Canadian investors have been showing more and more interest in exchange-traded funds (ETFs) these days. And no wonder. After years of volatile growth, it’s time to look at ETFs that can provide you with far safer growth. This comes from purchasing an entire portfolio of equities, bonds, and more with the click of a button.
However, not every ETF is perfect. In fact, you’ll still need to do your research to come up with a diversified range of ETFs that will fit exactly what you want. Even still, if you have $100 to spend, these are the three I would pick up for the perfect diversified ETF portfolio.
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Growth
If you’re looking for growth over the next few years, then you’re going to want an actively managed ETF. These are ETFs that are managed by a team of professionals. While this does mean there are higher commission fees, it also means that you could see more growth as they are rebalanced regularly.
A strong choice in this case is CI First Asset Tech Giants Covered Call ETF (TSX: TXF). This ETF seeks to provide investors with exposure to the performance of a portfolio consisting primarily of equity securities of technology companies while generating additional income through a covered call options strategy.
As to strategy, the ETF primarily invests in large-cap technology companies that are considered leaders in their respective industries. These include the “Magnificent Seven” companies in the United States, and other major players in the tech sector. Shares of the ETF are up 35% in the last year alone and climbing. Plus, there is the addition of a 6.96% divided yield for added income.
Income
Speaking of income, another ETF that investors will want to focus on is one that provides solid income. While growth might be far lower, you can look forward to fixed income often on a monthly basis — all while seeing far lower commission fees since these typically are not actively managed funds.
In this case, I would consider BMO Ultra Short-Term Bond ETF (TSX: ZST). This ETF aims to provide income with capital preservation by investing primarily in a diversified portfolio of short-term, fixed-income securities. The fund aims to maintain a low duration, which refers to the sensitivity of bond prices to changes in interest rates.
By focusing on short-term bonds, the ETF aims to mitigate interest rate risk while providing investors with a source of regular income. Because of the low duration in which it holds bonds, it is less sensitive to changes in interest rates. This feature can be appealing to investors seeking to minimize interest rate risk. So, while you won’t see returns really from this investment, you can grab a stable dividend at a 4.97% yield.
Diversification
Now, investors will want to round this out with exposure to a diversified ETF that can provide a strong core for your overall portfolio. To do this, you’ll likely want to invest in an ETF that doesn’t include Canada. Because Canadians tend to be heavily invested at home, you want exposure to everything else.
A great option in this case is Vanguard FTSE Global All Cap ex Canada Index ETF (TSX: VXC). The ETF seeks to provide long-term capital growth by replicating the performance of the FTSE Global All Cap ex Canada Index. The ETF invests in a broad range of global equities, excluding Canadian stocks, to provide investors with exposure to companies across developed and emerging markets worldwide. This approach offers diversification across geographies, sectors, and market capitalizations.
It really offers the best of everything. You get exposure to global investments and emerging markets. There is comprehensive coverage from small to large-cap stocks. And it’s low-cost. Plus, dividends are reinvested back into the fund for even more long-term potential. So, with shares up 20% in the last year and a 1.55% divided yield, it’s the perfect way to round out your long-term growth.
