Skip to main content

The Globe and Mail

Rob Carrick's 2017 ETF Buyer's Guide: Best Canadian equity funds

The latest edition of The Globe and Mail ETF Buyer's Guide is leaner and meaner than in previous years.

The universe of exchange-traded funds is expanding in a way that makes it ever harder for investors, particularly rookies, to build a portfolio. To combat the clutter, the ETF guide is taking a tougher approach to picking funds for inclusion. Instead of trying to offer a selection of everything available, the guide now uses a screening process to identify core funds for portfolio building.

Only funds with a five-year history were included for this first instalment of the guide, which covers Canadian equity ETFs. That's long enough to include strong up markets such as in 2016, and losing years such as 2011 and 2015. Also, funds must have generated average daily trading volumes over the past 30 days of at least 5,000 shares. The idea here is to avoid orphan funds that don't trade much. The less liquid an ETF is, the more potential there is for buyers to have to pay a premium to market price when buying, and accept a below-market price when selling.

Any of the 10 funds included here could be your one and only Canadian equity fund, although some are better suited as a complement to a core fund. Look for similar lists in the weeks ahead covering ETFs that hold Canadian bonds and U.S. and international stocks. Additional instalments will cover dividend stocks in Canada and globally.

An ETF is a low-fee version of a mutual fund that trades as if it were a stock. The traditional ETF tracks major stock and bond indexes, but a growing number follow specific screening strategies or have a manager who picks stocks. To invest in ETFs, you need a brokerage account. For help on that, consult my latest ranking of online brokers, published late last year.

Here is an explanation of the terms you'll find in this ETF Buyer's Guide.

Assets: Shown to give you a sense of how interested other investors are in a fund. A $1-billion fund is considered huge, while $100-million is serious heft.

Management expense ratio (MER): The main cost of owning an ETF on an ongoing basis; as with virtually all funds, published returns are shown on an after-fee basis.

Trading expense ratio (TER): The cost of trading commissions racked up by the managers of an ETF as they adjust the portfolio. Combine the TER to the MER for a fuller picture of a fund's cost. Note: Many ETFs do so little trading that their TERs round down to zero.

Dividend yield: Mainstream stock indexes tracked by ETFs can be a good source of dividend income. The yields shown here are supplied by Globeinvestor.com and based on recent actual payouts.

Top three sector weightings: It's a given that more than half of the typical Canadian equity ETF portfolio will be covered off by financials, energy and materials. But some funds go even further with weightings in financials that alone exceed 40 per cent. If you hold a lot of bank stocks or other investments exposed to banks and insurers, you may want a Canadian equity ETF that has a comparatively low financials weighting.

Inception date: The older an ETF is, the more likely it is that you can look back at a history of returns through good markets and bad.

Click here to download an Excel version of the table.

Report an error Licensing Options
Comments

The Globe invites you to share your views. Please stay on topic and be respectful to everyone. For more information on our commenting policies and how our community-based moderation works, please read our Community Guidelines and our Terms and Conditions.

We’ve made some technical updates to our commenting software. If you are experiencing any issues posting comments, simply log out and log back in.

Discussion loading… ✨

Combined Shape Created with Sketch.

Combined Shape Created with Sketch.

Thank you!

You are now subscribed to the newsletter at

You can unsubscribe from this newsletter or Globe promotions at any time by clicking the link at the bottom of the newsletter, or by emailing us at privacy@globeandmail.com.