Retirement Savers: 3 Ultra-Safe ETFs for Your RRSP or TFSA

If you’re saving for retirement, funds like iShares Core Capped S&P/TSX Composite Index ETF (TSX:XIC) can be great bets.

| More on:
Female hand holding piggy bank. Save money and financial investment

Image source: Getty Images

If you’re a retirement saver looking for safe investments, ETFs are some of the best bets.

Offering built-in diversification and extremely low fees, they’re safer than stocks and cheaper than typical mutual funds.

Among ETFs, the cheapest and best diversified are index ETFs. By simply investing in equally weighted shares on an index, they forego the need for active management. This simultaneously reduces MER and maximizes diversification.

If you’re looking to get some quality ETFs into your RRSP or TFSA, the following are three excellent candidates to consider.

iShares Core Capped S&P/TSX Composite Index ETF

iShares Core Capped S&P/TSX Composite Index ETF (TSX:XIC) is a Blackrock index fund that tracks the S&P/TSX Composite Index; its holdings represent 70% of the market capitalization on the TSX.

This isn’t exactly the same as buying the market (the composite excludes very small-cap stocks), but it’s extremely close.

By buying XIC, you immediately get a basket of about 250 stocks. The sectors with the heaviest weightings include banks, energy and telecommunications. The TSX index has a pretty high average dividend yield compared to U.S. indices; as a result, XIC delivers a respectable amount of income.

iShares S&P/TSX 60 Index ETF

iShares S&P/TSX 60 Index ETF (TSX:XIU) is another Blackrock fund that aims to replicate TSX stocks. However, instead of following the S&P/TSX Composite, this one tracks the TSX 60, which only includes the largest 60 stocks on the TSX by market cap.

The fact that XIU focuses on large caps gives it some advantages over XIC.

First, its dividend yield is slightly higher (2.78%) than its more popular sibling (2.53%).

Second, it has enjoyed a slight performance advantage historically over XIC.

Canada has not produced as many small-cap success stories compared to U.S. markets, and its large caps have done a little better than the TSX as a whole. That’s a slight advantage for XIU. However, it should also be noted that with XIU, you’re also getting somewhat less diversification than with XIC.

Vanguard S&P 500 Index ETF

Vanguard S&P 500 Index ETF (TSX:VFV) tracks the S&P 500, the world’s most watched stock market index.

Over the years, the S&P 500 has easily beaten both the TSX and the TSX 60, thanks to the preponderance of growth success stories in the United States.

The U.S. version of Vanguard’s S&P 500, VOO, is one of the most widely owned funds in the world. VFV, the Canadian version, is the exact same portfolio but traded on the TSX. This means you can buy it without dealing with currency exchange rates. However, if you buy the U.S. version, you’ll get to hold on to a larger portion of your dividends in an RRSP, so that’s worth paying attention to.

VFV has a dividend yield of 1.34% at current prices, which is not as high as the Canadian ETFs mentioned. However, VFV has much stronger historical capital gains.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Andrew Button owns shares of iSHARES SP TSX 60 INDEX FUND.

More on Dividend Stocks

financial freedom sign
Dividend Stocks

Invest $300 Each Month in This Dividend Stock to Actually Create a $1 Million Portfolio

This dividend stock is the perfect option if you're looking for solid returns and passive income to actually create a…

Read more »

A meter measures energy use.
Dividend Stocks

3 Utility Stocks That Are Too Cheap to Ignore

Some utility stocks are priced too low to overlook. Here are three stellar options that every investor should consider buying…

Read more »

stock research, analyze data
Dividend Stocks

Rogers Stock Rose 10% in November: Is it a Buy Today?

Which is a better in the Canadian telecom sector: BCE or Rogers stock?

Read more »

Dividend Stocks

2 TSX Dividend Stocks Offering Big Income in a Bearish Market

A bear market is the time to buy dividend stocks and lock in long-term income. Here are two stocks that…

Read more »

FREIGHT TRAIN
Dividend Stocks

These 2 Dividend Payers Are Outpacing the TSX

Some leading TSX dividend stocks are outperforming the market. CN and ENB stock are two to watch.

Read more »

TFSA and coins
Dividend Stocks

Retirees: How to Earn Tax-Free Income in 2023 to Supplement Your OAS and CPP Payouts

These two high-yielding ETFs can help retirees meet their retirement income needs.

Read more »

HIGH VOLTAGE ELECRICITY TOWERS
Dividend Stocks

3 Canadian Utility Stocks for Passive Income

Canadian utility stocks have fallen and you can pick up serious bargains for passive income and growth. Here are three…

Read more »

TFSA and coins
Dividend Stocks

Passive Income: 2 Top TSX Dividend Stocks to Buy for a TFSA

These top TSX stocks pay growing dividends with attractive yields.

Read more »