There aren’t many individual stocks I’d commit to buying and holding forever. Things change – management can falter, accounting scandals erupt, competition heats up, or regulatory scrutiny tightens. These are idiosyncratic risks, and as an investor, they’re risks you don’t get compensated for.
On the other hand, give me an exchange-traded fund (ETF) with hundreds of stocks, and I’m all in for the long haul. Sure, it’ll fluctuate with the market, but the broad diversification eliminates company-specific risks.
Over time, I’m betting the companies in those ETFs will, on average, grow their earnings, pay dividends, and buy back shares. Here are three low-cost index ETFs you can buy today, hold forever, and combine into a globally diversified stock portfolio.
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U.S. stocks
First up is the BMO S&P 500 Index ETF (TSX: ZSP), which gives you exposure to 500 of the largest U.S. companies. These stocks are screened for liquidity, prominence, and earnings quality, ensuring you’re holding some of the most well-established names in the market.
The ETF is market-cap weighted, meaning companies with the highest market value take up a larger share of the fund. This approach ensures your investment aligns with the overall U.S. market’s composition.
The cost? A rock-bottom 0.09% management expense ratio (MER). On a $10,000 investment, that’s just $9 in annual fees. For this level of diversification and exposure to the world’s largest economy, that’s a bargain.
Canadian stocks
Sure, you could try your hand at picking individual Canadian stocks, but why bother when you can own the 60 most prominent ones in a single click with the BMO S&P/TSX 60 Index ETF (TSX: ZIU)?
This ETF tracks the S&P/TSX 60, a basket of the largest and most liquid Canadian companies, spanning sectors like financials, energy, and materials. It comes with a slightly higher 0.15% MER, but that’s still dirt cheap by most standards.
Plus, it pays a solid 2.6% dividend yield, giving you a steady stream of income. Better yet, most of these dividends are categorized as eligible dividends, making them more tax-efficient for Canadian investors holding this ETF in non-registered accounts.
International stocks
Finally, to round out your diversification, consider the BMO MSCI EAFE Index ETF (TSX: ZEA).
EAFE stands for Europe, Australasia, and the Far East, so this ETF holds stocks from developed markets outside of North America, including heavyweights like Japan, the United Kingdom, Germany, France, Australia, and Switzerland.
It’s slightly more expensive at a 0.22% MER, but that’s standard for ETFs covering non-North American markets. Plus, it pays a respectable 2.7% dividend yield, providing a bit of income while giving you exposure to global growth opportunities.
