Greetings, you charming and astute Canadian. We’re always excited to meet a Canadian who is interested in ETFs as a kind of passive investing. You’re in excellent company, as Justin Trudeau’s presence in this video attests.
Newbie investors should look at ETFs designed to track the growth of two of our favorite economies: our own homegrown Canadian economy and that of our sometimes rambunctious southern neighbor, the United States. To invest in US firms, you don’t have to drive many hours or endure US customs; you can buy US equity ETFs from the comfort of your own home. So when we say Canadian ETFs, we’re referring to a selection of ETFs that allow you to invest in either the US or Canadian economy.
We’ve compiled a list of the most popular exchange-traded funds (ETFs) that invest in the Canadian or US stock markets—nothing fancy here, like ETFs that short the market or focus on specific sectors. What exactly do we mean when we say ‘prominent’? These are the ETFs with the most assets under management. So, why should one choose one over the other? That is an excellent question. The Canadian and US stock markets share some similarities; both, for example, have a slew of massive financial services firms; however, due to Canada’s vast natural resources, the Toronto Stock Exchange tends to have a higher concentration of energy, mining, and mineral stocks, whereas the New York Stock Exchange has a higher concentration of technology and healthcare firms. ETFs frequently have very low, or no, investment minimums. And, given that diversity, as discussed in this article, is one of the best tactics for maximizing gains while limiting losses, it might be worthwhile to purchase some exposure to both the US and Canadian markets. Before you invest, keep in mind that any stock investment is speculative, and previous performance isn’t necessarily indicative of future outcomes.
What are some of the top Canadian ETFs
The iShares Core S&P/TSX Capped Composite Index ETF, the BMO S&P TSX Capped Composite IDX ETF, the Horizons S&P/TSX 60TM INDEX ETF, and the Vanguard FTSE Canada All Cap ETF are some of the best Canadian ETFs that invest in Canadian firms.
Consider checking out the ETFs listed below. The most major difference between them is the index they are attempting to replicate through their stock holdings. The ETFs with the biggest assets under management (AUMs) will be at the top of the list.
What are the best dividend ETFs in Canada?
The BMO Canadian Dividend ETF is another outstanding addition to the list of Canada’s best dividend ETFs. This income-producing instrument, issued by the Bank of Montreal, aims to offer investors with exposure to the performance of a yield-weighted portfolio of Canadian dividend-paying equities.
The ETF seeks to invest in a portfolio of Canadian equities securities that has the potential for long-term growth and dividend growth. The underlying diversified dividend-paying assets offer monthly dividend income to the ETF’s participants. Over the years, the medium-risk ETF has outperformed the market, and it provides investors with a very stable income.
In Canada, how do I choose an ETF?
Choose the ETF with the lowest cost, as measured by the MER, if all other factors are equal. ETFs that replicate an index passively have the lowest management costs since they require the fund manager to make fewer choices.
Actively managed ETFs (along with some specialized and theme ETFs) have higher fees since their mandates require the fund manager to make more choices and provide more supervision.
When choosing between ETFs that track the same benchmark in the same way, as well as actively managed or specialized funds with almost identical mandates and holdings, it’s usually best to go with the lowest fee option. Paying a greater fee won’t offer you a better return; instead, it will lower your earnings.
What is the most secure ETF to buy?
“Start with index ETFs,” suggests Alissa Krasner Maizes, a financial adviser and founder of the financial education website Amplify My Wealth. “They have modest expenses and provide rapid diversity.” Some of the ETFs she recommends could be a suitable fit for a wide range of investors:
Taveras also favors ETFs that track the S&P 500, which represents the largest corporations in the United States, such as:
If you’re interested in areas like technology or healthcare, you can also seek for ETFs that follow a specific sector, according to Taveras. She recommends looking into sector index ETFs like:
ETFs that monitor specific sectors, on average, have higher fees and are more volatile than ETFs that track entire markets.
In Canada, how do I purchase the S&P 500 index?
Yes, you can invest in the S&P 500 from Canada in a variety of ways. The S&P 500 is a stock market index that measures the performance of 500 of the largest publicly traded firms in the United States. This means you can’t invest directly in the S&P 500 index, but you can buy equities in the firms that make up the index or buy an index fund, such as a mutual or exchange traded fund, that tracks the index’s overall performance.
How to invest in the S&P 500 index in Canada
- Invest in an S&P 500 index fund. Some index funds track the performance of all 500 S&P equities, while others only track a subset of them or are more heavily weighted in one direction. Choose the fund that best meets your investment objectives.
- Make an account with a trading platform. You’ll need to open a trading account with a broker or platform to invest in an S&P 500 fund. It’s worth noting that some index funds are only available through specific brokerages or platforms.
- Make a deposit. To start trading, you’ll need to make a deposit into your account. You may be charged a deposit fee by some brokers, or you may be required to pay a currency fee to convert your Canadian dollars into US dollars.
- Invest in an index fund. After you’ve deposited your funds, you can purchase the S&P 500 index fund. Investing in an ETF or index fund usually comes with a minor annual fee.
Can I invest in an ETF using a TFSA?
Tax-free savings accounts (TFSAs) have been increasingly popular in recent years. They’re tax-advantaged investment schemes that have been registered with the IRS. Growth on TFSA assets, whether in the form of capital gains, interest, or dividends, is tax-free, and amounts can be withdrawn without being counted as part of your taxable income. You cannot deduct your TFSA contributions from your taxable income, unlike a Registered Retirement Savings Plan. Amounts taken from your TFSA will be added to the following year’s contribution room. Residents of Canada who have reached the age of majority in their jurisdiction, either 18 or 191, are eligible to open TFSAs.
How does a TFSA work?
TFSAs aren’t the same as regular savings accounts. When you think of them as investment vehicles, you may unlock significant wealth. You must also evaluate your risk appetite and if your goals are long-term or short-term while managing your TFSA. Only qualifying investments, such as mutual funds, publicly traded equities, government bonds, some corporate bonds, ETFs, GICs, cash, and even certain options, are allowed in your TFSA, according to the Income Tax Act.
The types of investments you can buy are also determined by your TFSA account type.
Investing with a TFSA
You just open a TFSA registered plan with your bank with a regular TFSA account. The types of investments you can make in this TFSA will, of course, be limited to those given by your bank. GICs, savings accounts, and mutual funds offered by your bank are typical examples.
You are not limited to the money given by your financial institution if you have a self-directed TFSA. Almost any financial institution offers mutual funds, GICs, stocks, bonds, ETFs, and other investment options. You have complete control over your account as the account holder. You also gain control over how your investments are managed. With a TFSA from TD Direct Investing, you may put yourself in a position to profit from opportunities in both the Canadian and US markets. Remember to examine your risk profile before making any investing decisions.
Is it possible to live just on dividends?
The most important thing to most investors is a secure retirement. Many people’s assets are put into accounts that are only for that reason. Living off your money once you retire, on the other hand, might be just as difficult as investing for a decent retirement.
The majority of withdrawal strategies require a combination of bond interest income and stock sales to satisfy the remaining balance. This is why the renowned four-percent rule in personal finance persists. The four-percent rule aims to provide a continuous inflow of income to retirees while also maintaining a sufficient account balance to continue for many years. What if there was a method to extract 4% or more out of your portfolio each year without selling shares and lowering your principal?
Investing in dividend-paying equities, mutual funds, and exchange-traded funds is one strategy to boost your retirement income (ETFs). Dividend payments produce cash flow that might complement your Social Security and pension income over time. It may even give all of the funds necessary to sustain your pre-retirement lifestyle. If you plan ahead, it is feasible to survive off dividends.
Is it wise to invest in Vanguard ETF?
Vanguard S&amp (VOO) This fund follows the S&P 500 index, which means it holds the same companies as the index and attempts to replicate its performance over time. This ETF is ideal for investors who wish to minimise their risk while boosting their long-term gains potential.