Are you looking for quality exchange traded funds (ETFs) to add to your portfolio?
If you are, then you’re making a wise choice. Studies show that index ETFs tend to deliver good returns at a relatively low level of risk. Outperforming 95% of active fund managers over the long term, they’re the best option for most people.
With that being said, not all ETFs are created equal. There are overpriced rip-off ETFs just like there are overpriced rip-off mutual funds and hedge funds. The magic of ETFs is not that they trade on exchanges, but rather the fact that so many of them are index funds (i.e., funds built on broad market indexes). This feature gets rid of costly investment decision-making and allows the low fees that ETFs are known for. In this article, I’ll share three Canadian-traded ETFs that may be worth adding to your portfolio in 2025.
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Canadian stocks
The iShares S&P/TSX 60 Index Fund (TSX: XIU) is a Canadian broad market index fund. It tracks the TSX 60, which is Canada’s largest 60 companies (excluding private companies).
The iShares S&P TSX 60 Index Fund has many characteristics that make it desirable for investment. First, it’s quite diversified, with 60 stocks. Second, it has pretty low fees (about 0.15% including both management fees and fund expenses). Third, it has high volume and liquidity, which means you don’t lose much to market makers when you buy and sell it. Finally, the entire portfolio is Canadian stocks, so you don’t pay any withholding taxes on the fund’s dividends. At a time when many Canadians are making a conscious decision to “buy Canadian,” XIU provides one way to do that with your investments.
Canadian dividend stocks
The BMO Canadian Dividend ETF (TSX: ZDV) is a Canadian fund of dividend stocks. Its holdings overlap with those of the iShares S&P/TSX 60 Index Fund to a significant degree, but with the difference that non-dividend stocks are not included. So, for example, Shopify shares are not included in this fund.
ZDV is a good fund for those who want a little extra dividend income in their accounts. It has a 3.8% dividend yield, which is higher than that of the TSX Composite Index. On the flip side, its fees (0.39%) are also a little higher than those of a typical broad market fund. But if dividends are what you’re after, the extra fees may be worth it.
U.S. stocks
Last but not least, we have U.S. stocks. While it might seem odd to mention U.S. stocks in an article about Canadian ETFs, and when Canada is in a trade war with the U.S., the fact is that U.S. stocks are a major part of the global markets. An adequately diversified portfolio has some exposure to them.
You can invest in U.S. stocks on the Canadian exchanges via the Vanguard S&P 500 Index Fund (TSX: VFV). It’s basically a Canadian-listed version of the ‘VOO’ index fund that is so popular in the US. It consists of the 500 biggest U.S. publicly traded companies that have been profitable for at least one year. This fund’s underlying portfolio is one of the more popular pooled investment vehicles in the world, being endorsed by Warren Buffett and others. Its 0.08% management fee is roughly double that of its U.S. traded version, but its TSX listing spares you currency exchange costs.
