Switching from stocks to ETFs

Morning folks. I would love to receive some helpful advice from anyone who has an insight into ETFs.

Moneysense has a great article on their top picks for ETFs. You can use Morningstar or Yahoo Finance to find information on holdings, past performance, MER, etc.

To answer your questions:

1. I recommend when there's a particular sector you feel is undervalued or has the most potential to run. This takes quite a bit of research though and you mentioned you have a lack of time, so I'd avoid it for the time being.
2. Me personally, equal weightings between US (VFV), Canada (ZCN). Also have international equities (1/2 split between XEC and XEF).

I also have exposure to tech via QQQ and a few individual stocks. I am hoping the stocks hit my sell target, in which case I'm going to funnel everything to ETFs. I used to spend hours researching stocks but have found it not worth my time and it's stressful.

Hopefully this helps.

Rob Carrick in the Globe and Mail often has rundowns on ETFs by major categories (bonds, Canadian, etc.).
I'm unsure if they're pay walled, but all the basic information you're asking about (fees, performance) is covered there.

sandeep8g wrote: ↑ https://www.wealthsimple.com/en-ca/product/trade/

I have a LIRA account with Wealthsimple that is invested in a particular portfolio. But someone said on here a while ago that their ETFs are good too (especially as compared to Questrade). So I should look into that as well.

https://canadiancouchpotato.com/model-portfolios/
https://www.finiki.org/wiki/Portfolio_d ... nstruction

To answer your questions:
1) No
2) Both plus international, and fixed income unless your tolerance for risk and volatility is high.

Moneysense does an annual "ETF allstars" article with commentary from a few different notable columnists/bloggers/whathaveyou

https://www.moneysense.ca/save/investin ... -for-2018/

Judging by the yearly release schedule, the next article should be coming up within the next month. I always read this article and it seems to be spot on, however it doesn't dive into the sector based ETFs, these are simply for broad based ETFs.

Limited7 wrote: ↑ Hey folks. I am currently finding it very difficult to keep up with the stocks due to lack of time so I am exploring the idea of investing in ETFs. I am certainly trying to avoid the high MER ETFs while looking for maximum returns, so if someone knows an online source where I can get information on past performance of ETFs along with their MER fees etc. I would really appreciate if they could share it.

I also have a a couple other questions if you guys have the time to answer:

1. Do you guys recommend sector based ETFs?
2. What is your preference between Canadian and US ETFs?

Since you have some knowledge of the stock market (ie owned and researched stocks currently), I would actually avoid many of the index based ETFs and spend some time researching the factor based or smart ETFs and find some that fit your investing theme - ie when you are researching stocks, what criteria do you look for to buy? What do you look for to sell? Have the ETF automate your selection process for you.... saves you time and keeps with the investment themes you are comfortable with. If you are making money and comfortable with your current themes, why change them... just change how they are done.

Example - let's say you like value and you like how the Buffet investment style where he looks for companies with a large economic/technology advantage over the competition (ie a moat).... then you can do some research on some of the various ETFs that do that sort of thing for you for a small fee - ie like the MOAT ETF in the US. Or let's say you like Canadian bank stocks but you only want to buy the ones that performed poorly last year (following the time tested theme of buying last years dog on the basis it will outperform this year), then you can get something like HCB or RBNK which will do that for you.

Why is it that most ETFs have exposure to financial instruments (bonds, debts etc)? Is it because it is absolutely impossible for a good ETF to exist with no exposure to the finance industry or am I looking in the wrong places

Limited7 wrote: ↑ Why is it that most ETFs have exposure to financial instruments (bonds, debts etc)? Is it because it is absolutely impossible for a good ETF to exist with no exposure to the finance industry or am I looking in the wrong places

With the drive to lower and lower MERs, I wouldn't be surprised that some ETFs are trying anything they can in order to make some money. After all, they ain't offering these products out of the goodness of their hearts! They want to make money!!

What type of ETFs are you looking at?

Limited7 wrote: ↑ Why is it that most ETFs have exposure to financial instruments (bonds, debts etc)? Is it because it is absolutely impossible for a good ETF to exist with no exposure to the finance industry or am I looking in the wrong places

What do you mean? Here's all of Vanguard's Canadian Index ETF's - more than half of them are purely equities (with some holdings in cash to keep the fund functional): https://www.vanguardcanada.ca/individua ... tyle=index

Here are all of Blackrock Canada's ETFs: https://www.blackrock.com/ca/individual ... &view=list Most of them are pure equity holdings.

craftsman wrote: ↑ With the drive to lower and lower MERs, I wouldn't be surprised that some ETFs are trying anything they can in order to make some money. After all, they ain't offering these products out of the goodness of their hearts! They want to make money!!

What type of ETFs are you looking at?

ownthesky wrote: ↑ What do you mean? Here's all of Vanguard's Canadian Index ETF's - more than half of them are purely equities (with some holdings in cash to keep the fund functional): https://www.vanguardcanada.ca/individua ... tyle=index

Here are all of Blackrock Canada's ETFs: https://www.blackrock.com/ca/individual ... &view=list Most of them are pure equity holdings.

Thanks for your insight guys. Can I ask a silly question since no question is a silly question . And and this is out of pure curiosity OK...

Is it almost impossible to an ETF to exist with no exposure to the financial industry? Ownthesky provided some great recommendations from Vanguard and Blackrock that excluded financial instruments which is what I was requesting in my previous post; but having looked at all the major and/or best performing ETFs I always see banks related holdings on the top of each list. I know that banks literally own us and there is no escape from them. Not that I have anything against the banks but I am just intrigued to hear from the experts as to why every good ETF has to have a share of the financial industry in its portfolio?

Limited7 wrote: ↑ Thanks for your insight guys. Can I ask a silly question since no question is a silly question . And and this is out of pure curiosity OK...

Is it almost impossible to an ETF to exist with no exposure to the financial industry? Ownthesky provided some great recommendations from Vanguard and Blackrock that excluded financial instruments which is what I was requesting in my previous post; but having looked at all the major and/or best performing ETFs I always see banks related holdings on the top of each list. I know that banks literally own us and there is no escape from them. Not that I have anything against the banks but I am just intrigued to hear from the experts as to why every good ETF has to have a share of the financial industry in its portfolio?

When you say no exposure to the financial industry, how 'no exposure' are you thinking? ie - no holdings at ALL? Or just no stocks? And how close don't you want to be to the financial industry? No insurance? No finance? Or just no banks?

50% XUU = iShares Core S&P U.S. Total Market Index ETF
https://www.blackrock.com/ca/individual ... -index-etf
- MER = 0.07%
- Yield = 1.58%

30% XEI = Canadian Dividend Stocks iShares high dividend ETF
https://www.blackrock.com/ca/individual ... ckerSearch
- MER = 0.22%
- Yield = 4.38%

20% CASH


Great US exposure at a low cost and amazing canadian exposure with a great dividend yield. 20% cash is a must for when you need to rebalance once a year.

This is my favourite ETF allocation

edit: IMO you don't need emerging markets/euro/international... US is the only market you need, I like canada because of bias and because we have solid and safe bank/energy.

OR if you want an all in one with foreign exposure go for VBAL or VGRO

Limited7 wrote: ↑ Thanks for your insight guys. Can I ask a silly question since no question is a silly question . And and this is out of pure curiosity OK...

Is it almost impossible to an ETF to exist with no exposure to the financial industry? Ownthesky provided some great recommendations from Vanguard and Blackrock that excluded financial instruments which is what I was requesting in my previous post; but having looked at all the major and/or best performing ETFs I always see banks related holdings on the top of each list. I know that banks literally own us and there is no escape from them. Not that I have anything against the banks but I am just intrigued to hear from the experts as to why every good ETF has to have a share of the financial industry in its portfolio?

Very curious as to your adversity toward finance companies considering they are a major part of the economy hence their inclusion in an index etf. And as many are income(dividend) producing, they will be a large part of a dividend etf.

If you are very adamant about taking these out of the investment equation, you could look at sector ETFs. Keep in mind though, they tend to be smaller and less in demand, so their MERs tend to be higher so if you also want to reduce your mamagement fees as you mentioned, you will likely have to pay more than what you will be charged in an index. Additionally, since these industry specific ETFs tend to focus on one area, you will need to purchase a few to have a fairly diversified portfolio.

Many ETF companies have many different ones. For example iShares has a Global Healthcare ETF (TSX XHC, NYSE:IXJ). BMO has an equal weight REIT (TSX:ZRE).

And although ETFs may be cheaper, low cost mutual funds may also be a great alternative too.

But more importantly, rather than see what ETFs to pick from, I think moreso, you need to come up with a strategy more so than decide based on what ETFs you see available. You say you do invest in stocks, but don't have enough time. Would many of your holdings be names you like to keep holding? How about a combination of both.

While personally I do mostly my own stocks, my strategy is to slowly overtime become a passive investor. While my target was 30%(around my age), I currently have 15-20% in funds I dont touch (eg. Sask Pension, ETFs and a bit of mutual fund). The rest I do with stocks.

Limited7 wrote: ↑ Thanks for your insight guys. Can I ask a silly question since no question is a silly question . And and this is out of pure curiosity OK...

Is it almost impossible to an ETF to exist with no exposure to the financial industry? Ownthesky provided some great recommendations from Vanguard and Blackrock that excluded financial instruments which is what I was requesting in my previous post; but having looked at all the major and/or best performing ETFs I always see banks related holdings on the top of each list. I know that banks literally own us and there is no escape from them. Not that I have anything against the banks but I am just intrigued to hear from the experts as to why every good ETF has to have a share of the financial industry in its portfolio?

So here's the rub: index funds simply picks stock based on a list of companies with a few very simple rules. This picking and rule usage requires very little effort on the part of the fund manager, so that's why they are able to offer the index fund for almost zero fees. Most Canadian stock indexes track large firms, including banks, because they are unlikely to go bankrupt tomorrow and often pay reliable dividends - this makes them a good fund for long term investment. What you're describing is a fund that does active management, in that they are choosing to not buy some stocks and to buy others. I'm not aware of a fund that chooses to exclude banks, but if it existed, it would be more expensive than a standard ETF because of this active management.

I know that banks literally own us and there is no escape from them.

The Canadian banking industry has a small number of big players that exist in all provinces that are well support by the federal government and largely beloved/trusted by Canadian consumers, so they're very successful. Hence, they dominate our stock market- not because they're doing anything sinister, but because investors want to own stocks in a successful company that the market has chosen to support. If people decided en masse that they hate our banks, there's plenty of credit unions that would welcome their business- but they don't! Investors recognize this and see value in these banks. Their representation in our index holdings is a market consensus on their success by all market participants, not a grand bank conspiracy.

If you HATE our financial industry, for whatever reason, the best thing you can do to stick it to them is to become an owner of these companies (by purchasing stocks) AND refusing to do business with them. You'll take their money right out of their pocket while simultaneously not supporting them at all.

If you really want to own an index ETF AND avoid banks, there are "small cap" indexes which buy stocks in small companies. Here's an example of one: https://www.blackrock.com/ca/individual ... -index-etf
As you can see, it's a fair bit more expensive than the larger ETFs, but if you scroll down to their holdings, you'll notice that no financial company makes up >1% of their stock holdings. I think the largest financial company they own stocks in is "Home Capital" at 0.91%.

craftsman wrote: ↑ When you say no exposure to the financial industry, how 'no exposure' are you thinking? ie - no holdings at ALL? Or just no stocks? And how close don't you want to be to the financial industry? No insurance? No finance? Or just no banks?

Thanks craftsman. Based on responses from the other folks what I have deduced so far is that any ETF that has no holdings of the financial industry (insurance, banks etc.) then either it would either have lower returns, ...or the risk rating would be high (perhaps due to lesser certainty?), ...or the MER would be considerably higher.

Side question guys, once I bite the bullet and move majority of my funds to spread across different ETFs, how often do you think I should balance my portfolio?

Also found an interesting article here on Couch Potato that explains when it is best to use US based ETFs vs. Canadian (registered vs. non-reg).

Limited7 wrote: ↑ Thanks craftsman. Based on responses from the other folks what I have deduced so far is that any ETF that has no holdings of the financial industry (insurance, banks etc.) then either it would either have lower returns, ...or the risk rating would be high (perhaps due to lesser certainty?), ...or the MER would be considerably higher.

Side question guys, once I bite the bullet and move majority of my funds to spread across different ETFs, how often do you think I should balance my portfolio?

While your account is small, you can re-balance with new contributions, but as it gets quite large this becomes impossible. To keep your sanity and reduce the risk you'll tinker too much while you sell things, most people either do it yearly or monthly.