Generally, Canadians are blocked from buying mutual funds registered in the U.S. At the same time, some Canadian funds are available in a limited number of provinces. However, Canadians can buy Vanguard exchange-traded funds listed on stock exchanges.
The concept of low-free index investing originated with Pennsylvania-based Vanguard Group. That company now administers overt $5 trillion U.S. in assets spread across 400 mutual funds and ETFs.
ETFs can play an important role in portfolio diversification. For example, take these two low-fee ETFs:The first mirrors large cap stocks in the U.S., including the giant tech stocks that dominate the S&P 500. The second fund tracks emerging markets, with over 60% of its holdings in leading Asian economies.
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VANGUARD GROWTH ETF (New York symbol VUG; buy or sell through brokers)aims to track the Center for Research in Security Prices (CRSP) U.S. Large Cap Growth Index. It’s a broadly diversified index that consists mainly of big U.S. companies.
The $82.4 billion fund holds Apple, Alphabet, Amazon.com, Facebook, Comcast, Home Depot and Visa. Its other stocks include Philip Morris International, Mastercard, Walt Disney, Abbvie, Netflix and Boeing. Vanguard launched the ETF on January 26, 2004. Its MER is just 0.05%.
The fund’s breakdown by industry is as follows: Technology, 28.3%; Consumer Services, 20.7%; Industrials, 14.5%; Financials, 13.0%; Health Care, 11.4%; Consumer Goods, 6.8%; Oil and Gas, 3.9%; Materials, 1.2%; and Telecom Services, 0.2%.
Recommendation in Canadian Wealth Advisor: Vanguard Growth ETF is a buy.
ETFs: China, Taiwan, India account for close to 60% of stocks in this ETF
VANGUARD FTSE EMERGING MARKETS ETF (New York symbol VWO; buy or sell through brokers) aims to track the Financial Times Stock Exchange (FTSE) Emerging Markets Index. It’s made up of the common stock of companies in developing countries. The ETF was launched on March 4, 2005. Its MER is 0.14%.
The top holdings for Vanguard FTSE Emerging Markets include Tencent Holdings (China: Internet), Taiwan Semiconductor Manufacturing (computer chips), Naspers Ltd. (South Africa: media), China Construction Bank Corp., Baidu Inc. (China: Internet), Industrial & Commercial Bank of China, Vale SA (Brazil: mining), Reliance Industries (India: conglomerate), Alibaba Group (China: Internet), Housing Development Finance Corp. (India: finance) and Ping An Insurance Group of China.
The breakdown by country for this $84.5 billion fund is as follows: Mainland China, 34.8%; Taiwan, 14.5%; India, 11.5%; South Africa, 7.2%; Brazil, 7.1%; Thailand, 3.7%; Russia, 3.6%; Mexico, 3.5%; Malaysia, 3.2%; Indonesia, 2.1%; Philippines, 1.3%; Chile, 1.3%; Poland, 1.3%; Turkey, 0.8%; and others, 4.1%.
Recommendation in Canadian Wealth Advisor: Vanguard FTSE Emerging Markets ETF is a buy for aggressive investors.
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Good article, however I am looking for ETF’s with similar holdings that trade on the TSX.
Thanks, Nathan. Our most-recent issue of Best ETFs for Canadians offers two solid buys on funds that are focused on this market.