There’s one thing that many investors may not hear when they get started. And that’s the fact that eventually, every company closes up shop. Companies we couldn’t imagine ever going under have come and gone over the decades. From PanAm to BlockBuster, times change, and that means so too do investments.
With that in mind, exchange-traded funds (ETF) offer a far safer long-term investment. These can change simply because they are either actively managed, or follow an index. There’s no work on your part, so if a stock goes under, the ETF will manage!
So if you’re looking to build up a long-term portfolio, let’s get into three I would start with right away.
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Global growth
The Vanguard FTSE All-World ex Canada Index ETF (TSX: VXC) is a strong choice for investors seeking global exposure in their portfolios. The ETF holds comprehensive diversification and impressive performance metrics.
From a valuation perspective, VXC boasts a price-to-earnings (P/E) ratio of 19.7, which is reasonable given the global diversification and inclusion of both developed and emerging markets. The ETF’s yield of 1.6% also provides a modest but steady income stream. This, combined with its year-to-date daily total return of 15.7%, demonstrates its potential for both income and capital appreciation.
Furthermore, VXC’s expense ratio is an exceptional feature, effectively minimizing the cost of investment and maximizing net returns for investors. Its beta of 1 over five years as well shows that the ETF’s volatility is in line with the broader market, providing a balanced risk profile. Given these factors, VXC stands out as a compelling option for investors aiming to diversify their holdings internationally while benefiting from strong returns and low investment costs.
Dividends
The iShares Canadian Select Dividend Index ETF (TSX: XDV) is another top choice for investors seeking consistent monthly income through high dividend yields. XDV’s financial metrics enhance its appeal. It has a P/E ratio of 10.3, indicating that it is attractively valued relative to the earnings it generates. This low P/E ratio, combined with a substantial yield of 5.1%, makes XDV an excellent option for income-focused investors. The high yield is particularly appealing for those looking to generate steady cash flow, which is distributed monthly, providing a reliable income stream.
Furthermore, XDV’s year-to-date daily total return is 6.4%. This demonstrates its capacity to deliver both income and capital appreciation, despite being primarily focused on high dividend yields. The ETF’s beta of 0.9 over five years suggests lower volatility compared to the broader market, offering a relatively stable investment with reduced risk.
Add in its low expense ratio, which minimizes investment costs, XDV stands out as a cost-effective and efficient option for investors aiming to enhance their portfolio with high dividend-paying Canadian stocks. This combination of stability, high yield, and low costs makes XDV a compelling choice for dividend-focused investors.
High growth potential
Finally, the iShares S&P/TSX Capped Information Technology Index ETF (TSX: XIT) is a great option for investors seeking high growth potential within the Canadian market. Especially through exposure to the information technology sector. Yet if you’re worried it’s just a new ETF bound to fail, think again. The ETFs inception date of March 19, 2001 highlights its long-standing presence in the market, providing investors with nearly two decades of performance history and credibility.
XIT’s primary appeal lies in its focus on the technology sector. This, of course, is known for its high growth potential. The ETF’s P/E ratio of 46.6 reflects the premium investors are willing to pay for the growth prospects. The year-to-date daily total return of 1.8% might seem modest. But it must be considered in the context of the volatile tech sector. This can experience rapid growth during favourable market conditions.
This said, it’s clear that investing in XIT does come with higher volatility. That’s seen by its beta of 1.7 over five years. This indicates greater fluctuations compared to the broader market. The higher risk is balanced by the potential for substantial returns. And that makes XIT suitable for investors with a higher risk tolerance seeking significant capital growth. So, for those looking to tap into the dynamic and rapidly evolving Canadian technology sector, XIT offers a targeted and efficient investment option.
