When it comes to long-term investments, exchange-traded funds (ETF) can be the best in the business. You have an entire portfolio at your fingertips! But that doesn’t mean the choice becomes a lot easier, with thousands to choose from.
Today, however, we’re focusing on two. The Vanguard FTSE Canada All Cap Index ETF (TSX: VCN) and the iShares Core MSCI All Country World ex Canada Index ETF (TSX: XAW) are two of the best ETFs to consider for a buy-and-hold strategy. These ETFs provide a solid blend of diversification, risk management, and growth potential, making them ideal for decades-long investing.
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VCN
VCN gives you exposure to a wide range of Canadian companies, from large-cap blue-chip stocks to smaller, high-growth firms. With top holdings, VCN offers diversified exposure across Canada’s key industries, including financials, energy, and technology. As of its latest figures, VCN has delivered strong annual returns, averaging 9.3% since its inception in 2013. The Canadian market has shown resilience, and with a fund like VCN, you get to capitalize on the strength of sectors like banking. These make up over 30% of the fund.
VCN has seen solid performance in recent months, benefiting from Canada’s robust financial and energy sectors. In 2024, it returned an impressive 29.8%, riding the waves of a strong domestic market. The ETF’s quarterly dividends, most recently yielding 2.9%, also add to its appeal for passive income investors.
XAW
While Canada offers prime investment opportunities, global diversification is crucial. This is where XAW comes in. By excluding Canadian stocks, XAW provides exposure to international markets, including the United States, Europe, and emerging markets. The fund’s largest holdings are heavily weighted in sectors like technology and healthcare. This global reach is key for long-term investors looking to spread risk and tap into growth outside the Canadian economy.
XAW has become increasingly popular as investors seek diversification amid global economic uncertainty. With technology stocks driving returns, XAW offers access to high-growth areas like tech and healthcare, which have shown resilience even in volatile markets. The global diversification it provides helps investors mitigate the risk of being too concentrated in one market.
Common themes
Both VCN and XAW are managed by reputable firms. Vanguard, known for its low-cost and index-driven strategies, ensures that VCN stays well-diversified across Canada’s entire stock market. iShares, a leader in global ETFs, ensures that XAW provides balanced exposure to different regions and sectors, making it a top choice for those looking to capture global growth.
As long-term investments, both VCN and XAW are poised to perform well due to their diversified nature and sector exposures. VCN’s focus on the Canadian market means it will benefit from Canada’s resource-rich economy, especially in energy and financials. Meanwhile, XAW’s exposure to international markets, including emerging economies, positions it well for future growth, particularly as global economies continue to recover and expand.
Bottom line
Together, VCN and XAW offer an excellent combination of domestic and global diversification, making them perfect for long-term investors. VCN gives you access to Canada’s leading industries, while XAW expands your portfolio globally – thusly spreading risk across various sectors and regions. Together, these ETFs provide a balanced and robust foundation for decades of steady growth.
