Passive Canadian investors looking for a U.S. growth jolt without having to pick individual names may wish to consider broadening their horizons beyond the TSX-traded ETFs that provide exposure south of the border. In a prior piece, I highlighted how it’s still worth it to buy U.S.-traded ETFs as well.
If it’s not the lower expense ratios (the fees you’ll pay to the fund’s managers), it’s the unique mix of stocks that may not have a close comparable on the TSX Index. In this piece, we’ll look closer at some U.S.-traded ETFs that I think might be worth picking up while the Canadian dollar is still relatively hot.
With the U.S. Federal Reserve mixed on what comes next (rate hike or cut?), I do think the loonie could be in for a bit of a pullback. Whether that represents an opportunity to make the jump from Canadian dollars to greenbacks remains the big question. Either way, I think there’s a lot of impressive growth to be had by diversifying into some U.S. ETFs that are still quite popular among Canadians.
In this piece, we’ll look at three intriguing growth-focused ETFs for Canadians who want exposure to the U.S. tech sector as it is experiencing a bit of AI disruption and growing fear of high spending. You’ve got to spend money (in AI) to make money, right? In any case, let’s check in on a growthier ETF that is worth venturing into the American exchanges for, preferably, to give your RRSP a nice growth jolt.
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Vanguard Mega Cap Growth Index Fund
I was quite surprised to see the Vanguard Mega Cap Growth Index Fund (NYSEMKT: MGK) among the most popular of U.S. ETFs owned by Canadian investors. When you consider the low expense ratio (just 0.05%) and the huge dose of mega-caps as well as the lack of TSX-traded comparables, perhaps it shouldn’t be that much of a shocker to envision Canadian investors buying up the MGK. Remember that your RRSP is effectively a “shield” from the pesky 15% U.S. withholding tax on dividends paid.
After all, mega-cap growth has been where the returns have been in recent years. More recently, the MGK slipped 9% from its all-time high as investors showed more love for small caps.
Could small-cap value be the new theme? Or is the dip in large growth a buying opportunity? I think it’s the latter. If you like mega-caps (specifically mega-cap tech) and want to take advantage of the relative retreat in the slowing giants, I’d argue the MGK is a stellar pick right here. Despite the recent slip, the long-term momentum is still very much intact. The ETF is still up 84% in five years. And if I were to guess, I’d label this latest correction as a yawn-worthy dip that long-term thinkers need not hit the panic button over.
As others “rotate” after the fact, perhaps it’s time to stick with the proven performers for the long-term game. At the end of the day, AI is a field that requires massive investment. And the smaller players might not have the wallets to stay ahead. Either way, I think MGK is a great U.S. ETF to add to your watchlist if you’re looking for value in the obvious or opportunities hiding in plain sight.
