But Canadian investors these days need no excuses to justify their home-market bias. Domestic index ETFs have performed better than virtually all the other major investable regions for more than a year now.
A big part of that outperformance has come from the heavy financial and commodity skew to the Canadian stock market, which has benefited from rotation away from giant technology stocks and into energy, materials, and industrials. Investors today are seeking exposure to companies with real earnings, not just hoped-for ones.
There are many fund options to choose from, but the top vote-getter for our panel was the Vanguard FTSE Canada All-Cap Index ETF (VCN). For one of the lowest MERs on the market, it offers a representative sample of Canadian large- to mid-cap stocks and consistently high liquidity. “It’s the most complete slice of the Canadian market available—broader than the S&P/TSX Capped Composite used by XIC and ZCN, which exclude small-cap and artificially limit single-name exposure,” argued panellist Mark McGrath.
Close behind was the iShares Core S&P/TSX Capped Composite Index ETF (XIC), which for similar terms tracks the country’s preeminent stock index.
The iShares S&P/TSX 60 Index ETF (XIU) came in a more distant third in our poll. While containing fewer stocks, it has a higher expense ratio than either VCN or XIC. Where it pulls ahead of rivals, however, is in its dividend yield, currently topping 3%. That makes it a good option for investors who want both income and long-term growth.
“XIU continues to hold all the top-Canadian stocks that everyone knows about (banks, energy/pipelines, utilities) and remains tax efficient for non-registered accounts offering a mix of income and growth,” explained panellist Mark Seed.
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