My criteria for a forever buy-and-hold investment is simple. I want something I am confident will have a positive trajectory 10 years or more from now. That gets much easier when you diversify. The goal is not to hit a home run. It is to avoid permanent loss of capital over long stretches of time.
A single stock, a single sector, or even a single country can struggle for years. When you spread your bet across thousands of companies, all 11 sectors, and multiple regions of the world, the odds improve materially.
The two exchange-traded funds (ETFs) below do exactly that. You will notice they both exclude Canadian equities on purpose. Many investors prefer to pick their own Canadian dividend stocks, and that is fine. These ETFs complement those choices without overlap.
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The Vanguard option
The first ETF I would buy and hold forever is Vanguard FTSE Global All Cap ex Canada Index ETF (TSX:VXC).
This ETF provides exposure to thousands of large-, mid-, and small-cap stocks across both developed and emerging markets, excluding Canada. Developed markets are split between the U.S. and international regions.
The U.S. makes up the largest portion of the portfolio, roughly 60% to 70%, while the rest of the developed exposure comes from EAFE markets such as Japan, the United Kingdom, France, Germany, Switzerland, and Australia.
The remaining allocation is to emerging markets, including countries like China, India, and Brazil. VXC is market-cap weighted, meaning larger companies receive larger weights. That is why the top holdings are dominated by major U.S. companies.
Despite the breadth, costs are reasonable. The management expense ratio is 0.22%. After fees, the ETF currently offers a 12-month trailing yield of about 1.39%, paid quarterly. The real value here is not income. It is broad, global diversification in a single holding.
The iShares option
If you prefer iShares over Vanguard, the equivalent option is iShares Core MSCI All Country World ex Canada Index ETF (TSX:XAW).
Instead of tracking an FTSE index, XAW follows the MSCI All Country World ex Canada Index. The objective is the same. It provides exposure to U.S. equities, international developed markets, and emerging markets, all while excluding Canada.
XAW uses a fund-of-funds structure, but at the underlying level it still represents more than 8,000 individual stocks worldwide, weighted by market capitalization. Fees are identical to VXC at a 0.22% expense ratio.
The trailing 12-month yield is slightly lower at about 1.29%, but total returns between these two ETFs have historically been similar when dividends are reinvested. Choosing between them often comes down to personal preference rather than performance differences.
