There are a lot of great ETF products are out for frugal value investors like me. They are provided by BMO, Blackrock ishares, Horizons, Vanguard, Purpose invest, Firsta sset, RBC etc… however my absolute favorite is Vanguard. They provide great quality products at a fraction of cost. They have been very well known for low cost ETFs in US for a while and entered to Canada with the same low cost ETFs. As you may know, my core holdings are VTI and VCE which have been doing great and I am thinking of adding VXC in the near future for world market exposure.
Here are my favorite Vanguard ETFs.
- Trading Currency – US
- VTI – US stock market index (0.05% MER)
- VOO- S&P 500 ETF (0.05% MER)
- VWO- Emerging markets ETF (0.15% MER)
- VNQ- REIT ETF (0.10% MER)
- VEA- Europe and Pacific (0.09% MER)
- VEU- All world excluding US ETF (0.15% MER)
- Trading currency- CDN
- VUN- US stock market index (0.15% MER)
- VCE- Canadian stock market index (0.05% MER)
- VRE- Canadian REIT index (0.35% MER)
- VDU- Developed excluding North America index (0.20% MER)
- VXC- All world excluding Canadian Index ETF (0.25% MER)
If your main currency is American $, then buy US traded Vanguard ETFs, no reason to worry about CDN ETFs. Living in a country that has the biggest competitions for funds is a great thing for individual investors.
If your main currency is Canadian $ and you are thinking of getting US exposure (the biggest market in the world) then selecting VUN would give convenience of not to worry about the currency exchange charge which is around 1%-2% (a lot more expensive than typical MER) however if you have RRSP and then keeping VTI would be a better idea as 15% of withholding tax on dividend won’t incur (all the cost saving will adds up).
To sum up Here is my ideal strategy for US stock exposure for people whose main currency is CDN $.
- In RRSP account- VTI (no 15% of withholding tax) or VUN(for convenience)
- In TFSA account- VUN (as currency exchange charge is too much and no withholding tax advantage for VTI)
- In non registered account- VUN (as currency exchange charge is too much and no withholding tax advantage for VTI)
REIT index– VNQ and VRE both are awesome to be exposed in real estate market. Both are reasonably priced at 0.10% MER and 0.35% MER respectively and REIT dividends are typically higher than other markets. VRE had a yearly return of 14% and VNQ had a yearly return of whooping 23% as of November 30 2014..
World index- VEU, VDU, VXC all are good products for world exposure. For Canadian investors VXC with VCE will give total world market exposures for mere 0.05- 0.25% MER which is a steal in my opinion. For American investors, having VTI and VEU will get total world market exposures for 0.05- 0.15% MER.
Vanguard offers very reasonable and competitive ETFs and they are absolutely my favorites. If you are a lazy value investors then picking one of Vanguard ETFs will give more than satisfactory results over a long term. Invest and forget.
Do you have any Vanguard ETF in your portfolio? If so then what do you have? How long have you been holding and do you like their performances so far?
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