If you’re looking to own high-quality U.S. companies alongside Canadian stocks in your portfolio, there’s no question that the Vanguard S&P 500 Index ETF (TSX: VFV) is one of the best places to start since it gives you a simple way to buy a whole portfolio of them.
And since some of the world’s biggest businesses trade south of the border, many of which also earn revenue around the world, having exposure to the U.S. economy, especially through a simple investment vehicle, is a significant opportunity for Canadians.
However, at the same time, as much as buying a broad index fund can offer a slew of advantages, it doesn’t mean you have to give up on picking individual stocks altogether.
In fact, combining the two can make a lot of sense. For example, many investors prefer to own high-quality index funds like VFV for broader exposure, while still choosing individual stocks based on the long-term opportunities they find most interesting or want more exposure to.
So, if you’re considering VFV today, here’s why it can make a strong core holding and the types of Canadian stocks I’d look at alongside it.
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Why VFV is one of the best Canadian ETFs to consider
It can certainly make sense to own more than one index ETF, but if there’s one place to start, it would be the S&P 500. That’s why VFV is already one of the top names to consider first.
You get access to the biggest tech stocks in the world, AI companies, banks, healthcare businesses, consumer staples and more, many of which are global brands. So, you’re buying a collection of established businesses with several different ways to grow.
Plus, its annual management fee is just 0.08%, keeping costs low while you give your investments years to compound.
One thing to keep in mind, though, is that those companies aren’t equally weighted. The largest businesses have the biggest influence on VFV’s returns, so owning hundreds of stocks still leaves you with significant exposure to the major tech names.
Nevertheless, it’s a simple way to invest in the long-term growth of American businesses without having to follow each company individually.
And the best part is that you don’t need to pick one particular time to buy it. You can dollar-cost average and continue adding exposure over time, especially during periods of higher volatility or weakness when stocks are selling off but you still have years to leave your money invested.
A Canadian growth stock to pair with it
Some investors will be happy owning a portfolio of broader index funds and leaving it at that. However, many prefer to layer additional stocks on top of that, such as a high-potential growth stock like Calian (TSX: CGY), which provides military training, space and communications solutions, healthcare services and more.
What makes Calian particularly interesting is that increasing defence spending involves a lot more than buying equipment. Military personnel also need training, and operations depend on reliable communications. Calian helps provide both.
For example, in August, it secured a 15-year agreement to continue supporting British Army training, worth nearly $300 million over its term. That gives it years of work with an established and reliable customer while countries around the world continue investing in improving and modernizing their military capabilities.
Furthermore, it completed its acquisition of Galaxy Broadband in August, expanding its ability to provide satellite communications in remote areas, including Northern Canada.
That gives Calian more scale and opportunities to combine Galaxy’s expertise with the services it already offers. It also gives it more ways to serve defence, government and other customers that need reliable connections in places where providing them is difficult.
That’s why, given its established customer relationships, growing demand and more services to offer, Calian has a tonne of long-term potential and is exactly the type of high-quality growth stock to consider adding alongside broader index funds like VFV.
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