3 Canadian ETFs to Buy and Hold for Decades

There are few investments better than the iShares S&P/TSX 60 Index Fund (TSX:XIU) for Canadian passive investors.

| More on:
exchange-traded funds

Image source: Getty Images

ETFs (exchange-traded funds) are among the best investments for “buy and hold” investors. You never know when a bad earnings miss or accounting scandal will ruin an individual company, but a broad market index will usually perform decently over the long term. While you’re unlikely to get rich with index funds, they’re among the best ways to ensure an “average” return over a long period. With that in mind, here are three Canadian ETFs to buy and hold for decades.

iShares S&P/TSX 60 Index Fund

The iShares S&P/TSX 60 Index Fund (TSX:XIU) is Canada’s most popular ETF by trading volume. Every month, about 3.6 million XIU shares exchange hands, making it a true monster among Canadian funds.

What makes XIU such a great buy and hold investment?

First, it’s super diversified. With 60 stocks, it has as much diversification as you need to limit exposure to the worst corporate catastrophes.

Second, it’s based on large caps, which also reduces risk somewhat.

Third and finally, the fee is quite low, approximately 0.16% per year. That’s not the lowest index fund fee out there, but it’s low enough that you won’t notice its effects.

The BMO U.S. Mid-Term Investment Grade Corporate Bond ETF (TSX:ZIC) is a top Canadian bond fund that holds U.S. bonds. The bonds it holds are top rated corporate bonds. The high ratings mean that the bonds are considered safe. However, they’re just risky enough to deliver some kind of return.

As of this writing, ZIC yielded 3.15%. That’s as high a yield as many dividend stocks, yet you get the added safety of bonds–which get priority payment over dividends. By contrast, the 10 year U.S. treasury yields 1.7%. With a bond fund like ZIC, you’ll get a much higher return than the risk free rate, without taking on an inordinate amount of risk, which is definitely worth looking into.

The Vanguard S&P 500 Index Fund

You might be surprised to see the Vanguard S&P 500 Index Fund (TSX:VFV)(NYSE:VOO) on this list. After all, it’s a U.S. fund. What does this have to do with Canadian ETFs?

Well, the stocks in the Vanguard S&P 500 index fund are certainly American. But you can actually buy a Canadian version of the fund itself. If you buy the Vanguard S&P 500 as “VFV” on a Canadian exchange, you don’t need to deal with currency conversion costs, or worry about exchange rates. That makes the decision to invest in it a little easier. On the flipside, VFV has a slightly higher fee than VOO (0.08% vs 0.04%), but either fund’s fee is near-zero.

VFV is one of the world’s most popular index funds for a reason. Tracking the S&P 500, its holdings are among the best performing stocks in the world. As a Canadian investor, it’s only natural to invest in Canadian stocks. But there’s no reason not to get some U.S. exposure in the mix too. To that end, VFV could work wonders.

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 and Vanguard S&P 500 ETF. The Motley Fool owns shares of Vanguard S&P 500 ETF.

More on Dividend Stocks

Technology
Dividend Stocks

10 Years From Now, You’ll Be Glad You Bought These Magnificent TSX Dividend Stocks

The TSX is lucrative to buy these magnificent dividend stocks in bulk and be proud of this decision 10 years…

Read more »

calculate and analyze stock
Dividend Stocks

4 Fabulous Dividend Stocks to Buy in July

Are you looking for long-term income? These four dividend stocks should not only provide you with value in July but…

Read more »

financial freedom sign
Dividend Stocks

5 Steps to Financial Freedom for Canadian Millennials

Follow these steps and nothing can stop Canadian millennials from achieving their early retirement dreams.

Read more »

Investor wonders if it's safe to buy stocks now
Dividend Stocks

We’re Only Getting Older: A Top TSX Stock That Benefits From an Aging Population

For a bet on the aging population, consider this small-cap stock with growth potential.

Read more »

Growing plant shoots on coins
Dividend Stocks

Yield Today, Growth Tomorrow: 3 Stocks to Keep Building Your Wealth

For investors seeking yield today and growth tomorrow, these top Canadian dividend stocks are certainly worth considering right now.

Read more »

Payday ringed on a calendar
Dividend Stocks

This 10.72% Dividend Stock Pays Cash Every Month

This dividend stock remains a consistent, defensive dividend producer that will give up over 10% in income each and every…

Read more »

Blocks conceptualizing Canada's Tax Free Savings Account
Dividend Stocks

TFSA Investors: 2 Standout Domestic Stocks With 7% Yields

These top dividend-growth stocks look oversold.

Read more »

Dividend Stocks

2 Dividend Stocks to Double Up on Right Now

Despite their recent declines, the long-term growth outlook of these two top dividend stocks remains strong, which could help their…

Read more »