So, you want to invest in U.S. stocks? That is probably a good idea. The U.S. stock market makes up roughly 60% of the global equity market. If you ignore it completely, you are leaving out a huge portion of global growth.
But how you invest in U.S. stocks matters. You could try picking individual companies. For beginners, though, it usually makes more sense to use an index exchange-traded fund (ETF). This gives you instant diversification and keeps costs low.
Let’s walk through three popular ways Canadians can get exposure to U.S. stocks using ETFs that track the S&P 500, the Nasdaq 100, and the Dow Jones Industrial Average.
Source: Getty Images
The S&P 500 Option
If you want broad exposure to the U.S. economy, BMO S&P 500 Hedged to CAD Index ETF (TSX: ZUE) is a straightforward choice.
This ETF tracks the S&P 500, which holds 500 large U.S. companies selected for their size, liquidity, and consistent earnings. Think of it as a snapshot of corporate America. You get exposure to technology, healthcare, consumer companies, industrials, and more.
ZUE is affordable, with a 0.09% expense ratio. That means you pay $9 per year for every $10,000 invested.
It is also currency-hedged. That means the ETF aims to remove the impact of movements between the U.S. dollar and the Canadian dollar. If the U.S. dollar weakens, your returns are not dragged down. The trade-off is that hedging is not free and can slightly reduce long-term performance.
Also, like most Canadian-listed ETFs that hold U.S. stocks, dividends are subject to a 15% U.S. withholding tax. That creates a small drag over time. Still, if you want simple, diversified U.S. exposure, ZUE gets the job done.
The Nasdaq 100 Option
If you want to lean harder into innovation and growth, BMO Nasdaq 100 Equity Hedged to CAD Index ETF (TSX: ZQQ) may appeal.
Unlike the S&P 500, the Nasdaq 100 holds only 100 companies. It excludes financial stocks entirely and is heavily tilted toward technology and growth companies. Just 10 stocks can make up more than half of the portfolio.
This means more exposure to themes like artificial intelligence, cloud computing, semiconductors, and digital advertising. If those areas thrive, ZQQ can outperform broader indexes.
But there are trade-offs. The yield is lower because many of these companies reinvest profits instead of paying dividends. The fund is also more expensive, with a 0.39% expense ratio. And because it is more concentrated, it can be more volatile.
The Dow Jones Option
If you prefer something more old school, consider BMO Dow Jones Industrial Average Hedged to CAD Index ETF (TSX: ZDJ).
The Dow is one of the oldest stock indexes in the world. It holds just 30 large, blue-chip U.S. companies chosen by a committee. It is price weighted, which means higher-priced stocks have more influence.
Because it includes established companies across multiple sectors, the Dow often has a slightly more value-oriented feel compared to the tech-heavy Nasdaq 100. Its yield is higher than both, reflecting a tilt towards dividend-paying companies.
ZDJ has a 0.26% expense ratio, placing it between ZUE and ZQQ in terms of cost. If you want exposure to iconic American blue chips without going all-in on technology, this is a reasonable middle ground.
