In many ways, it feels like passive investing has gotten a whole lot more complicated over the years, with so many new ETF products coming online and trading live on the TSX Index. More competition in the Canadian ETF marketplace is never a bad thing, as it could drive a race to the bottom in MERs (Management Expense Ratios).
But, at the same time, some passive investors, especially those who go well beyond just index investing, might find that picking ETFs is becoming more like picking stocks. There are just so many options. Just like in the stock market, much of the merchandise on display might not even be worth your attention.
Remember that “new” products might be more exciting, but they aren’t necessarily better. In any case, this piece will look at three Canadian ETFs that I’d look to hold in a TFSA (or, really, in any account) for the long run. While fancy new products will keep coming online, the following trio, I think, should serve as a core for any long-term portfolio that aims to keep costs on the lower end.
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Vanguard FTSE Canada All Cap Index ETF
The Vanguard FTSE Canada All Cap Index ETF (TSX: VCN) might be one of the simplest ETFs out there. It’s a great way to bet on the broad Canadian stock market with a focus on the mega-cap heroes and beyond. The TSX Index itself has been on an unstoppable bull market in the past two and a half years. And while the easier money has been made, I still think that we’re close to the middle innings, rather than running close to the end.
And, with that, I don’t mind paying a slight premium on the Canadian market. Either way, it’s still cheaper than the U.S. market, and the dividend yield, currently at 2.1%, is still quite decent, especially considering the capital gains potential. If you appreciate simplicity and really low MERs (0.06%), the VCN is one of three core pillars to put your TFSA on a rock-solid foundation.
Vanguard S&P 500 Index ETF
The Vanguard S&P 500 Index ETF (TSX: VFV) is a great way for Canadian investors to obtain low-cost exposure to the S&P 500. No hedging, a low MER (0.09%), and exposure to the American economy that’s flying high on the back of the AI tailwind.
While it’s nothing really exciting, I still think it ought to be viewed as one of the staples in any passive investor’s ETF fund. Like the Canadian market, the S&P 500 is on a nice bull run, and one that might not come to a close anytime soon, especially as the index looks to make a run for 8,000.
Invesco Nasdaq 100 Index ETF
Finally, we have the Invesco Nasdaq 100 Index ETF (TSX: QQC), a tech-heavy index that could give investors a closer seat to the AI revolution. As you may know, Space Exploration Technologies is now a part of the Nasdaq 100 after its fast-tracking IPO.
For investors who want a piece of Elon Musk’s space titan, the Nasdaq 100 will have its share. What’s most striking is that the Nasdaq 100 is poised to include other large AI IPOs to come, making the index far growthier (but choppier) than the S&P 500.
