Are you new to investing? I’m not here to talk you out of picking stocks. Sooner or later, you’ll likely give it a try, and it can be a fulfilling and rewarding hobby when done thoughtfully.
Instead, I want to suggest an approach that lets you have fun with stocks while still keeping your investments on solid ground: the “core-satellite” method.
With this strategy, you can allocate 10% of your portfolio to individual stocks – the satellite – while dedicating the remaining 90% to a low-cost, globally diversified index fund – the core.
The satellite gives you the freedom to explore stocks you’re passionate about, but the core ensures your portfolio remains balanced and protected from excessive risk. It’s a win-win.
So, what should you choose for your core? Here’s an index fund I think is a must-buy for Canadian investors.
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Why I like this Vanguard index fund
When it comes to finding a reputable and beginner-friendly fund manager, Vanguard is an excellent place to start.
Known for their low fees and investor-owned structure, Vanguard puts its clients’ interests first, making their funds a go-to for cost-conscious investors.
The one I think is ideal for beginners is the Vanguard FTSE Global All Cap ex Canada Index ETF (TSX: VXC).
This ETF is highly diversified, holding thousands of stocks across large, medium, and small companies. Its portfolio spans the U.S., international developed markets like Japan, the U.K., and Germany, as well as emerging markets such as China, India, and Brazil.
In essence, VXC lets you invest in nearly the entire global stock market with just one purchase – just like buying any other stock.
Another reason I like VXC is its low management expense ratio (MER) of just 0.22%. If you invested $10,000, the annual fees would amount to only $22.
And don’t worry – you don’t pay this fee directly. It’s automatically deducted over time from the ETF’s returns, leaving you with a hassle-free investment option
Why buy VXC?
I like VXC because it specifically excludes Canadian stocks, making it a natural choice for the 90% core of a “core-satellite” portfolio.
Here’s the idea: allocate 90% of your portfolio to VXC for global exposure, and use the remaining 10% to explore and learn about Canadian stocks.
This setup ensures minimal overlap, as your satellite holdings focus on Canadian opportunities while the core stays globally diversified.
Over the long term, the majority of your portfolio will track the global market’s average return. And if you’re lucky – or develop strong investing skills – the 10% satellite in Canadian stocks might even help you outperform.
