This post was originally posted in 2008 but was recently updated (March 2018) to include the latest low cost index ETFs available to investors.

Diversified indexing seems to be all the rage these days. To be honest, I’ve really grown to appreciate the simplicity of index investing and have used this approach for a number of my own accounts.  More specifically, I use this for our family RESP, my wife’s RRSP and a portion of my own RRSP.

After doing some research, if I were to put together a diversified couch potato’ish passive index ETF portfolio, I would choose ETF’s with broad index coverage along with the lowest MER’s possible.

Here is what I came up with which happens to be very similar to the Canadian Capitalist sleepy portfolio:

The Diversified Low-Cost ETF Portfolio (mix of CAD and USD)

Canadian Index XIC (CAD) or VCN (CAD) 0.06%
Total U.S Market VTI (USD) 0.04%
70% Europe, 30% Pacific VEA (USD) 0.07%
94.3% Emerging Markets, 5.3% Pacific, 0.20% North America VWO (USD) 0.14%
Canadian Short Term Bond Index VSB (CAD) 0.11%

Update Jan 2017: For your international exposure, consider VXUS which also has some small cap coverage.  I like VXUS because has broad international exposure and has a low MER (0.11%), however, the drawback is that it includes some Canadian coverage (duplication).  VXUS would replace VEA and VWO above, reducing the total number of ETFs to 4.

Canadian Index XIC (CAD) or VCN (CAD) 0.06%
Total U.S Market VTI (USD) 0.04%
70% Europe, 30% Pacific VEA (USD) 0.07%
94.3% Emerging Markets, 5.3% Pacific, 0.20% North America VWO (USD) 0.14%
Total International Index VXUS(USD) 0.11%
Canadian Short Term Bond Index VSB (CAD) 0.11%

Update November 2016, I added this table below as a lot of readers want to avoid the FX conversion from CAD to USD (needed to purchase USD based ETFs).  Vanguard and iShares have a number of ETFs that are low cost, in CAD, and non-hedged (hedging is known to underperform over the long term).

CAD only (non-hedged)  Diversified Low-Cost ETF Portfolio

Canadian Index XIC (CAD) or VCN (CAD) 0.06%
Total U.S Market VUN XUU(CAD) 0.16 0.07%
International Index (MSCI EAFE) XEF (CAD) 0.22%
Emerging Markets Index VEE (CAD) 0.24%
Canadian Short Term Bond Index VSB (CAD) 0.11%

Update January 2017
, If you would like to simplify even further, you could replace XUU, XEF, VEE with iShares All Country World ex-Canada Index ETF (XAW).  With a MER of 0.22%, you could reduce your portfolio to three ETFs and still maintain a reasonably low MER.

Simplest CAD only Diversified ETF Portfolio (only 3 ETFs)

Canadian Index XIC (CAD) or VCN (CAD) 0.06%
Total U.S Market XUU (CAD) 0.07%
Developed ex North America Index XEF (CAD) 0.22%
Emerging Markets Index VEE (CAD) 0.24%
All-World ex-Canada Index VXC XAW(CAD) 0.27 0.22%
Canadian Short Term Bond Index VSB (CAD) 0.11%

There are lots of ways to tweak the portfolio. I chose XIC over XIU because of the lower MER which is the same reason why I chose a combination of XEF and VWO instead of using VEU or XIN.

VTI, the total U.S market, is a steal in my opinion as it covers the whole U.S market without having to purchase separate funds for the Russell 2000, S&P 500, DJIA, and Nasdaq. If you’re looking for a higher potential return and willing to take on a bit more risk, you may want to purchase a U.S small cap ETF separately.

VSB, a Canadian short term bond index, was chosen because short-term bonds are known to have a lower correlation with the equity markets than long-term bonds. Having a bond portion in the portfolio will reduce volatility while only slightly reducing potential returns. The bond portion will start out small (maybe non-existent) in the early years but increase in percentage as the portfolio gets closer to funding retirement.  An alternative would be to choose the total Canadian bond index using VAB (MER 0.13%).

But what about asset allocation (the percentage of each ETF)?  It really depends on how much you can tolerate volatility in your portfolio (some would define volatility as risk).  While the higher the bond % may slightly reduce the long-term return of your portfolio, it will also dampen those big market corrections that are guaranteed to occur (remember 2008?).

As a rule of thumb, beginner investors who are a little more aggressive may want to start at a bond allocation at 25% of their portfolio and those a little more conservative 40%.  There are a number of “balanced” mutual funds that hold 40% bonds.  As another example, Canada Pension Plan holds 30% bonds with a “retirement” timeline of 75 years.  Bond allocation typically increases with age to reduce the impact of a large market correction when you are withdrawing from your portfolio during retirement.

To see the latest of the “easy” ETF portfolios, check out Vanguards newest products, VGRO and VBAL. Essentially all in one balanced ETF portfolios that have very low MERs.

How does the portfolio look to you? What would be your picks for a diversified low-cost ETF portfolio?

For those of you just starting out on your investing journey, you can see my list of discount brokers that offer commission-free ETF transactions to further reduce your investing fees.

If you would like to read more articles like this, you can sign up for my free weekly money tips newsletter below (we will never spam you).


  1. Canadian Capitalist on July 17, 2008 at 8:42 am

    Thanks for the link. As you know, XIC is better in my opinion because it is more diversified and avoids concentration (which might be a real problem with our stock market). Having said that buying a few stocks to represent the Canadian portion is a viable alternative.

  2. Telly on July 17, 2008 at 11:04 am

    I’d love to see what allocation you’d choose. We had a bit of a discussion at CC’s blog about this not long ago.

  3. FrugalTrader on July 17, 2008 at 11:21 am

    Interesting question Telly, for me, I would keep it simple and would resemble my RESP strategy.

    Basically mostly, if not all, equities initially then gradually adding to my bond portion as I get closer to retirement. In terms of equity allocation, I would probably choose an equal weight for each ETF rebalancing as I add cash to the portfolio.

    What do you do with your index portfolio?

  4. Paul S on July 17, 2008 at 12:04 pm


    Great idea.

    What are the historical performance numbers on these funds vs their equivalent indexes? Was this part of your selection process?

  5. FrugalTrader on July 17, 2008 at 1:13 pm

    I’m not sure about the exact numbers, but there is going to be a small tracking error with all index based funds/etf’s. For my selection process, I assumed that all index etf’s had the same tracking error, and based my selection based on MER and asset allocation.

  6. Ryan on July 17, 2008 at 2:38 pm

    I use the following allocation:

    Canada – total 20%
    20% – XIC

    US – total 30%
    20% – VTI – total market
    5% – VBB – small cap
    5% – VRB – small cap value

    International – total – 30%
    20% – VEA
    10% – VWO

    Fixed – 20%
    5% – XRB – Real Return Bonds
    5% – XSB – Short Bonds
    10% – XRE – REITs

    The biggest downside is the currency risk as 60% of the portfolio is in US dollars. Also – I would like to find a replacement for XRE as the MER is 0.55%.

  7. Dividend Growth Investor on July 17, 2008 at 4:46 pm

    There’s not a right or wrong allocation, only one that is suited for each individual.

    As for bonds, I noticed you are looking at short-term bonds. What about long-term bonds? In US you could check out BLV or TLT. What about foreign bonds exposure? Check out BWX.

    Also have you thought about real-estate? Some people say that real estate investment trusts are a separate asset class, just like stocks, bonds, commodities. IYR for US and RWX for international could be a good starting point.

    You might also add some small-caps and mid-caps as well. IWM is the russell 2000 index etf, so it should be ok.

    A very good starting ETF list for US investors could be found form Yahoo! finance:

    There’s 794 ETF’s in the US. I just got a headache simply by opening the list..

  8. FrugalTrader on July 17, 2008 at 5:39 pm

    Hey DGI, long term bonds have a higher correlation to equities than short term bonds. If I were to hold bonds, the purpose would be to reduce volatility as I get closer to retirement.

  9. Ryan on July 17, 2008 at 5:43 pm

    Debating allocation decisions is always fun. I use the following:

    Canada – 20% total
    XIC – 20%

    US – 30% total
    VTI – 20% – total market index
    VBB – 5% – small cap
    VBR – 5% – small cap value

    International – 30% total
    VEA – 20% – Europe and Pacific
    VOW – 10% – Emergying Markets

    Fixed Income – 20% total
    XSB – 5% – short bonds
    XRB – 5% – real return bonds
    XRE – 10% – REITs

    The main disadvantage of my allocation is that so much of it is in US$ and therefore there is alot of currency risk. I would also like to find a replacement for XRE as its MER is much to high.

    I am not a believer in market timing but if you are I would suggest sticking with short bonds at this point. That way you wont be hurt when interest rates start to rise.

    • chris on January 11, 2019 at 10:08 am

      I like this allocation. There have obviously been some changes since it was posted (10 years ago!) – how did it work out for you Ryan and what changes have you made to your allocation since?

  10. sid on July 17, 2008 at 7:20 pm

    Since these are all ETF’s, brokerages treat these as buying stocks. How would you buy into these each month to minimize your trading fees? With 5 ETF’s at $9.99 per trade that’s $50 a month or $600 a year. If you invested in mutual funds with no loads with 1% MER’s, you’d break even at $60,000. I know I don’t have that much to invest every year and I can find mutual funds with no loads and MER’s less than 1%. So is there any advantage with these?

  11. Antony Pranata on July 17, 2008 at 8:27 pm

    What’s your opinion on Horizon’s Beta ETF? Their MER is higher, but the potential return might be better.

  12. FrugalTrader on July 17, 2008 at 9:26 pm

    Ryan: Thanks for sharing. Seems that you have a well diversified ETF portfolio.

    Sid: ETF portfolios only make sense for larger accounts like you mentioned. If your account is smaller, it would make sense to stick with mutual funds like the td e-series.

    antony: I’ve written about the horizon betapro ETF’s before and they seem like a decent choice for “trading”. It’s hard to say what it will do in the long run, there’s not enough data thus far.

  13. Cannon_fodder on July 17, 2008 at 9:30 pm

    I took a look at the Beta Pro’s perfomance vs. the underlying indices and it shows within a year that they don’t come close to 2x the performance. It was enough to convince me to pass on them.

  14. Charles in Vancouver on July 18, 2008 at 2:52 am

    (please delete if this posts twice)

    Ryan, your VEA and VWO holdings may be priced in US dollars, but they do not represent US dollar exposure because those funds are not hedged to any currency. Rather, they represent exposure to global currencies, namely whichever ones the underlying companies do business in. So that 30% of your portfolio has some US exposure (foreign companies who do a lot of US business), some Euros, some Pounds, some Yen, and a smattering of others.

    So really, only 30% is exposed absolutely to the US dollar; another 30% is exposed to a total coin-toss of currency fluctuations; and 40% is in your home currency. That’s not too bad at all. When you calculate rebalancing, remember to convert everything to CDN$ at the prevailing rate and you may even profit from currency swings over the years.

  15. Charles in Vancouver on July 18, 2008 at 3:22 am

    Sid: A hybrid approach is also possible. One need not make 5 trades per month. One could:
    a) Add to the ETFs monthly, but only one trade at a time. Each month you add your entire contribution to whichever ETF is most underweighted. Over the course of the year you will stay approximately within your target allocation.
    b) Collect your monthly contributions in a high-interest savings account, money market fund or in no-load funds matching the underweighted category (e.g. if VEA is underweight, buy into a no-load EAFE index fund). Then you can make a small number of annual or quarterly trades with that money when it makes sense.
    c) Same as b, but set a threshold amount – e.g. tell yourself that if any ETF is underweight by more than $1500 and you have that much in cash or a no-load fund of the same category, you will make one trade.

    With an annual-hybrid approach you could make as few as 3-5 ETF trades (this is my preferred strategy). Now the break-even point slides lower.

  16. Almost there on July 18, 2008 at 10:08 am

    Does anyone know a good low cost dividend paying etf? Ive seen CDZ with a mer .60%.

  17. Ryan on July 18, 2008 at 12:27 pm

    Hi Sid – The way I reduce brokerage fees is to only make one ETF purchase every year. My strategy is to automatically purchase TDeFunds (using dollar cost averaging) every two weeks. Once a year I sell my TDeFunds to purchase ETFs from TD Waterhouse. I do use 9 ETFs but because I only make one transaction a year this costs me less than $100 in brokerage fees.

    Charles – thanks for the info on VWO and VEA.

  18. Dividend Growth Investor on July 18, 2008 at 2:22 pm

    Almost There,

    There are several dividend ETF’s out there. The ones worthwhile in my opinion are SDY and DVY. I do have some problem with the weightings in SDY according to yield though..

  19. Dividend Growth Investor on July 18, 2008 at 2:25 pm


    Short-term bonds will let you maintain some flexibility if interest rates rise. With longer term bonds however you earn higher current interest. If interest rates do not increase a lot or decrease you will be better off with longer-term bonds; If interest rates increase however, like they did in the 1970’s then sticking to short term maturities will be the way to go..

  20. FrugalTrader on July 18, 2008 at 4:46 pm

    Thanks for the tips DGI !

  21. Ryan on July 18, 2008 at 5:18 pm

    William Berstein looking at the trade-off between short-term and long-term bonds in his book the Four Pillars of Investing. He found that short-term bonds offer very similar returns as long-term bonds. If thats true than there is little reason to purchase long duration bonds because long bonds are more risky then short bonds.

    Alos – with interests rates this low I would suggest buying short bonds because there value will be less effected when interest rate rise.

  22. Robert Penner on July 19, 2008 at 11:26 pm

    FT, is this all hypothetical or are you planning to start investing in these? And would you borrow to invest, to get the tax write-off?

    • FrugalTrader on July 20, 2008 at 6:22 am

      Hey Robert, as I mentioned in the article, i’m slowly being converted to an indexer. I’m already indexing a portion of my RRSP but plan to increase the amount when the time is right.

      If you check out my Smith Manoeuvre portfolio updates, you’ll see my leveraged portfolio contents. There is a small index portion of that portfolio, but it’s mostly income producing securities.

  23. sid on July 20, 2008 at 3:21 pm

    FT, Ryan and Charles, thanks for the replies. I’ll stick with mutual funds for another year or two when my portfolio’s a little bigger and then reconsider the ETFs.

    I just noticed that three out five of the funds you listed were in USD. Do you do anything to “hedge” against the change in currencies?

  24. FrugalTrader on July 20, 2008 at 3:53 pm

    sid, ETF’s that hedge against currency risk have higher MER’s and it’s been shown that currencies risk is reduced significantly if investing for the long term.

  25. Almost there on July 23, 2008 at 3:38 pm

    Dividend Growth Investor,
    Those 2 look good but they are both american which would have a non-resident withholding tax for Canadians.
    Do you know of any good canadian efts??
    I saw this on TMF.

    Weighing yield
    To distinguish themselves from their competition, dividend ETFs put together their portfolios in different ways. Let’s look at some of them:

    The WisdomTree LargeCap Dividend Index Fund (DLN) uses a simple approach, choosing the 300 largest stocks from its dividend index and weighting them by the total amount of dividends each company pays.

    The iShares Dow Jones Select Dividend Index Fund (DVY) includes dividend-paying stocks that have maintained or increased dividends in each of the past five years, have a payout ratio of 60% or less, and trade an average of at least 200,000 shares daily.

    The PowerShares Dividend Achievers ETF (PFM) screens for companies that have increased dividend payouts for at least 10 straight years and then chooses the highest-yielding stocks among them.

    The SPDR S&P Dividend ETF (SDY) picks 50 high-yielding companies that have raised dividends consistently over at least a 25-year timeframe.

    The First Trust Value Line Dividend Index Fund (FVD) uses Value Line’s safety rankings to screen for stocks it deems safer than average and then takes above-average dividend yields with market caps of more than $1 billion. Unlike most other dividend ETFs, this fund gives each stock equal weight in its portfolio.

    Again all american, but there is some good info as to the differences in the various etfs.

  26. cnidog on August 8, 2008 at 11:19 pm

    For what it is worth, here is what CIBC Wood Gundy recommended in their July 2008 Monthly World Markets Report:
    Growth Aggressive Growth
    Cash 0% 0%
    Fixed Income ETFS
    XBB 20% 0%
    Equity ETFs
    XIC 22% 27%
    XTR 8% 8%
    IVV 16% 17%
    EFA 19% 25%
    EEM 9% 17%
    VNQ 6% 6%

    Meanwhile, RBC recommends the following asset allocation in its Summer 2008 edition of Direct Investor. Unfortunately, they do not make Index fund recommendations, only asset classes.

    Growth Aggressive Growth
    Cash 4.1% 3.3%
    Fixed Income 19.5% 0.0%
    Canadian Equities 23.8% 34.3%
    US Equities 31.8% 33.2%
    Int’l Equities 20.8% 29.2%

    The big difference between the two seems to be the CIBC thinks that oil is going to rise to $200/bbl and therefore has placed heavy emphasis on big energy producing countries like Canada, Russia and Arabia. It also likes the trends in the economies of Brazil, China and India.

    RBC, on the other hand, thinks that US stocks are really undervalued now, and has placed heavy emphasis on US equities.

  27. Rob Viglione on August 11, 2008 at 2:41 am

    Great foundations for a solid portfolio, but I’d also recommend adding a diversified commodities element, as well as a handful of currencies. For commodities, I highly recommend a broadly diversified ETF such as GSG. It tracks the performance of the GSCI Excess Return Index, which tracks 24 different commodities. It is weighted with approximately 67% invested in energy, 16% in agriculture, 7% in industrial metals, 7% in livestock and 3% in precious metals. The index is production weighted to reflect the relative significance of those commodities to the world economy.

    It’s possible to get into specific commodities, such as oil (USO), natural gas (UNG), agricultural commodities (DBA), and precious metals (XME), to name a few. Still, unless you have reason to be particularly bullish on any of these I’d recommend the far more diversified GSG.

    As far as currencies are concerned, I recommend adding a selective group to your portfolio using ETF’s: FXE, FXF, FXC, FXA, FXM, FXS, FXY, and FXB. I’ve written a more detailed article on how to choose the right currencies:

    Two things to consider are how currencies correlate to other assets in your portfolio, namely stocks and bonds (and hopefully commodities), as well as relative income yields. Currency ETF’s pay dividends that are representative of interest rates in their respective countries. It would be prudent to add currencies that have both high yields as well as negative correlation to major assets currently in your portfolio.

  28. Patch on August 11, 2008 at 2:29 pm

    so much for simple…

  29. FrugalTrader on August 11, 2008 at 2:53 pm

    Patch, if you have questions, the readers and I would be happy to address them.

  30. Mark on February 9, 2009 at 9:48 pm

    Would you guys still reccomend the above portfolio? I’m looking to start mine this year

  31. FrugalTrader on February 9, 2009 at 9:54 pm

    Mark, the above portfolio is not a recommendation but a place to start your research. Best of luck!

  32. Mark on February 9, 2009 at 9:57 pm

    Ok thanks FT, It gives me some further insight into other areas I can be looking at.

  33. Sampson on February 10, 2009 at 12:26 am

    Mark, I think the most important thing you have to consider is your target asset allocation.

    I typically use a couple of pie charts
    – one based on asset classes (equity vs. fixed income etc.)
    – next based on breakdown within those assets (large vs. small cap, sector allocations etc.)
    – finally. one based on regional allocations (Canada vs. US vs. Emerging Markets vs. EAFE etc.)

    Just draw these out, then slow decide how to fill each of those categories by comparing various ETF’s offered by different companies. Make sure the indexing method is accurate, make sure it isn’t particularly biased (e.g. market cap weighted indices etc.).

    Good luck!

  34. Mark on February 10, 2009 at 7:40 pm

    Thanks Sampson thats really useful, The first two I’m relatively comfortable with, BUT how do you decide on distribuition of the first two in the third. If any of you guys can reccomend some good books/online resources for this I would appreciate it. I’ve read some basic stuff But I’m still not comfortable I totally understand diversification at this detail


  35. Johnc on March 31, 2009 at 11:02 pm

    With a ETF like CDZ or XDV would it be advantages to DRIP to reduce fees. I guess the same would go for any high dividend paying equities in a RRSP account.


  36. cannon_fodder on July 15, 2009 at 2:39 pm

    FT et al,

    Instead of VEA, what about XIN which trades on the TSX? Pros and cons?

  37. Carl on July 28, 2009 at 2:13 am

    Hi all, great discussion.

    I’m researching to replace many high MER funds with an asset allocation for long term investing and rebalancing once a year. I’m already using ETFs in my son’s RESP, but I’m currently wondering if I’m not going to buy individual stocks instead of ETFs given the somewhat large dollar amount that’s going to go in index ETFs.

    I’ve read that a good diversification is attained for an allocation class with “only” 20 stocks. So lets say you have 100,000$ to put in one sector (for example large caps canadian stocks), that would mean 5000$ per stock with a 10$ commission (0.2%) and no other fees (except when selling of course). For a long term buy and hold investment, saving fees charged by ETFs would be a bonus at the expense of additional research on my part (even though I must admit these fees are tiny compared to what we were paying before).

    I’m also not considering buying bond ETFs, but investing directly into bonds to build a bond ladder.

    I’ll probably consider ETFs for overseas investments though. It will just be easier that way.

    Essentially, how big do you think a portfollio should be before buying individual stocks makes sense? Or do you think picking stocks individually is not worth the trouble giving the low MER of ETFs?

    One advantage I see for individual stocks is that you don’t have all your eggs in the same basket, namely the fund company.

    So what do you think?

  38. CiscoKid on September 9, 2009 at 2:22 pm

    Hi guys,

    Great discussion. Honestly I frequently read about finance, but have been a little slow jumping into the pool. I’ve taken my first steps in opening a discount brokerage account with Questrade thanks to MDJs article.

    So the plan is to buy ETFs now (and once a year thereafter) and continue to buy group RRSPs at work which I plan to open an account with TD to buy e-funds by-weekly following FTs RESP strategy & follow Ryan’s suggestion to sell them off each year to buy more ETFs.

    I know I’m not starting out with much (just a little over 15K) but I think it will be the least amount I will be contributing each year & I believe we may be selling our house soon (which means I may pay back the money from the HBP of 40K between my wife & I)

    By mixing & matching info I’ve gathered on many MDJ threads I will probably shoot to allocate my money as follows (though I’m an avid follower of MDJ I will make an excellent couch potato candidate since I don’t really follow the markets all that much):

    Canada – total 30% $4,500
    20% – XIC $3,000
    10% – XIU $1,500

    US – total 30% $4,500
    20% – VTI $3,000
    5% – VBB $750
    5% – VRB $750

    Internat. – total 30% $4,500
    20% – VEA $3,000
    10% – VWO $1,500

    Fixed – 10% $1,500
    5% – XSB $750
    5% – XRE $750

    Any feedback would greatly be appreciated. Maybe buying so many different stocks/ETFs is ill advised with such small funds? or I’m really missing some fundamentals? I just don’t know… I read the article about when’s best to switch from e-series to ETFs, but then with many other comments (like Ryan mentioning that buying everything all at once can really cut down on the costs) & ETFs low MER over the long haul, I thought it might be best just to jump in!

    I’ve also been thinking about investing inside of a TFSA & have also been thinking since I plan to join the OPP in the near future (with an amazing pension plan) I should consider cutting back a bit on investments inside my RRSPs. Any thoughts?

  39. FrugalTrader on September 10, 2009 at 2:15 pm

    Cisco, couple of questions, why do you hold XIC and XIU? There is some cross over between the two. XIU tracks the largest 60 companies, while XIC tracks over 250.

    As well, what is VBB and VRB?

    One more note, XRE covers REITs which aren’t considered fixed income. It acts more like an equity than fixed income.

  40. Mark in Nepean on September 10, 2009 at 8:44 pm

    What ETFs, if any, would you guys recommend for a TFSA???

    Seems like it would be a good choice to “plunk” a few thousand into ETFs into your TFSA in 2010…

  41. CiscoKid on September 11, 2009 at 3:12 pm

    Thanks FT for your response,

    All of my choices are based on what I’ve read from your website, but perhaps my conclusions are funny to some but as a novice investor (no previous experience) I chose what I thought to be logical, but please feel free to share your opinions.

    1st off, I don’t hold anything today, so why did I think it best to hold XIC & XIU?;

    1 – I see that you like XIU because of the low MER & I also noticed in your RESP post you like to put 30% in Canadian Equity (which I’ve come to the conclusion these are?)
    2 – Other posters explained why they prefer XIC (and they allocate 20%) So I thought 10% XIU & 20% XIC was a good compromise, but maybe not…

    VBB (US small cap) & VRB (US small cap value) where what Ryan listed higher in this post which I assume are (US Equity) which you also like to allocate 30% to.

    As per XRE, guess I missed the boat on that one, but it was also taken from Ryan’s portfolio.

    Though I try to be informed about finances I guess the old saying (knowing the path & walking the path are 2 different things) stays true to me. I thought it might be a good time to get my feet wet & join the game.

    I’m also thinking of waiting till mid October before I do any buying, after reading your last net worth update I decided to search the internet about a possible market correction in Sept. & Oct. & it sounds like there might be a drop of a good 10% (any thoughts?) I’d hate to jump in and instantly loose 10% on my investment…

    I recently visited to try and track down the ETFs in what could possibly become my 1st portfolio, but I wasn’t able to find all the ETF symbols (including VRB nor VBB) & there are others like VEA which don’t even look like they’ve made any money since they began & I wonder why someone would like this one… is it because it pays dividends?

    What would be nice is if there were an article for someone who is just starting out who knows they will never be a REAL stack trader & believes in ETFs. With a few pics of what one should choose & if they wanted to get into the market, should they start now? or wait till mid October in the event of a market adjustment? & if he/she wanted to invest all year, should he/she open an account with TD to buy e-funds by-weekly following your RESP strategy & sell them off each year to buy more ETFs.

    Thanks in advance ;-)

  42. Uncle pirate on November 18, 2009 at 1:08 am

    Great information about an ETF portfolio.

    Can you help me out. Is it possible to hold VBR or VTI within my Canadian RRSP account?

  43. FrugalTrader on November 18, 2009 at 9:37 am

    Uncle pirate, yes it is possible to hold US securities (like VTI) within your RRSP. Most RRSP’s require Canadian currency, so when you purchase, you’ll purchase it in Canadian dollars (after exchange rate).

  44. pat on April 29, 2010 at 5:13 pm

    is there an open platform to trade ETF’s ? kinda like the platforms to trade forex ?

  45. Lisa on December 12, 2010 at 6:24 pm

    I am looking to start a low cost diversified ETF portfolio for retirement income from a locked-in account. I have two questions:
    (1) Where do you buy your ETFs at those MERs? I’ve looked at the on-line discount brokerages for RBC, TD Waterhouse & Scotia i-Trade, and none of these carry all the funds you list, or at the MERs you list. For example, Scotia i-Trade lists VTI, but at .15% (not .07%), and does not list either VEA or VWO. (The Canadian ETFs are not a problem, only the international ones.)
    (2) For a retirement portfolio, would you change the ETFs? I understand that the portfolio would be weighted differently, with more cash & fixed income, but what about the actual equity ETFs?

  46. Barry on January 22, 2011 at 1:21 pm

    For those who are new be aware that the Vanguard ETF’s all trade on the NYSE so you will be charged currency exchange fees which can be up to 2.05% depending on your brokerage. This would take away from the savings you’re getting from the lower MER.

    Of course there is a way around this by doing Norbert’s Gambit

    With certain brokerages it is actually quite easy to do in your SDRSP account.

    • FrugalTrader on January 22, 2011 at 1:23 pm

      @Barry, an alternative is to open an account with a discount broker that allows for USD RRSP.

  47. Amit on January 25, 2011 at 3:39 pm

    My etf portfolio (not so low-cost) is as follows:-

    In RRSP:
    Developed: Large Cap: DND, EWP
    Developed: Large Cap Value: EFV, EWG
    Developed: Mid Cap: EWO
    Developed: Mid/Small Cap Value: DLS, DGS
    Developed: Real Estate: DRW
    Developed: Fixed Income/Bonds: FXA (using currency ETF for my fixed income portion)
    Emerging: Large Cap: VWO, DWX
    Emerging: Large Cap Value: DEM
    Emerging: Mid Cap: GULF
    Emerging: Small Cap: BRF
    Emerging: Fixed Income: PCY, FXM

    US: Large Cap Value: VPU
    US: Mid Cap Value: CVY
    US: Small Cap Value: IWC
    US: Real Estate: VNQ
    US: Fixed Income: BIV, TLT, BND, TIP, IEF, JNK, HYG

    Canadian: Large Cap: XMA, XIU
    Canadian: Large Cap Value: XCV, XDV
    Canadian: Mid Cap: XMD
    Canadian: Mid Cap Value: CDZ
    Canadian: Real Estate: XRE
    Canadian: Fixed Income: XRB, XSB

  48. Peter on January 25, 2011 at 9:48 pm

    I’m 29 years old, and my RRSP portfolio is in the $40-$50k at this point. I plan to be invested for at least another 25 years, and have a relatively high risk-tolerance. I like the couch potato philosophy, and plan to rebalance once or twice a year as nescessary.

    I’m planning to build with 90% equities, and 10% bonds. I also like the idea of earning dividends and utilizing DRIPs where available. The following is what I’m currently thinking:

    20% CDZ
    20% XDV
    20% VTI
    20% XIN
    10% XGD
    10% XBB

    This should leave my MER <0.5%, give me exposure to most of the major indicies, decent diversification, as well as some growth from dividend income.


  49. Ruth on April 11, 2011 at 4:05 pm

    Wow, what useful information!
    I am just jumping into ETF’s and reading all of this really confirmed my choices.
    I have 1 question. Do environment or alternative energy based ETF’s exist, Would anyone have some info and names.

  50. Amit on April 11, 2011 at 4:21 pm

    @Ruth: In Canada, there’s XEN – – by iShares.

    In USA there’s EVX, PBD, PBW, GEX, PZD, PHO to name a few.

    But, I have noticed that they trail the performance of the market as a whole. You do get the peace of mind that you are investing in green etfs, but you may not be able to get a good performance. However, things may change in the future as more and more people decide to go green or the natural resources such as water and clean air become a rarity with the ever-increasing population on our planet.

  51. Ruth on April 11, 2011 at 4:43 pm

    Amit: Thanks for the great information. I have one last question (for now!).

    Since pharmaceutical patents are expiring left and right, do you have any info on ETF’s that include those who are about to benefit the most, so: pharmacies, generics, medical/pharmaceutical wholesalers…

  52. Amit on April 11, 2011 at 4:48 pm

    @Ruth: IHE, PJP, and XPH might be the best way to hedge against the patent expiration. Check out this article:-

  53. Clay on October 16, 2011 at 12:23 am

    If you don’t like the MER of XRE just buy the index. It’s only 13 stocks!

  54. Sean on September 8, 2012 at 3:19 am

    I’m relatively new to the million dollar journey site but I have thoroughly enjoyed reading through the discussion and recommendations of other investors. One thing I noticed is that the purpose of this article is for a low cost, diversified ETF portfolio and not to fault other investors out there but I see many of you who have portfolios that extend above 10 and even 15 ETF’s and comments have been made that this can be very costly to maintain on an annual basis due to all the brokerage fees and I completely agree.

    To give a little bit of background, I will start off by saying that I am by no means a professional when it comes to personal investment however I do try to take a simple, methodical approach. At the end of the day you have to factor in ALL costs and fees associated with trading to determine net portfolio gains and it’s easy to lose sight of that. KISS… remember that from grade 8 science? Keep it simple s*****. I’m 31 years old and just purchased my first home with my wife in the GTA. We managed to put 20% down to avoid high risk mortgage fees and as we currently stand today, we have over $150K equity in our home and just over $100K in our RSP.

    The breakdown and strategy is about as simple as it gets. Hold 4 ETF stocks and 3 TD eFunds at an annually expense of only $40. Is there a better way? Perhaps, but I also don’t have time to follow the daily movement, nor the need to deal with the added stress that market volatility can bring. Therefore my portfolio breakdown is as follows:

    40% – VCE – Vanguard Canadian Index (Canada)
    30% – VTI – Vanguard Total US Market Index (US)
    15% – VEU – Stable World Markets (in theory) (World)
    15% – VWO – Emerging Markets (World)

    Throughout the duration of the year I contribute my money to TD eFunds that carry no fees on a weekly basis. The purchase can be automated for each week to reap the benefit of dollar cost averaging.

    40% – TDB900 – Canada
    30% – TDB902 – US
    30% – TDB911 – World

    Every quarter or 6 months I make sure my ratios are still matched (40% Can, 30% US and 30% World) and then at the end of the year I make one set of trades to convert all the eFunds into their equivalent Vanguard funds. Tracking the ratios is as simple as downloading your portfolio from TD into CSV format and creating a quick pie chart for easy visibility. The simple reason that I chose Vanguard over iShares is that their funds all have lower MER’s than iShare equivalents.

    I’ve also noticed that many of you like to have bonds for fixed income. Since i’m not planning on using this money for another 20 years, we don’t mind all our money being in stocks. It’s slightly higher risk than bonds but when you’re dealing with ETF index funds, that’s about as low risk as it gets when trading stocks.

    As I mentioned, there are definitely other approaches but I find this is simple and works for me.


  55. Elbyron on November 24, 2014 at 2:28 pm

    I’m surprised there’s been no mention of the fact that several discount brokerages offer free ETF purchases. Some only offer a specific subset of ETFs but Questrade and Virtual Brokers have all of them available to buy for free. Going back to sid’s comment earlier, this means you can invest monthly and not have to pay $9.99 per purchase. While you do still have to pay brokerage fees to sell the ETF shares, you probably won’t be doing that regularly, as you can usually manage the re-balancing by simply adding more to the underperformers. Since MERs on ETFS are lower than TD e-series, it’s definitely going to save you more than $10 per fund/ETF even if you’ve only got a few thousand to invest. Really the only reason I still recommend e-Series to my friends is because it’s a lot simpler to setup than getting a brokerage account and figuring out which ETFs to buy (though articles like this are a great help).

    FT, I believe you actually wrote about the free ETF trading a while back… maybe you could edit this article to include a link to it?

    • FrugalTrader on November 24, 2014 at 2:43 pm

      Thanks for the feedback Elbyron, I will update the article.

  56. Gail Bebee on November 26, 2014 at 12:03 am

    To my mind, this article misses a major ingredient in portfolio building.
    Asset allocation is one of the main factors in determining returns. it deserves more attention than MERs. What is your asset allocation?

  57. SST on November 27, 2014 at 9:56 am

    @Gail — Ibbotson’s research found that asset allocation ultimately accounts for 100% of the absolute level of portfolio returns. Make of that what you will.

  58. FrugalTrader on November 27, 2014 at 10:39 am

    @Gail, thanks for stopping by and good point about asset allocation. I’ve written about bond allocation in the past which ultimately depends on the risk tolerance of the individual (for new investors, higher bond allocation theoretically equals lower volatility of your portfolio). We have about 10% bond allocation in our total investable assets. What about yourself?

  59. SST on November 27, 2014 at 10:02 pm

    re: “…the risk tolerance of the individual (for new investors, higher bond allocation theoretically equals lower volatility of your portfolio).”

    Except that risk and volatility are not the same thing.

  60. RealTonyYoung on December 2, 2014 at 11:45 pm

    Hey all, I’m relatively new to all this, but, I’m 33 and just starting out. I’m investing heavily into the equity market and not afraid of the risk – I’m in for the long haul. I use 25% equal weighting into each of VDY, VUS, TDB905, TDB638. What are people’s thoughts? Is there a better way? Everything I’ve been reading and researching is telling me to index, and low-MER ETF’s seem to be the way to go

  61. Sampson on December 3, 2014 at 11:11 pm

    @ SST,

    Actually risk IS defined as portfolio variance (volatility) by the CFA institute.

    It is the true definition of risk in this context.

  62. FrugalTrader on December 4, 2014 at 9:48 am

    @RealTonyYoung, So you are using VDY as your Canadian exposoure, VUS for your US coverage, TDB905 (mer: 0.53%) for international, and TD638 (mer 2.88%) for your emerging markets. My opinion is that if you are already using ETFs, why not replace your mutual funds with equivalent ETFs?

  63. Al on December 4, 2014 at 10:44 am


    I agree with SST despite the edicts coming out of the CFA Institute. Who cares about volatility if the business you are invested in is sound – wouldn’t you rather have a choppy and volatile 25% than a completely stready 5%?

    Why not go ask someone who actually runs a business, you’ll get a very different definition of risk. An, of course, stocks are fractions of businessess.

  64. SST on December 5, 2014 at 10:41 am

    Volatility is the consistency of expected returns.

    It is not risk but a measurement of the effects of fundamentals, the source of most risk. Volatility always comes after the fact, thus it is not risk; at the very most it is tail-end risk.

    In this context — bond allocation — bonds have low volatility because there are few fundamental events which can put the expected return at risk.

    Then again, as one CFA article states, “it is impossible to operationally define risk. At best, we can operationally define our perception of risk. There is no true risk.”

  65. Sampson on December 5, 2014 at 10:07 pm

    When constructing a portfolio, you do not believe in assessment of volatility as an important metric?

    For an individual investor building a ‘simple low cost diversified ETF portfolio’ and considering when monies from the portfolio will be harvested, volatility and sequence of returns risk are of predominant importance.

  66. SST on December 6, 2014 at 10:10 pm

    As yet another CFA states, volatility is “not a measure of investment risk but a measure of behavioural risk.”

    We all have our biases. :)

  67. Jozo on December 30, 2014 at 5:51 pm

    I am absolute beginner who is planning to invest some money into ETFs. I have small amount of money 5k. First I was thinking to go with TD e Series and than after doing some research I changed my mind due to low fees at Questrade and due to recognition that one day with more money available will be more beneficial for me to trade independently through some brokerage firm. I would honestly appreciate if somebody could specify some ETF portfolio which would be adequate for me to start.
    Thank you in advance.

  68. Peter Saumur on February 2, 2015 at 12:16 am


    I’m assuming you are Canadian. You have choices but the biggest question is: are you saving for retirement (RRSP) or tax-free dividends (TFSA) ?

    With 5k, I would keep things simple and start your portfolio with a Tax-Free Savings Account and with Canadian ETFs.

    XIC a broad exposure ETF to Canadian market
    XBB as stable Canadian bond ETF

    And the twist:

    The new VXC ETF for exposure to all markets excluding Canada in one investment. Since it’s relatively young (a year?) it’s uncertain where it will go. Pays quarterly dividends are around $0.11 / share.


    I opted out since I had international investments in my RRSP and, instead, bought into EWU

    EWU is an ETF for the total UK market, which suffers none of the withholding tax issues you get with other nation ETFs in a TSFA. Currently rated 4 stars by Morningstar and has a Dividend Yield 7.59% and MER of 0.4%. It complements XIC nicely in that it diversifies into markets not covered in Canada (strong in Financials and Consumer Products).

    Your *aggressive* weighting (again I am assuming long-term and you are young) :D

    40% – XIC ($2000)
    40% – EWU ($2000)
    20% – XBB ($1000)

    This would be a very reasonable, simple to manage start to your investments.

  69. Curt on February 27, 2015 at 1:35 pm

    I may be the only Canadian using ETFs as a part of my investment portfolio who did not appreciate the technical difference between “Global” and “International” exposure in ETFs and Mutual Funds. So far it has been a relatively inexpensive lesson and a bit of a frustration when attempting to use an online analysis and rebalancing tool. The tool classifies “Global” as Other and “International” as “International”. An excellent example is Vanguard’s VXC. The consequence is that the Canadian rebalancing tools only address the conventional distribution Fixed, Canadian, US, and International. I think the distinction between Int’l and Global and the implications can be significant if not understood by those of us learning as we go.

  70. SST on March 4, 2015 at 12:55 am

    re: “Except that risk and volatility are not the same thing.” ~ SST

    “Actually risk IS defined as portfolio variance (volatility) by the CFA institute.” ~ Sampson

    “That lesson has not customarily been taught in business schools, where volatility is almost universally used as a proxy for risk. Though this pedagogic assumption makes for easy teaching, it is dead wrong: Volatility is far from synonymous with risk. Popular formulas that equate the two terms lead students, investors and CEOs astray.” ~ Warren Buffett (2014 Letter to Shareholders)

    When the CFA Institute hits multi-billionaire status (or starts generating 1.8 million percent 50-yr returns), I’ll start listening. ;)

  71. Evelyn on March 26, 2015 at 12:18 am

    I am considering to switch VXC and VSB into XAW and XQB to save MER for 0.03%. Please advise whether the new ETFs are good or not.

    • FrugalTrader on March 27, 2015 at 3:15 pm

      @Evelyn, if you’ve already started a portfolio with vanguard products, then I probably wouldn’t switch unless your portfolio is very large. However, for someone just starting out, I like XAW and XQB. However, i’m thinking that it’s only a matter of time before Vanguard drops their prices to match.

  72. John on April 4, 2015 at 7:29 pm

    I have been putting off rebalancing my non registered account because of possible tax implications.

    Today I called to and the agent thought that there was no issue with rebalancing from 1 index found to another, and that there should not be any taxes due…

    Can anyone confirm?

  73. across on April 27, 2015 at 3:04 pm

    Why are you not concerned with liquidity and ease of trade? For example, XUU is so thinly traded. The spread is so wide compared to more popular XSP. So you lose a lot of value when buy in and sell. In the event of crash, you can’t even get out fast enough.

  74. Ryan on May 14, 2015 at 11:55 pm

    This is my first post but have been reading million dollar journey very intensely for about 4 or 5 months now and have found this way of investing to be extremely exciting. It has really encouraged me to ramp up my savings. Putting a spare $1000 into a mutual fund was never all that exciting but transferring it into my brokerage account and putting in an order for some etf’s is just plain fun.

    My question is this: (but first a little background) I am using Questrade and using sleepy 5 etf portfolio very similar to those discussed above. I make regular contributions every month as well as some lump sum deposits throughout the year. Monthly contributions are currently $200/month (and could be significantly more if I gain the confidence to pull my contributions from my advisor and the mutual funds I purchase through him – as I said I’m less than 6 months into index investing). Being self employed in a seasonal industry, my income is also variable throughout the year so I make additional lump sum deposits of a few thousands dollars here and there as things allow. Okay, finally the question: how should I make my etf purchases (as part of the sleepy portfolio) throughout the year? I was thinking I would determine my desired asset allocation and then as cash is transferred into my account I would make the appropriate etf purchases to balance the desired asset allocation. In many cases the monthly contributions may not actually balance it (especially as it grows to a larger balance), but it would at least steer it in the right direction. This should remove the need to really re-balance it very often since it should be continually balanced, correct? Correct me if I’m wrong, but shouldn’t this also result in some dollar cost averaging too, since my regular purchases should be the “cheapest” of the etfs in the portfolio, relatively speaking?

    As I said, I’m very new to this and 6 months ago had never even heard of an etf or index investing whatsoever, so I would love any input or suggestions. Thanks in advance.

    • Le Barbu on May 15, 2015 at 9:19 am

      @Ryan, since you are self employed, I suggest to keep all your RRSP contributions in cash/equivalent until the limit date for yearly contribution. This mean you’re short only few weeks/year (depending of your tax filling/return). Forget the dollar averaging and buy/sell to rebalance, it’s trivial on the long run. Just buy the lagging asset to meet your goal.

      • Grant on September 20, 2015 at 9:49 am

        Le Barbu, I disagree. You should put the money on the market into the worst performing etf(s), (buy low), when you have it, not hold in cash. As the market goes up the majority of the time you incur opportunity cost if you hold in cash.

    • FrugalTrader on May 15, 2015 at 2:50 pm

      Ryan, congrats on taking control of your finances. You could do as you say and simply use the new cash contributions to rebalance. Or you could build your cash balance and deploy semi-annually or annually. Another option is to actually sell a portion of your position to formally rebalance, but I would avoid that as it incurs commissions.

  75. P on June 26, 2015 at 2:48 am

    I am just looking up these ETFs at
    And many of them’s MER much higher than your data:
    XIC 0.1% Vs 0.05%

    VCN 0.11% Vs 0.05%

    VSB 0.15% Vs 0.1%

    Did they increase MER recently?

    • FrugalTrader on June 26, 2015 at 8:53 am

      Hi P, upon further inspection, you are right. The vanguard products “management fee” is what I quoted, but the overall MER is what you quoted. I did not notice this before, perhaps it could be new?

  76. Sam B on July 8, 2015 at 10:46 am

    Since Vanguard recently decided to include Canada in their VEA investment strategy, it became less of a good choice for diversification if you already own VCN. I moved to iShares’ IEFA instead, which excludes US and Canada, at a reasonable 0.12% MER.

  77. Grant on September 20, 2015 at 9:43 am

    Nice article. I’m interested in your comment that short term bonds have a lower correlation to the stock market than long term bonds. I think that would depend on whether the crash was in an inflationary environment (more common), or a deflationary environment (like 2008). Could you refer me to a resource that discusses this issue? Thanks.

  78. Mark Kantor on March 9, 2016 at 2:46 pm

    I would like to ask you for help: software itself (I don’t deal this} put request for disability tax credit. I don’t know hov to fix it. Please help me.
    Best Regards, M. Kantor.

  79. Cameron on March 9, 2016 at 10:22 pm

    I have opted to use the “The Diversified Low Cost ETF Portfolio (mix of CAD and USD)” in my RRSP but since I had started over a year ago the canadian dollar has lost ground against the USD. Would it be wise to start to contributing to the “CAD only (non-hedged) Diversified Low Cost ETF Portfolio” and still keep my USD etfs. I would use XUU in replacement of VTI, XEF for VEA and VEE for VWO. Obviously I would keep the same allocation and would resume contributing to my USD etfs when the candian dollar strengthens against the american dollar. Or is the conversion difference trivial in the long term over my investment life time?

    Also I’m going to start investing in my TFSA since I will be maxing out both accounts this year. Would the “CAD only (non-hedged) Diversified Low Cost ETF Portfolio” be appropriate in my TFSA??


  80. Bernie on September 19, 2016 at 5:17 pm

    Why not just invest in Mawer Funds? Mawer Balanced Fund would be an easy one stop solution rather than a mix of ETFs. MAW104 has beaten the index benchmarks 90% of the time and is ahead by a substantial percentage over the long term.

  81. Grant on September 19, 2016 at 6:39 pm

    Mawer is not a bad option, but I wouldn’t go that route due to active manger risk, and, in fact Mawer funds do not actually outperform their proper risk adjusted benchmarks, as explained here.

    If you wanted a one fund option, which is certainly a good idea, than I’d go with Tangerine Index Funds. Better to have the certainty of market returns (less fees), rather than the remote hope of outperformance.

  82. GeoNomad on June 4, 2017 at 11:06 am

    I see you updated the recommendation in September 2017.

    Next time you travel to the future, can you please bring back some more recommendations. It would help a lot!

    • FT on June 4, 2017 at 6:41 pm

      I laughed out loud when I read your comment. Fixed the date. :)

  83. Mike B on March 31, 2018 at 10:58 pm

    Great article, as always! I took a closer look at the “CAD only (non-hedged) Diversified Low-Cost ETF Portfolio” and noticed that neither iShare XEF (Developed) or Vanguard VEE (Emerging) include South Korea. Seems like a bit of a gap in the worldwide coverage (missing companies like Samsung and LG). It looks like this is because iShares considers Korea an “emerging” economy while Vanguard considers them “developed.” So, I switched Vanguard VEE to iShares XEC instead.

    • FT on April 3, 2018 at 9:03 am

      Good tip about South Korea Mike. XUU/XEF/XEC is the combo that I’m using for my wife’s LIRA.

  84. Mike on February 3, 2019 at 1:49 am

    Hi FT,

    I’ve been following your site for years and I was hoping to get your opinion on the performance of ETFs vs index mutual funds like TD e-series. ETF MERs are definitely attractive and this is a fund and period dependent question, but how does the net return of ETFs compare to equivalent index mutual? Have you posted anything doing a side by side comparison?

    Based on a quick review some ETFs look to be performing returns at or below some of their equivalent index mutual which would erode the MER advantage. Anyhow, this wasn’t an exhaustive analysis on my part so I’m curious on your thoughts. Given how popular ETFs have become, I have to think the data shows they are the clear winner for investors.

    Are you aware of some good articles or analysis on this topic?

    Thanks in advance.

    • FT on February 4, 2019 at 9:35 am

      Good question Mike. I haven’t done a direct comparison of TD e-series Canadian index vs shares Canadian index ETF (or other indices). They should be close when you include the dividend providing that they are tracking the exact same index (some track TSX60, others the entire index). Providing that they are tracking the index and have low tracking error, the ETF should outperform by a bit due to the lower MER.

      • Mike on February 6, 2019 at 2:17 pm

        Thanks for the explanation, that makes sense. Mike

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