. The fund applies strict criteria to select only companies that have increased their dividend overtime and that offer a high yield.
PDC holdings
Name
Weight
Enbridge Inc
8.5%
Royal Bank of Canada
7.9%
The Toronto-Dominion Bank
7.9%
Bank of Nova Scotia
7.8%
Bank of Montreal
7.6%
Canadian Natural Resources Ltd
4.2%
BCE Inc
4.1%
TELUS Corp
4.0%
TC Energy Corp
4.0%
Canadian Imperial Bank of Commerce
4.0%
Consult issuers’ website for up-to-date data
ZDV – BMO Canadian Dividend ETF
BMO Canadian Dividend ETF seeks exposure to companies that exhibit growth in paying dividends. The fund has a large number of holding and allocates a maximum of 5% per position.
XDIV – iShares Core MSCI Canadian Quality Dividend Index ETF
XDIV invests in Canadian stocks with strong financials. The companies selected pay above-average dividend yields and have either paid steady or increasing dividends.
XDIV holdings
Name
Weight
Canadian Imperial Bank of Commerce
9.4%
Royal Bank of Canada
9.2%
Bank of Nova Scotia
9.0%
TC Energy Corp
8.9%
The Toronto-Dominion Bank
8.8%
Manulife Financial Corp
8.5%
Nutrien Ltd
7.7%
Sun Life Financial Inc
6.8%
Fortis Inc
4.6%
Power Corporation of Canada
4.0%
Consult issuers’ website for up-to-date data
DGRC –CI Canada Quality Div Growth Index
CI Wisdomtree CDN Qlty Div Gwth Idx holdings provide exposure to dividend-paying Canadian companies with growth characteristics.
DGRC holdings
Name
Weight
Rogers Communications Inc Class B
5.3%
Thomson Reuters Corp
5.2%
Royal Bank of Canada
5.0%
Shaw Communications Inc Class B
5.0%
Bank of Nova Scotia
5.0%
Bank of Montreal
5.0%
The Toronto-Dominion Bank
5.0%
Canadian Imperial Bank of Commerce
4.9%
TC Energy Corp
4.9%
Canadian National Railway Co
4.9%
Consult issuers’ website for up-to-date data
RBNK – RBC CDN Bank Yield Index
RBC Canadian Bank Yield Index ETF seeks to replicate the Solactive Canada Bank Yield Index. The latter is focused only on the Canadian banking industry.
RBNK holdings
Name
Weight
Canadian Imperial Bank of Commerce
25.7%
Bank of Nova Scotia
24.0%
Royal Bank of Canada
16.6%
The Toronto-Dominion Bank
15.9%
Bank of Montreal
8.5%
National Bank of Canada
8.0%
Consult issuers’ website for up-to-date data
RCD – RBC Quant CDN Dividend Leaders
RBC Quant Canadian Dividend Leaders ETF seeks to provide unitholders with exposure to the performance of a diversified portfolio of high-quality Canadian dividend-paying equity securities that will provide regular income and that have the potential for long-term capital growth.
RCD holdings
Name
Weight
Constellation Software Inc
7.9%
Royal Bank of Canada
6.4%
Enbridge Inc
5.5%
Bank of Nova Scotia
4.9%
The Toronto-Dominion Bank
4.4%
BCE Inc
4.3%
Canadian Imperial Bank of Commerce
4.2%
Canadian National Railway Co
3.6%
Barrick Gold Corp
2.8%
Bank of Montreal
2.4%
Consult issuers’ website for up-to-date data
In this post, our main objective is to delve into the top ten largest ETFs in Canada. We’ll begin by providing a comprehensive explanation of what ETFs are and why they have gained significant popularity. Afterward, we will examine each ETF in detail, shedding light on their individual fund objectives, fees, dividend yields, and historical performance.
As evident from the aforementioned list, index ETFs dominate the majority of the entries. Notably, the most widely recognized indexes include the S&P/TSX and the S&P 500.
Top 10 Largest ETFs in Canada: Performance comparison
Largest ETF in Canada – Average returns – updated daily
Symbol
Mgmnt Fee
XIU
0.15%
ZSP
0.08%
XIC
0.05%
XSP
0.10%
ZCN
0.05%
ZAG
0.08%
ZEA
0.20%
XEF
0.20%
VFV
0.08%
XUS
0.10%
Largest ETF in Canada / Management fees
What are the Fees associated with ETFs
Management Expense Ratio (MER):
The percentage of a fund’s average net assets paid out of the fund each year to cover the day-to-day and fixed costs of managing the fund. The figure is reported in the Fund’s annual management report of fund performance. MER includes all management fees and GST/HST paid by the fund for the period, including fees paid indirectly as a result of holding other ETFs.
Management Fee:
The annual fee payable by the fund to the manager of the fund for acting as trustee and manager of the fund. This fee forms the largest portion of the MER. Typically, included in the management fee are the costs associated with paying the custodian and valuation agents, registrar and transfer agents, and any other service providers retained by the manager.
Operating Expenses:
Other operating costs such as fees and expenses relating to the independent review committee, brokerage expenses and commissions, and taxes.
The S&P/TSX Composite Index is a capitalization-weighted index that tracks the performance of companies listed on Canada’s largest stock exchange, the Toronto Stock Exchange (TSX).
S.P. 500 Index
The S&P 500 Index, or the Standard & Poor’s 500 Index, is a market-capitalization-weighted index of the 500 largest publicly-traded companies in the U.S.
The S&P 500 stands out as an exceptional index due to its composition primarily consisting of prominent and established US corporations. It offers a high level of diversification across multiple sectors within the US economy. Widely recognized as the premier benchmark for large-cap US equities, it serves as a reliable gauge for evaluating the overall performance of these stocks. Consequently, if you hold a positive long-term outlook on the American economy, the S&P 500 emerges as the most suitable index.
Advantages of Index ETFs
Advantage
Description
Diversification
Instantly diversifies investment risk across various companies, industries, or regions.
Cost-effectiveness
Lower management fees compared to actively managed funds.
Transparency
Holdings are disclosed daily, providing clear visibility into the ETF’s assets.
Liquidity
Can be bought or sold at market prices throughout the trading day, ensuring easy entry or exit from positions.
Performance Tracking
Aims to closely track the performance of a specific index, providing a benchmark for evaluating returns.
Accessibility
Accessible through brokerage accounts, making it available to a wide range of investors.
Tax Efficiency
Potentially lower taxable events due to lower portfolio turnover compared to actively managed funds.
Ishares S&P TSX 60 Index ETF (XIU.TO)
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 largest 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 Holdings
Name
Weight %
ROYAL BANK OF CANADA
7.94
SHOPIFY SUBORDINATE VOTING INC CLA
7.37
TORONTO DOMINION
7.07
BANK OF NOVA SCOTIA
4.35
ENBRIDGE INC
4.28
CANADIAN NATIONAL RAILWAY
4.22
BROOKFIELD ASSET MANAGEMENT INC CL
3.76
BANK OF MONTREAL
3.68
CANADIAN IMPERIAL BANK OF COMMERCE
2.87
CANADIAN PACIFIC RAILWAY LTD
2.86
Please consult issuers’ website for up-to-date data
XIU Sector allocation
Sector
Weight %
Financials
35.90
Energy
14.30
Materials
10.70
Information Technology
10.69
Industrials
9.89
Communication
5.84
Consumer Discretionary
4.16
Consumer Staples
3.61
Utilities
3.16
Health Care
0.84
Please consult issuers’ website for up-to-date data
ZSP – BMO S&P 500 Index ETF
ZSP Strategy
The BMO S&P 500 ETF seeks to replicate, to the extent possible, the performance of the S&P 500 Index, net of expenses. ZSP invests in the constituent securities of the index and holds these securities in a proportion equal to that which they represent in the index.
ZSP-U is a Canadian ETF however it only trades in US $.
ZSP is a Canadian ETF that trades in Canadian $ and is not hedged against currency risk.
ZSP is the second largest ETF in Canada.
ZSP-U vs ZSP which one to choose
If you are uncertain between a hedged, unhedged or US $ ETF, please refer to the table below:
Ishares Core S&P TSX Capped Comp ETF (XIC.TO)
Seeks long-term capital growth by replicating the performance of the S&P®/TSX® Capped Composite Index, net of expenses. While XIU has 60 holdings in total, XIC is much larger with 219 Canadian companies. In terms of performance both XIU and XIC are quite close. XIC has a lower 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 which is the same case for XIU.
XIC is the third largest ETF in Canada.
XIC Ishares Core S&P TSX Capped Comp ETF Holdings
Name
Weight %
ROYAL BANK OF CANADA
6,24
SHOPIFY SUBORDINATE VOTING INC CLA
5,79
TORONTO DOMINION
5,55
BANK OF NOVA SCOTIA
3,42
ENBRIDGE INC
3,36
CANADIAN NATIONAL RAILWAY
3,31
BROOKFIELD ASSET MANAGEMENT INC CL
2,95
BANK OF MONTREAL
2,89
CANADIAN IMPERIAL BANK OF COMMERCE
2,26
CANADIAN PACIFIC RAILWAY LTD
2,24
Please consult issuers’ website for up-to-date data / Largest ETF in Canada
Please consult issuers’ website for up-to-date data / Largest ETF in Canada
ZCN – BMO S&P TSX Capped Comp ETF
The BMO S&P/TSX Capped Composite Index ETF (ZCN) is an index ETF (passive strategy). It has been designed to replicate the performance of the S&P/TSX Capped Composite Index (Index). The ETF invests in and holds the Constituent Securities of the Index in the same proportion as they are reflected in the Index.
Weight (%)
Name
6.11%
ROYAL BANK OF CANADA
5.55%
TORONTO-DOMINION BANK/THE
3.72%
ENBRIDGE INC
3.34%
BANK OF NOVA SCOTIA/THE
3.15%
BROOKFIELD ASSET MANAGEMENT INC
3.12%
CANADIAN NATIONAL RAILWAY CO
3.08%
BANK OF MONTREAL
2.98%
CANADIAN NATURAL RESOURCES LTD
ZAG – BMO Aggregate Bond Index ETF
ZAG is a fixed income ETF. It invests primarily in Bonds. The fund invests in a variety of debt securities primarily with a term to maturity greater than one year.
ZEA – BMO MSCI EAFE ETF
The BMO MSCI EAFE Index ETF (ZEA) is an index ETF. It invests in developed equity markets, excluding Canada and the U.S.
Weight (%)
Name
7.17%
ISHARES CORE MSCI EAFE ETF
2.26%
NESTLE SA
1.64%
ROCHE HOLDING AG
1.51%
ASML HOLDING NV
1.26%
SHELL PLC
1.25%
ASTRAZENECA PLC
1.21%
NOVARTIS AG
XEF – Ishares Core MSCI EAFE IMI Index ETF
XEF invests in an international portfolio of stocks. It’s a simple way to get exposure to over 1500 stocks from Europe, Asia and Australia. The index tracked is the MSCI EAFE® Investable Market Index.
Name
Weight %
NESTLE SA
2.03
ROCHE HOLDING PAR AG
1.47
ISHARES CORE MSCI EAFE ETF
1.46
ASML HOLDING NV
1.33
SHELL PLC
1.12
ASTRAZENECA PLC
1.11
Please consult issuers’ website for up-to-date data / Largest ETF in Canada
VFV – Vanguard S&P 500 Index ETF
Vanguard S&P 500 Index ETF seeks to track the performance of a broad U.S. equity index that measures the investment return of large-capitalization U.S. stocks. The S&P 500 Index, or the Standard & Poor’s 500 Index, is a market-capitalization-weighted index of the 500 largest publicly-traded companies in the U.S.
The S&P 500 is an excellent index because most of its constituents are large, established US corporations. Besides, It’s well-diversified across various sectors of the US economy. The S&P 500 is widely regarded as the best gauge of large-cap U.S. equities. It can be easily used to express an opinion on the US economy in general. In other words, if you are bullish on the performance of the American economy in the long term, it’s probably the best index for you.
VFV ETF Holdings
Holding Name
Weight %
Apple Inc.
6.03
Microsoft Corp.
5.74
Amazon.com Inc.
3.88
Facebook Inc. Class A
2.19
Alphabet Inc. Class A
2.18
Alphabet Inc. Class C
2.03
Tesla Inc.
1.70
NVIDIA Corp.
1.40
Berkshire Hathaway Inc. Class B
1.37
JPMorgan Chase & Co.
1.32
please consult issuers website for up-to-date data
XUS – Ishares Core S&P 500 Index ETF
XUS is ideal if you would like to invest in a diversified portfolio of US Companies (mainly Large Capitalization). It tracks the S&P 500 Index.
Name
Weight %
ISHARES CORE S&P 500 ETF
96.09
APPLE INC
0.26
MICROSOFT CORP
0.22
AMAZON COM INC
0.13
USD CASH
0.12
TESLA INC
0.09
What’s an ETF?
An ETF is a basket of securities (that part of an index) that you can buy or sell through a brokerage firm on a stock exchange. ETFs are offered on virtually every conceivable asset class from traditional investments to so-called alternative assets like commodities or currencies.
Why ETFs are popular?
The short answer answer is fees. ETFs compete directly with traditional mutual funds which fees can range from 2 to 4%. Mutual funds are managed actively by the manager thus they are expensive. While the ETF track usually an index (so there is no portfolio manager picking stocks). For example, an ETF that tracks the S&P/TSX will have to have in its holdings the majority of the stocks that are part of that index.
The manager of an index ETF will seek to replicate the performance of the index, he cannot exclude, overweight or underweight a stock. He will just buy the stocks at the same proportion that are represented in the index itself. Because, the manager role is limited, the fees are cheaper.
Several empirical studies looking at the performance of ‘active’ managers found that for most, their performance was less than the performance of the market index! So why bother paying 4% fees when you can simply ‘buy’ the index.
What are the types of ETF?
There are so many types of ETFs in the market. Below are the most common ones:
Investors should pay close attention to the following:
The fund’s objective;
Risk level
Management Expense Ratio (Total fees charged by an ETF)
Liquidity
Are ETFs good for beginners?
ETFs are great for both beginners and Experts.
They are ideal if you want to bet on a particular sector or commodity;
ETFs are used by large number of investors as a mean of generating passive income (for instance with Dividend ETFs);
Actively managed ETFs allow investors access to sophisticated investment styles: Value investing, Covered call,…etc).
Disclaimer
The data on this website is for your information only. It does not constitute investment advice, or advice on tax or legal matters. Any information provided on this website does not constitute investment advice or investment recommendation nor does it constitute an offer to buy or sell or a solicitation of an offer to buy or sell shares or units in any of the investment funds or other financial instruments described on this website. Should you have any doubts about the meaning of the information provided herein, please contact your financial advisor or any other independent professional advisor.
Introduction
The Harvest Retirement Income ETF (HRIF) deserves attention for those particularly interested in retirement income solutions. HRIF is designed to offer a combination of income and growth by investing in an actively managed portfolio of equities. Let’s delve into what makes HRIF a notable option for investors, especially those nearing or in retirement.
Objective of HRIF ETF
Objective: The Harvest Retirement Income ETF aims to provide unitholders with a monthly cash distribution. There is also opportunity for capital appreciation. It targets a mix of equity income securities, focusing on quality companies with the potential for long-term growth.
Strategy: HRIF typically includes a diversified set of holdings across various sectors and geographies. The idea is to generate income through dividends and capital gains. The fund maintains a focus on companies that exhibit stability and growth potential.
Portfolio HRIF ETF
ETF Name
Weight
Sector
Harvest Brand Leaders Plus Income (HBF)
14.4%
Diversified
Harvest Equal Weight Global Utilities Income (HUTL)
Income Focus with Growth Potential: HRIF is particularly appealing to retirees or those close to retirement who are looking for a steady stream of income. The ETF’s strategy of investing in income-generating equities allows for a focus on distribution, which is crucial for investors relying on their investment for regular income.
Diversification: By investing in a range of sectors and geographies, HRIF offers diversification, which is key in managing risk, especially for retirees who may have a lower risk tolerance. Diversification can help smooth out returns and protect against sector-specific downturns.
Professional Management: HRIF is actively managed, meaning a team of professionals selects the holdings based on rigorous analysis. This can be an advantage for investors who prefer not to manage their own portfolios or those who value professional oversight in selecting quality income-generating investments.
HRIF ETF Sector allocation
Considerations
Fees: As with any managed fund, it’s important to consider the fees associated with HRIF. Higher fees can eat into returns over time, so weigh the cost against the potential benefits of professional management and strategy.
Market Risks: While HRIF aims to invest in stable, income-producing equities, it’s still subject to market risks. Economic downturns, sector-specific issues, or global events can affect the performance of the investments within the ETF.
Performance: Look at the historical performance of HRIF, but remember that past performance is not indicative of future results. Consider how the ETF has done in various market conditions and how it aligns with your risk tolerance and time horizon.
Conclusion
The Harvest Retirement Income ETF (HRIF) is an option worth considering for those focused on generating income in their retirement years. With its strategy of investing in a diversified portfolio of income-generating equities, HRIF seeks to provide a balance between income and growth. As with any investment, it’s crucial to understand your own financial situation, risk tolerance, and investment goals. Consult with a financial advisor to determine if HRIF or any other investment is a suitable part of your retirement planning strategy. Happy and wise investing!
Investing in semiconductor ETFs can be a smart way to gain exposure to the rapidly growing technology sector. Semiconductors are the backbone of modern electronics, powering everything from smartphones to advanced AI systems. Here, we explore some of the best semiconductor ETFs available to Canadian investors.
Why Invest in Semiconductor ETFs?
Growth Potential
The semiconductor industry is at the forefront of technological advancements, driving innovation in various fields such as artificial intelligence (AI), 5G, and autonomous vehicles. Leading companies like NVIDIA, AMD, and TSMC have shown remarkable growth due to their critical role in these cutting-edge technologies.
NVIDIA (NVDA): NVIDIA’s stock price increased by approximately 120% over the past year, driven by high demand for its GPUs, which are essential for AI, gaming, and data center applications.
Advanced Micro Devices (AMD): AMD saw its stock price rise by about 80%, benefiting from strong sales of its CPUs and data center processors, which compete directly with Intel.
Taiwan Semiconductor Manufacturing Company (TSMC) (TSM): TSMC’s stock increased by roughly 50%, supported by its position as the world’s largest contract chip manufacturer, with significant demand from clients like Apple and NVIDIA.
Company Name
Stock Price Increase
Key Performance Drivers
NVIDIA (NVDA)
~120%
High demand for gaming GPUs, AI applications, data centers
Advanced Micro Devices (AMD)
~80%
Competitive CPUs, data center processors, gaming market
Taiwan Semiconductor (TSMC) (TSM)
~50%
Demand from major clients, leading-edge technology
Intel Corporation (INTC)
~20%
Demand for PCs and data centers, substantial investments
Performance of Popular Semiconductor Stocks in the Past Year
Diversification
Investing in a semiconductor ETF provides diversification within the semiconductor sector, reducing the risk associated with investing in individual stocks. By holding a broad range of semiconductor companies, ETFs mitigate the impact of any single company’s performance on the overall investment. For example:
Accessibility
ETFs offer an easy and cost-effective way for Canadian investors to gain exposure to international semiconductor companies. They allow investors to participate in the growth of leading semiconductor firms without needing to invest directly in foreign markets.
1. iShares PHLX Semiconductor ETF (SOXX)
While not a Canadian-specific ETF, the iShares PHLX Semiconductor ETF (SOXX) is accessible to Canadian investors and is one of the most popular semiconductor ETFs. It tracks the performance of the PHLX Semiconductor Sector Index, which includes companies primarily involved in the design, distribution, manufacture, and sale of semiconductors.
Key Features:
Expense Ratio: 0.46%
Top Holdings: NVIDIA, Intel, Texas Instruments
Dividend Yield: Approximately 0.73%
Performance: Historically strong, driven by the growth of the semiconductor industry.
2. VanEck Vectors Semiconductor ETF (SMH)
Another U.S.-based but widely available option is the VanEck Vectors Semiconductor ETF (SMH). This ETF tracks the MVIS US Listed Semiconductor 25 Index, which provides exposure to the largest and most liquid companies in the semiconductor industry.
Key Features:
Expense Ratio: 0.35%
Top Holdings: Taiwan Semiconductor Manufacturing, NVIDIA, Intel
Dividend Yield: Approximately 0.62%
Performance: Consistently solid returns, benefiting from the sector’s overall growth.
3. Invesco Dynamic Semiconductors ETF (PSI)
The Invesco Dynamic Semiconductors ETF (PSI) is designed to track the performance of the Dynamic Semiconductor Intellidex Index, which evaluates companies based on a variety of investment criteria, including fundamental growth, stock valuation, investment timeliness, and risk factors.
Key Features:
Expense Ratio: 0.56%
Top Holdings: Broadcom, NVIDIA, Advanced Micro Devices
Dividend Yield: Approximately 0.34%
Performance: Focused on dynamic and innovative semiconductor companies, offering strong potential for growth.
4. Horizons Global Semiconductor Index ETF (CHPS)
For a Canada-specific option, the Horizons Global Semiconductor Index ETF (CHPS) provides Canadian investors direct exposure to global semiconductor companies. This ETF seeks to replicate the performance of the Solactive Capped Global Semiconductor Index, net of expenses.
Key Features:
Expense Ratio: 0.60%
Top Holdings: Broadcom, Intel, Advanced Micro Devices
Dividend Yield: N/A
Performance: Offers a diverse exposure to global leaders in the semiconductor industry.
How to Invest
Canadian investors can purchase these ETFs through their brokerage accounts (such as CIBC investors’ edge). It’s important to consider factors like the expense ratio, historical performance, and the specific holdings of each ETF to align with your investment goals.
Conclusion
Semiconductor ETFs present an exciting opportunity for Canadian investors looking to tap into the growth of the technology sector. Whether opting for global ETFs like SOXX or SMH, or a more Canada-focused option like CHPS, there are various choices to suit different investment strategies. Always conduct thorough research or consult with a financial advisor to ensure these investments align with your financial goals and risk tolerance.
For more insights on ETFs and other investment opportunities, continue exploring our blog for the latest updates and tips.
