Some financial experts recommend exchange-traded funds (ETFs) to investors who want to simplify the process or gain instant diversification. The Toronto Stock Exchange has more than 700 ETFs with a wide range of exposure to major asset classes and sectors.
ETFs trade like stocks and are relatively inexpensive. Most are index funds that attempts to match a particular index’s return every year. Since indexes gain value over time, some ETFs are excellent choices if you seek high growth. Many ETF investors consider three names as the best in the lot.
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Entire Canadian stock market
According to BlackRock, it’s like investing in the entire Canadian stock market at a low cost. Likewise, the ETF is designed for long-term holding. As of January 17, 2022, net assets are around $10.41 billion, while total holdings number 241 (asset class is 100% equities).
Growth solutions
The BMO S&P/TSX Capped Composite Index ETF (TSX:ZCN) is for investors searching for growth solutions. The underlying index includes more than 200 top-ranked Canadian stocks, so would-be investors gain diversified exposure to approximately 95% of the country’s primary equity market.
ZCN consists of stocks (99.83%) and cash & cash equivalents (0.17%). As of this writing, the number of holdings is 242. The geographic allocation is 100% Canada. This ETF’s sector allocation skews toward the financials (32.22%), energy (13.02%), and industrials (11.94%) sectors.
Top-performing ETF
Horizons S&P/TSX 60 Index ETF (TSX:HXT) has been among TSX’s top-performing ETFs in the last three years. HXT’s total return was 61.49% (17.2% CAGR). Horizons’ investment objective is straightforward. It seeks to replicate the S&P/TSX 60 Index’s (total return) performance.
Note that the index addresses the needs of investment managers who require a portfolio index of the large-cap market segment of the Canadian equity market. Also, the structure reflects the sector weights of the S&P/TSX Composite. Horizons ETFs Management (Canada) Inc. is the fund’s investment manager.
Like XIC and ZCN, financials (36.34%) and energy (13.45%) sector stocks comprise the top two sector holdings. However, information technology (11.67%) is the third-largest sector constituent of HXT. The top holding is Shopify (8.1%), followed by RBC (7.83%), and TD (7.24%). As of January 17, 2022, HXT trades at $51.87 per share (+1.99% year-to-date), while net assets stand at 3,041,962,054.
Stock market exposure in a big way
Investment managers of ETFs don’t go through the laborious exercise of research and analysis when picking holdings. Since ETFs track specific indexes, they buy and sell stocks only when the underlying indexes add or remove names. If you have limited funds but want exposure to the stock market in a big way, go ETF investing.
