There are plenty of “usual suspects” for Canadian investors to consider in the world of exchange traded funds (ETFs). However, in this piece, I’d like to focus on three such ETFs I think don’t get the sort of coverage they deserve.
These are funds which each provide their own unique upside for investors of different risk profiles and time horizons. Without further ado, let’s dive in!
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BMO S&P/TSX Capped Composite Index ETF
The BMO S&P/TSX Capped Composite Index ETF (TSX: ZCN) is perhaps one of the best-known ETFs in the Canadian market, at least on this list of funds I’d suggest global investors are ignoring.
Tracking Canada’s main index, this ETF currently holds more than $15 billion in AUM and a razor-thin 0.06% expense ratio. That’s very cheap for the level of exposure this ETF provides to world-class companies. With a heavy weighting in financials (nearly one-third of the fund) and materials (approximately one-fifth of this ETF’s holdings), I think the blue-chip nature of many of the stocks in this fund are worth considering.
With a 29% surge in net asset value (NAV) over the past year and fund flows that hit $1.6 billion last year, I think the signal is clear. More smart money is piling into this ETF, and I don’t blame those investors.
iShares S&P/TSX Global Gold Index ETF
A very different ETF from a number of different perspectives, the iShares S&P/TSX Global Gold Index ETF (TSX: XGD) is an opportune fund to invest in for those worried about the future of markets overall.
Tracking a range of gold producers and related companies, the XGD is the go-to investment for those seeking leveraged exposure to the gold trade. With the rising price of precious metals of late, this has become somewhat of a crowded trade. That said, I don’t see why this rally can’t continue, given the underlying catalysts that propelled this rally have not dissipated.
Geopolitical flares and amplified bets on future central bank interest rate cuts have led the company’s portfolio holdings to outperform over the past year. For investors looking for low-beta exposure to equities (and diversification from volatile sectors), this ETF’s 0.6% expense ratio could be well worth the trouble.
Vanguard FTSE Canadian High Dividend Yield ETF
For investors looking to create a world-class portfolio of dividend stocks to buy, the Vanguard FTSE Canadian High Dividend Yield ETF (TSX: VDY) is an excellent option to consider.
This ETF is aimed at investors looking for above-market yields. Supported by a world-class portfolio of dividend stocks with rock-solid balance sheets, the fund’s 3.8% yield is one I think is worth considering right now.
Focused on investing in world-class energy and financials stocks, the yields this ETF provides are ones I’d consider to be very stable. Thus, despite receiving yields that are higher than many long-dated Canadian fixed income securities, this is an ETF with perhaps the preferable risk mix.
With a return of more than 20% over the past year, it’s clear that global investors are starting to look to other international markets like Canada for yield. I think that’s a trend which should continue, positioning VDY well for long-term upside as well.
