The 1 Canadian Stock I’d Buy and Hold Forever in a TFSA

If you’re looking for one and only one investment, then this ETF is the best option out there for your TFSA.

Amy Legate-Wolfe

Amy became interested in investing in 2018 after having her first daughter. After receiving a masters degree in journalism from Western University, she became frustrated that the finance industry remained a confusing place for Canadians like her: new parents, millennials, and other young people who needed to understand their finances. Now, Amy focuses on tech companies and renewable energy for growth opportunities, coupling that with long-term investing strategies and equities. She also provides investors with a daily newsletter, Canada Stock Digest, for daily market updates. Before joining Motley Fool Canada, she wrote for major news organizations including HuffPost, CTVNews.ca, and CBC. When she’s not researching investing strategies, Amy’s time is pretty much monopolized by her two wild daughters, but in what little spare time she has she loves to do yoga, go on walks with her dog, and travel with her husband. Follow Amy on LinkedIn and Canada Stock Digest. Favorite Investment Quote: “October: This is one of the particularly dangerous months to speculate in stocks. The others are July, January, September, April, November, May, March, June, December, August and February.” – Mark Twain

Published January 13, 2025 4:00 pm EST

| More on: VXC

If you’re considering just one investment for your Tax-Free Savings Account (TFSA), Vanguard FTSE Global All Cap ex Canada Index ETF (TSX:VXC) could be the perfect choice. Its global diversification, cost efficiency, and exposure to major economic growth sectors make it a standout option. Let’s explore why exchange-traded fund (ETF) VXC deserves a spot at the top of your TFSA wish list.

Pile of Canadian dollar bills in various denominations — Source: Getty Images

Global reach

The most compelling feature of VXC is its global reach. This ETF offers exposure to thousands of stocks from developed and emerging markets across the globe, excluding Canada. By doing so, it helps diversify your investments beyond the Canadian market, which only represents about 3% of the global stock market. This diversification is a built-in strategy to mitigate risk. If one region or market underperforms, others may help balance the portfolio.

VXC’s holdings include some of the most robust ETFs from Vanguard. A mix of large-cap, small-cap, and emerging market equities ensures that you are not overly reliant on a single asset class or market segment. Thus making your portfolio more resilient to market fluctuations.

The ETF’s sector allocation is equally impressive, with weightings in Technology (25.12%), Financial Services (15.83%), Consumer Cyclical (11.09%), Industrials (11.04%), and Healthcare (10.45%). These sectors represent the backbone of the global economy, with technology companies driving innovation, financial services supporting economic activity, and healthcare addressing global needs. By investing in VXC, you gain exposure to industries shaping the future.

Numbers don’t lie

Performance-wise, VXC has demonstrated consistent growth over time. As of writing, it achieved an average annual return of approximately 11.29% since its inception. Over the past year, the ETF delivered a strong return of 25.18% at writing, reflecting its ability to capitalize on global market trends. While past performance doesn’t guarantee future results, it indicates that VXC has historically rewarded its investors.

Another attractive feature of VXC is its quarterly dividend distribution. With a current annual yield of 1.45%, it offers a steady income stream on top of its potential for capital appreciation. Whether you’re reinvesting those dividends or withdrawing them tax-free in retirement, the income adds to your total return.

Yet one of the most overlooked yet critical aspects of an ETF is its cost. VXC’s management expense ratio (MER) is a mere 0.22%, making it an extremely cost-effective way to invest globally. Over time, high fees can eat into your returns. But with VXC’s low MER, more of your money stays invested and compounds, which is essential for long-term growth.

Future outlook

From a strategic standpoint, VXC’s exclusion of Canadian equities makes it an excellent complement to domestic investments. Most Canadian investors are already heavily exposed to Canada through other assets like real estate or individual Canadian stocks. VXC allows you to diversify internationally without overlapping too much with what you likely already own, creating a more balanced portfolio.

The future outlook for VXC remains bright. As global economies recover and grow, the ETF is well-positioned to benefit from this expansion. Its exposure to emerging markets adds an additional layer of growth potential since these economies often outpace developed ones over the long term. Coupled with its strong foundation in established markets, VXC strikes a perfect balance between stability and growth.

As for the TFSA, investing in VXC within a TFSA is a smart move because it allows you to maximize your returns. All growth and income within a TFSA are tax-free, and you won’t pay taxes when you withdraw your funds. This tax advantage amplifies the benefits of VXC’s strong performance and dividend income, helping you achieve your financial goals faster.

Bottom line

VXC offers a one-stop solution for investors seeking simplicity, diversification, and growth. Its global exposure, low fees, and reliable performance make it a stellar choice for your TFSA. If you’re looking for one investment to power your portfolio, VXC delivers on all fronts, providing a well-rounded and hassle-free way to grow your wealth.