You don’t need to be a stock-picking genius to build long-term wealth. With a little bit of research, a commission-free brokerage account like Wealthsimple, and a handful of low-cost exchange-traded funds (ETFs), you can create a diversified portfolio that helps grow your money over time, without the high fees or stress.
Here’s a simple, three-ETF strategy for investing $25,000 in a way that gives you global stock market exposure, low costs, and minimal upkeep. These ETFs are listed on the Toronto Stock Exchange (TSX), which means you can buy and sell them in Canadian dollars—no currency conversion fees required.
Source: Getty Images
$10,000 in the S&P 500
Start by allocating $10,000 to the U.S. stock market. The S&P 500 Index tracks 500 of the largest publicly traded U.S. companies and is market-cap weighted, meaning larger companies make up more of the index. It’s also self-cleansing, meaning poorly performing companies eventually get removed and replaced with stronger ones.
A great way to invest in the S&P 500 from Canada is through BMO S&P 500 Index ETF (TSX:ZSP).
It charges a 0.09% management expense ratio (MER), so you’d pay about $9 per year on a $10,000 investment. That’s incredibly low and leaves more of your money working for you. This ETF trades in Canadian dollars and pays quarterly dividends, which you can reinvest for even more long-term growth.
$10,000 in Canadian stocks
Next, allocate another $10,000 to Canadian equities. Canadian stocks offer two key advantages in a TFSA: no foreign withholding tax on dividends and no currency conversion risk. That means the dividends you earn from Canadian companies go further inside your account.
The S&P/TSX Capped Composite Index includes the largest companies on the TSX but limits any single stock to a 10% weight, helping avoid overconcentration in names.
You can access this entire market through BMO S&P/TSX Capped Composite Index ETF (TSX:ZCN) for a rock-bottom 0.06% MER.
That’s just $6 per year on a $10,000 investment. It also currently yields around 2.5%, giving you passive income to reinvest or spend, all tax-free in a TFSA.
$5,000 in international stocks
Lastly, add $5,000 in international stocks to round out your portfolio. This gives you exposure to developed markets outside North America, including countries like Japan, the U.K., France, Germany, and Australia. These regions offer different economic cycles and sector exposures, which help reduce your portfolio’s overall risk.
BMO MSCI EAFE Index ETF (TSX:ZEA) tracks the MSCI EAFE Index, which includes large- and mid-cap companies in 21 developed markets.
It charges a slightly higher 0.22% MER, which is common for international ETFs. Holding this ETF gives you instant access to hundreds of global companies you’d otherwise struggle to invest in directly.
The Foolish takeaway
With just three ETFs—ZSP, ZCN, and ZEA—you can create a globally diversified, low-cost investment portfolio using your $25,000. You’ll have exposure to U.S., Canadian, and international stocks, all in Canadian dollars and all held in a commission-free brokerage account. Reinvest your dividends, check in once or twice a year to make sure your allocations are still on track, and let time do the rest.
