Exchange Traded Fund Investing for Canadian Investors

Exchange Traded Fund Investing for Canadian Investors

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Many people tend to hold their savings in cash . Most of the time this is because they are not sure what to invest it in. It may start as for a short time and that can easily turn into years ! Holding your savings in cash is bad !! The purchasing power of cash over time decreases due to inflation. So never a good idea to hold your savings in cash !

A lot of my friends and family ask me to provide investing suggestions . I tend to invest in equity however I have a really high tolerance for risk. I wanted to do some research and provide some recommendations on index funds  – this group of people generally tend to have a lower risk tolerance .

This blog post provides an excellent overall view of the various type of ETFs available for a Canadian Investors . The One Fund solution recommended from the posting is definitively worth a read.  After reading this post – I recommend Tangerine’s One Fund to many young investors.

For my friend with savings over $50K I recommended the TD e-Series Funds.  I also recommend people  maximize the use of TFSA for investing.  For example you can have up to 52 k in a TFSA as of 2017 . So for someone who has 80k of savings I recommend he/she keep 52k of that money in TFSA – Any gains made in a TFSA investing account is not taxed. I also recommend they keep investments with a possibility of high return in the TFSA . Historically stocks have higher returns over bonds  – as such any investments around stocks should be in an investment TFSA. If my friend wanted to split his investment into 50 k in stocks  ETF and 30 k into  bonds ETF – I would recommend he buys all of his stock ETF in a TFSA, 28 k of bond ETF in a non TFSA investing account and the other 2 k bond ETF in a TFSA ( limit of TFSA is 52 k ) .

Lets take a look at some specific TD e-Series Funds.

You can see the various funds offered here .  I recommend opening each ETF’s link and reviewing the fee for the fund, the fund’s strategy, region it invests in , the specific securities that it is invested in etc. Important is to review the historical performance of each fund. If you copy and past the historical performance of various funds you can see some interesting trends. For example  when stocks perform poorly, bonds does well. This is one of the reasons diversification is recommended for passive investors !

Below are some fund performance charts to give you a feel for different type of returns of the various type of funds.

To get exposure to US equities :

1.S & P 500 – 500 Large US stocks

https://www.tdassetmanagement.com/fundDetails.form?fundId=3271&prodGroupId=1&lang=en&site=TDCT

YTD 2016 2015 2014 2013 2012 2011 2010 2009
8.33 11.17 0.67 12.89 31.49 15.21 1.55 14.30 25.72

This fund trades in USD – so currency implications are there for CAD investors.

2. Dow Jones Industrial Average – 30 US Blue Chip Companies

https://www.tdassetmanagement.com/fundDetails.form?fundId=3263&prodGroupId=1&lang=en&site=TDCT

YTD 2016 2015 2014 2013 2012 2011 2010 2009
7.78 11.74 19.31 19.14 37.27 6.92 10.35 7.30 3.39

 

To get exposure to the bond investing :

1.Managed Bond Fund – Management Fee High – 1.195

https://www.tdassetmanagement.com/fundDetails.form?fundId=4833&prodGroupId=4&lang=en&site=TDCT

YTD 2016 2015 2014 2013 2012 2011 2010 2009
4.42 2.75 4.80 8.88 6.97 5.08 4.30 6.32 6.84

2. Passive Bond Fund

https://www.tdassetmanagement.com/fundDetails.form?fundId=4817&prodGroupId=1&lang=en&site=TDCT

YTD 2016 2015 2014 2013 2012 2011 2010 2009
3.29 1.11 3.07 8.28 -1.58 3.06 9.09 6.35 4.56

 

To get exposure to CAD equities :

https://www.tdassetmanagement.com/fundDetails.form?fundId=3261&prodGroupId=1&lang=en&site=TDCT

YTD 2016 2015 2014 2013 2012 2011 2010 2009
1.36 20.63 -8.53 10.23 12.63 6.85 -8.89 17.19 34.63

 

To get exposure to Europe and International equities :

1.Europe only

https://www.tdassetmanagement.com/fundDetails.form?fundId=3265&prodGroupId=1&lang=en&site=TDCT

YTD 2016 2015 2014 2013 2012 2011 2010 2009
17.26 -4.09 16.75 1.38 32.28 17.15 -9.02 -1.53 12.94

2. To get exposure to Europe + other international companies

https://www.tdassetmanagement.com/fundDetails.form?fundId=4877&prodGroupId=1&lang=en&site=TDCT

YTD 2016 2015 2014 2013 2012 2011 2010 2009
14.59 -2.66 18.90 2.48 29.59 15.46 -10.02 1.71 9.52

 

There are many other different type of ETFs with different strategies such as ETFs that invest in mutual funds etc. As you can see from the performance of the above ETFs – most of the time simply investing in ETFs that follow  indexes is sufficient for most investors.

The TD website  has instructions on how to open an account where you can buy and sell the TD ETFs. Good luck ! If you have any  questions – feel free to ask it in the comments section and I’ll do my best to help !

 

 

 

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