Buying exchange-traded funds (ETF) and holding them in a Tax-Free Savings Account (TFSA) is like getting the best of both worlds. You enjoy the growth or dividends from a diversified portfolio without worrying about taxes eating into your returns. Since the TFSA allows your investments to grow tax-free, every gain you make stays in your pocket. Whether from rising stock prices or juicy dividends. Plus, with ETFs, you’re spreading your risk across many companies. So, you get a built-in safety net while watching your money work for you! With that in mind, here are two to consider.
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XAW
iShares Core MSCI All Country World ex Canada Index ETF (TSX: XAW) is a go-to option for global diversification. Launched in 2019, this ETF aims to provide broad exposure to international stocks, specifically excluding Canadian companies. It’s a great pick if you want to spread your investments across different countries and sectors. As of writing, the ETF has a previous close of $42.17, with a range today from $42.65 to $42.77 — not too far from its 52-week high of $42.77. The 52-week low? $32.75. It’s clear this ETF has shown some solid growth over the past year!
When it comes to the makeup of XAW, it includes a variety of global companies across both developed and emerging markets. This means you’re investing in big players across the U.S., Europe, Asia, and beyond. Some of the largest holdings are in major tech companies, while sectors like financials and healthcare are also well-represented. You’re essentially getting a basket of high-quality international stocks in one neat package.
Performance-wise, XAW has had a strong year, with a year-to-date total return of 17.94%. Its price-to-earnings (P/E) ratio stands at 20.76, indicating a fair valuation considering its global exposure. The ETF has a modest yield of 1.55%, meaning you’ll get a little income too. However, the main appeal here is long-term growth. With a five-year beta of 1.01, it mirrors the market pretty closely, providing some stability. All this comes with an ultra-low expense ratio, making it a low-cost option for investors looking for diversified international exposure in their TFSA.
XDV
iShares Canadian Select Dividend Index ETF (TSX: XDV) on the TSX is a solid choice for income-focused investors, offering exposure to Canada’s top dividend-paying companies. Launched in 2005, this ETF has been around for a while, thereby providing a dependable way to collect dividends while staying diversified within the Canadian market. Over the last 52 weeks, it has performed well, reaching a high of $30.95 from a low of $24.30, with shares near 52-week highs as of writing.
In terms of its holdings, XDV focuses on Canadian companies with strong, reliable dividend histories. These are typically blue-chip stocks from sectors like financials, utilities, and energy. With net assets of $1.64 billion, this ETF includes big names like the major Canadian banks and utility companies, thereby ensuring a steady stream of income from dividends. It’s well-diversified across various sectors, providing exposure to the core pillars of the Canadian economy.
When it comes to performance, XDV has delivered a year-to-date total return of 15.14%, thus making it a strong contender for those seeking both growth and income. The ETF sports a yield of 4.68% at writing, making it attractive for dividend-focused investors looking for regular payouts. With a P/E ratio of 11.32, it’s relatively undervalued. Plus, its five-year beta of 0.91 suggests it’s slightly less volatile than the overall market. And with a low expense ratio, you get all these benefits without having to worry about hefty fees. It’s a smart choice for a TFSA or any long-term income strategy!
