If you’re new to investing, it can be difficult to pick and choose the best investments to build a self-directed portfolio of stocks that you can hold in a Tax-Free Savings Account (TFSA). For newer investors, the simplest and most effective strategies could be to own Exchange-Traded Funds (ETFs) that you can stay invested in for the long run and hold in a TFSA.
Instead of choosing the right stocks, timing the market, or constantly adjusting your portfolio, investing in ETFs helps you build the core of your portfolio with broad-based one-ticket investments. When investing in an ETF, you gain exposure to a diversified group of stocks with one investment. This can simplify investing for you and minimize the effort you must make to rebalance your portfolio.
If you want to invest for the long haul and need to build a reliable portfolio, these three Canadian ETFs can be some of the easiest to buy and hold for a long time.
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Broader market exposure
ETFs like iShares S&P/TSX 60 Index ETF (TSX: XIU) and iShares Core S&P 500 Index ETF (CAD-Hedged) (TSX: XSP) are one-ticket investments that can offer exposure to a broad range of high-quality businesses.
XIU is one of the simplest ways to get reliable exposure to high-quality Canadian companies. The fund aligns itself and rebalances the portfolio it holds according to the S&P/TSX 60 Index. This index tracks the performance of the 60 largest companies on the S&P/TSX Composite Index by market capitalization.
Its portfolio includes major banks, energy infrastructure businesses, and several other essential businesses that generate steady cash flows and pay investors their dividends. Investing in XIU means gaining exposure to the 60 largest publicly-traded companies in the country. The underlying holdings have all been reliable through the decades and outperformed the broader index.
In a similar way, XSP offers exposure to the performance of the S&P 500 Index, hedged to the Canadian Dollar Index. If you were to invest in one ETF to gain global exposure, the S&P 500 Index would be the index to align with, and XSP offers you exposure to its performance.
Investing in XSP means instantly diversifying your exposure to the 500 largest companies in the US, most of which generate revenue worldwide. While the index is technically based in the US, you are getting exposure to global markets with this fund. As such, it is unsurprising that the index has been one of the best performers in recent years.
Mix in some targeted exposure
Broad diversification is an excellent strategy, but a targeted exposure can also be beneficial for investors. Once you build the core portfolio, you can consider betting on the Canadian banking sector with low-risk exposure through the BMO Equal Weight Banks ETF (TSX: ZEB). The fund replicates the performance of the Solactive Equal Weight Canada Banks Index.
Seasoned investors know that you cannot go wrong with investing in any of the major Canadian banks. With ZEB ETF, you don’t have to choose an individual stock based on which Canadian bank outperforms the rest. Instead, you can gain exposure to the performance of the entire sector.
Canadian banks, especially the Big Six Banks, are a league apart. All of them are high-quality businesses, with some of them paying dividends for as long as almost two centuries. That kind of track record is impossible to beat, and ZEB ETF lets you gain exposure to that performance in a single investment.
Foolish takeaway
When you’re still new to investing, adding these three ETFs can give you a good start. As you better understand the markets, you can start layering individual investments on top of core investments like these ETFs.
