The Best ETFs For Canadians

In a few months, I’ll begin the third edition of my book, Millionaire Teacher.

When I write about ETFs for Canadians, I might not mention any individual ETFs.

Today, I published a story with Canada’s national newspaper, The Globe and Mail. I explained why I think I’ve found something better than a portfolio of individual ETFs.

Image by Pixabay

Read the Article

 

 

Andrew Hallam

I’m a financial columnist for Canada’s national paper, The Globe and Mail, as well as for AssetBuilder, a financial service firm based in Texas. I’m also the author of Millionaire Teacher: The Nine Rules of Wealth You Should Have Learned in School and Millionaire Expat: How To Build Wealth Living Overseas. My mission is to educate, motivate and inspire people on basic retirement planning and best practices for investing, using evidence-based strategies. I'm happy to comment on your questions.

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6 Responses

  1. Kelly says:

    If in the next edition you only include the asset allocation ETFs the “fee snobs” will quickly point out that a disciplined investor who uses individual ETFs will reap the rewards as the fee difference compounds, and they might even be willing to demonstrate how much larger the nest egg would be. But in the book you could tell the rest of the story.

    For example, if we consider an investor who has a portfolio of $100,000, will add $1000 per month for 30 years and get an average annualized return- before management fees- of 6%.

    They could use a portfolio of ETFs with a weighted MER of .16% or an asset allocation ETF with an MER of .21%. A compound interest calculator says that a return of 6% – .16% = 5.84% would give them a nest egg of $1,553,225.26 and a return of 6% – .21% = 5.79% would give them a nest egg of $1,535,414.89. The difference would be $17,810.37.

    That might be enough to convince this investor that it was worth doing but you could take it one step further and consider how the larger nest egg will translate into retirement spending. For instance, if the investor plans to withdraw 3.5% from the nest egg every year the extra $17,810.37 will translate into an extra $623 per year, or about $11 per week. But that $11/ week is in 2020 dollars. In 30 years with an inflation rate of 1.7% the buying power of that $11 would be about $6.63. Or less than $1 per day.

    If the investor chooses the easier, but higher fee, option I doubt that it will make their “top ten life regrets” list.

  2. Kelly says:

    If in the next edition you only include the asset allocation ETFs the “fee snobs” will quickly point out that a disciplined investor who uses individual ETFs will reap the rewards as the fee difference compounds, and they might even be willing to demonstrate how much larger the nest egg would be. But in the book you could tell the whole story.

    For example, if we consider an investor who has a portfolio of $100,000, will add $1000 per month for 30 years and get an average annualized return- before management fees- of 6%.

    They could use a portfolio of ETFs with a weighted MER of .16% or an asset allocation ETF with an MER of .21%. A compound interest calculator says that a return of 6% – .16% = 5.84% would give them a nest egg of $1,553,225.26 and a return of 6% – .21% = 5.79% would give them a nest egg of $1,535,414.89. The difference would be $17,810.37.

    That might be enough to convince this investor that it was worth doing but you could take it one step further and consider how the larger nest egg will translate into retirement spending. For instance, if the investor plans to withdraw 3.5% from the nest egg every year the extra $17,810.37 will translate into an extra $623 per year, or about $11 per week. But that $11/ week is in 2020 dollars. In 30 years with an inflation rate of 1.7% the buying power of that $11 would be about $6.63. Or less than $1 per day.

    If the investor chooses the easier, but higher fee, option I doubt that it will make their “top ten life regrets” list.

    • Hi Kelly,

      You are correct about fees. But you are incorrect in your assumption that my books provide higher fee options only. I shun high costs and the lower the costs, the better.

      Cheers,
      Andrew

  3. Kelly says:

    I’ve made no such assumption!

    What I was trying to say is just that if in the next edition of Millionaire Teacher you include the low cost Canadian Asset Allocation ETFs and exclude the slightly lower cost option of using a portfolio of individual ETFs the “fee snobs” will complain that over the decades this choice will cost the investor a huge chunk of their retirement nest egg. (I’ve seen this happen many times on personal fiance forums.)

    • Hi Kelly,

      I’m a bit confused. I thought I included very low cost ETFs in that book. If somebody thinks the ETFs I chose will cost them a huge chunk of their retirement, they are mistaken. Once you get down to a certain level, it’s like a marathon runner complaining about the weight of his or her shoelaces. We would call such runners…slightly delusional, even though they might still be good people.

      Cheers,
      Andrew

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