The Only Index Fund I’d Buy and Never Sell

I would be comfortable holding this index ETF through the worst recessions and bear markets.

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Key Points
  • Not all index funds are forever holds; sector and country-specific funds can underperform for years.
  • VXC offers broad global diversification across thousands of stocks and all 11 sectors, excluding Canada.
  • VXC pairs well with Canadian holdings, providing zero overlap and a durable global foundation.

Just because a fund tracks an index does not mean it is automatically a forever holding.

There are plenty of index funds tied to specific sectors, countries, or themes. They may look diversified on the surface, but if that sector falls out of favour or that country goes through a lost decade, you can be underwater for years — sometimes decades. Even the most disciplined “diamond hand” investor will struggle to hold through that kind of stagnation.

That is why the only type of index fund I would genuinely be comfortable holding through thick and thin is a globally diversified one that spans all 11 sectors and multiple regions. If one country or industry struggles, another can pick up the slack.

Few options do that as cleanly as Vanguard FTSE Global All Cap ex Canada Index ETF (TSX: VXC).

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Source: Getty Images

What Is VXC?

VXC is designed to track the performance of the global equity market, via FTSE Global All Cap ex Canada China A Inclusion Index.

It holds thousands of stocks across developed and emerging markets. That includes the United States, Europe, Japan, Australia, and fast-growing economies such as India and Brazil.

The portfolio spans all 11 Global Industry Classification Standard sectors, including technology, healthcare, communications, consumer discretionary, utilities, financials, energy, consumer staples, real estate, materials and industrials.

Because it excludes Canada, there is no overlap with typical Canadian core holdings such as banks, pipelines, railways, and telecoms. The fund is market-cap weighted, meaning larger global companies carry more influence.

The management expense ratio is low for global exposure at around 0.22%, which is reasonable given the breadth of markets covered.

Why VXC?

Most Canadians are already overweight domestic stocks in their portfolio, especially dividend payers. Canada represents roughly 3% of the global equity market, yet it is common to see portfolios with 25%, 50%, or even more allocated to Canadian companies.

Add in employment income tied to the Canadian economy and perhaps a home as a major asset, and many investors are more concentrated than they realize. VXC solves that problem cleanly.

It provides zero overlap with Canadian equities, allowing you to dial in your desired domestic allocation separately. You can keep stock picking in Canada if you enjoy it. But VXC acts as a diversified global base underneath it all.

It also reduces the risk that one country’s economic cycle dictates your long-term results. If Canada lags while the U.S. or emerging markets outperform, you participate. If U.S. technology slows while European industrials recover, you are still exposed.

If I had to choose one index fund to hold through market cycles, sector rotations, and geopolitical shifts, it would be a globally diversified fund like VXC, not because it will always outperform, but because it is built to survive almost anything if you hold it long enough.

Fool contributor Tony Dong has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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