We recommend that investors diversify up to 30% of their portfolios into U.S. stocks and as much as 10% into international securities. One attractive way for safety-conscious investors to do this is with exchange-traded funds (ETFs). Today we look at several ETFs from a U.S. firm that offer a low-fee way to achieve this diversification. We profile two Vanguard ETFs that track a U.S. large-cap index and an emerging market index.
Pennsylvania-based Vanguard Group is one of the world’s largest investment management companies. In all, it administers almost $3 trillion U.S. in 170 mutual funds.
Vanguard, which went into business in 1975, offers low-fee index mutual funds. Generally speaking, Canadians can’t buy units of mutual funds that are registered in the U.S., because they aren’t registered with provincial securities commissions. For that matter, some Canadian funds aren’t available in all provinces.
10 Stocks to Buy and Hold Forever
If you have six or seven of these stocks in your portfolio, well done. These are stocks with staying power. They are companies that can withstand market setbacks—they pay dividends, for one thing—and they’re usually first to move up when the market recovers.
Canadians can, however, buy Vanguard exchange traded funds that trade on stock exchanges. We don’t recommend all of Vanguard’s ETFs, but here are two we do see as low-fee buys.
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, a broadly diversified index that mainly consists of big U.S. companies. The fund’s MER is just 0.09%.
The $48.1-billion Vanguard Growth ETF’s top holdings are Apple, Alphabet, Coca-Cola, Facebook, Visa, Home Depot, Comcast, Amazon.com, Gilead Sciences and Walt Disney Co. The fund’s breakdown by industry is as follows: Technology, 23.9%; Consumer Services, 22.2%; Health Care, 13.7%; Financials, 12.5%; Industrials, 11.9%; Consumer Goods, 10.1%; Oil and Gas, 4.0%; Materials, 1.3%; and Telecom Services, 0.3%.
Recommendation in Canadian Wealth Advisor: BUY for aggressive investors.
ETFs: Vanguard ETF holds large portion of its emerging market portfolio in Chinese, Taiwanese stocks
VANGUARD FTSE EMERGING MARKETS ETF (New York symbol VWO; buy or sell through brokers) aims to track the Financial Times Stock Exchange (FTSE) Emerging Index, which is made up of common stocks of companies in developing countries. The fund’s MER is just 0.15%.
The Vanguard FTSE Emerging Markets ETF’s top holdings include Taiwan Semiconductor (Taiwan: computer chips), Tencent Holdings (China: Internet), China Mobile, China Construction Bank, Naspers Ltd. (South Africa: media), Industrial & Commercial Bank of China, Bank of China, Hon Hai Precision Industry (Taiwan: electronics), Infosys (India: information technology) and Housing Development Finance (India: banking).
The $49.7-billion fund’s breakdown by country is as follows: China, 27.2%; Taiwan, 14.4%; India, 13.3%; South Africa, 9.4%; Brazil, 7.2%; Mexico, 5.5%; Russia, 4.5%; Malaysia, 4.0%; Thailand, 2.7%; Indonesia, 2.2%; Philippines, 1.9%; Poland, 1.8%; Turkey, 1.6%; and others, 4.3%.
Recommendation in Canadian Wealth Advisor: BUY for aggressive investors.
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