Nevertheless, there are good reasons to carry Canadian exchange-traded equity funds (ETFs) in your portfolio.
First, they’re tax efficient in non-registered accounts since the dividends they pay are subject to a lower tax rate than foreign dividends. Second, their dividend yield is higher (currently nearly 3%) than U.S. or international stock index ETFs. And finally, they provide diversification in the shape of commodity exposure, which may function an inflation hedge.
This category was once the preserve of the large three in index investing – iShares, BMO and Vanguard – but an outsider, TD’s Canadian Equity Index, shot to the highest of our poll this 12 months because of its ultra-low management expense ratio (MER) of 0.05%. It also tracks the Solactive Canada Broad Market Index, an alternative choice to the more popular S&P/TSX and FTSE Canada indexes. This makes it possible to avoid superficial loss rules when buying or selling larger funds with substantially similar exposure, equivalent to the iShares Core S&P/TSX Capped Composite Index ETF (XIC) and the Vanguard FTSE Canada All Cap Index ETF (VCN).
“I think the ideal use for this ETF, beyond a core portfolio holding, is to use it as a tax loss harvesting partner for the Vanguard and iShares ETFs, as they have similar holdings and historical performance but track different indices, thus avoiding the CRA’s superficial loss rule,” says panelist Tony Dong.
Second place went to 3 funds, VCN, XIC and ZCN (BMO S&P/TSX Capped Composite Index ETF). All of those funds have razor-thin MERs of 0.05% and 0.06% respectively.
In the table below you can find the perfect Canadian stock ETFs as judged by our panel. Slide the columns right or left along with your fingers or mouse to see more data. You can download the information to your device in Excel, CSV and PDF formats.
Best Canadian Stock ETFs 2024
Watch: What are ETFs
Read more about investing:
