One of the best things about building a portfolio of top TSX ETFs is that you don’t need to pick and monitor dozens of individual stocks. In fact, given the right ETF, investors can gain access to hundreds of businesses through a single ticker.
That makes it much easier to invest without needing to constantly monitor stocks.
The question then becomes: which of all the top TSX ETFs should investors consider right now?
The two options that I’m considering right now are the Vanguard S&P 500 Index ETF (TSX: VFV) and Vanguard FTSE Canadian High Dividend Yield Index ETF (TSX: VDY).
Each offers something different, and both are worth considering in a long-term TFSA.
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VFV brings U.S. growth potential
VFV tracks the S&P 500. This gives investors exposure to approximately 500 large U.S. companies.
More importantly, it offers diversification for investors looking for options outside of the usual Canadian banks and energy stocks. VFV includes a broad section of the U.S. economy, including consumer defensive, healthcare and tech stocks that would normally require separate, individual purchases from investors.
That appeal extends to the future, too. As the index changes, the fund also adjusts its holdings. This makes the ETF a great option for long-term portfolios, as there’s no longer a need to tinker with individual holdings.
The main appeal of the ETF is its long-term total-return potential. It also offers a quarterly distribution, with a yield of just 0.86%. That being said, despite the low payout, those distributions can still be reinvested to help the portfolio grow over longer periods.
In terms of fees, VFV carries a management expense ratio of just 0.08%.
Another thing to note is that a TFSA shelters returns from Canadian tax, but U.S. withholding tax still applies to dividends.
Add some Canadian dividend income
Investors looking for a stronger Canadian dividend income tilt may want to consider VDY. The ETF tracks a Canadian high-dividend index, providing exposure to multiple dividend-paying businesses through a single holding.
The fund includes top dividend payers from different segments of the market such as financials, energy, utilities and telecoms to name just a few.
Unlike the growth focus of VFV, this fund does have a focus on income. As a result, the fund offers a monthly distribution that, as of the time of writing, pays a yield of 3%.
VDY’s higher yield gives investors more cash to reinvest than the same amount invested in VFV. By way of example, an initial investment of $5,000 into VDY will generate about $150 each year to reinvest.
Over the course of a longer period, that compounding could prove to be powerful.
VDY carries a management expense ratio of 0.22%.
Holding these top TSX ETFs for the long haul
Together, both funds offer investors a straightforward way to combine U.S. stock exposure with Canadian dividend income.
For investors with a long runway, regular contributions and reinvested distributions can help build a portfolio from these top TSX ETFs over time.
In my opinion, one or both would be a great addition to any long-term portfolio.
