Simple Low Cost Diversified Index ETF Portfolios 2022

We’ve been writing about low-cost ETFs in Canadian index portfolios since 2008. Below is our 2022 update.

Unless you have been living under a rock (which we would actually understand considering the times we are in), you have definitely heard of diversified indexing. Diversified indexing is a popular investment strategy for a lot of reasons.

For now, here’s the short of it.

A diversified portfolio is one that contains many different assets, including stocks and bonds from all over the world. Geographical and asset type diversity is beneficial for a number of reasons, including the fact that it offers a certain level of protection if one of the stocks you hold crashes and burns.

When you have a diverse portfolio with a wide range of stocks, ETFs, mutual funds, and bonds you give yourself a better chance at not losing as much if something does in fact crash. 

Fortunately, ETFs make it so easy for DIY and investors to diversify their portfolio without worrying too much about choosing the perfect stock. It’s also a great way for beginners to get started. 

ETFs are exchange-traded funds that include a number of companies within them, so when you purchase an ETF, you’re not putting your eggs all into one basket, but you are spreading your eggs into multiple baskets. You can also read our guide for the best ETFs in Canada to find the ones we like best.

The great thing is that these baskets are usually made up of some pretty impressive multi-national companies, and you know how those folks like to make revenue. Some of the easiest ways to get onto the low cost ETF portfolio train is by using one of our favorite online Canadian brokers Qtrade or Questrade.

What Does a Good Low-Cost ETF Portfolio Look Like?

This is a great question, and one that with a some fundamental understanding of how investing in ETFs works, you’ll be able to create a solid portfolio that will likely grow, and not cost you a lot to do so.

Here we show you some ETF portfolio examples of our favorite options when it comes to having a solid diversified ETF portfolio. You will note that we use both CAD and USD here. 

If you want to learn more on choosing the Best Canadian Dollar (CAD) ETFs for U.S Equities, have a look at our full article.

Note: MER stands for Management Expense Ratio, and measures how much of a fund’s assets are used for administrative and other operating expenses. So, the lower the number, the more of your money you get to keep.

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

Canadian IndexXIC (CAD) or VCN (CAD)0.06%
Total U.S MarketVTI (USD)0.03%
70% Europe, 30% PacificVEA (USD)0.05%
94.3% Emerging Markets, 5.3% Pacific, 0.20% North AmericaVWO (USD)0.10%
Canadian Short Term Bond IndexVSB (CAD)0.11%

Update December 2021: For your international exposure, consider VXUS which also has some small cap coverage. I like VXUS because it has broad international exposure and has a low MER (0.08%), 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. 

Let’s take a look at what that would look like.

Canadian IndexXIC (CAD) or VCN (CAD)0.06%
Total U.S MarketVTI (USD)0.03%
70% Europe, 30% PacificVEA (USD)0.05%
94.3% Emerging Markets, 5.3% Pacific, 0.20% North AmericaVWO (USD)0.10%
Total International IndexVXUS(USD)0.08%
Canadian Short Term Bond IndexVSB (CAD)0.11%

Update November 2021, 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 IndexXIC (CAD) or VCN (CAD)0.06%
Total U.S MarketVUN XUU(CAD)0.16 0.07%
International Index (MSCI EAFE)XEF (CAD)0.22%
Emerging Markets IndexVEE (CAD)0.24%
Canadian Short Term Bond IndexVSB (CAD)0.11%

Update January 2021
, 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 IndexXIC (CAD) or VCN (CAD)0.06%
Total U.S MarketXUU (CAD)0.07%
Developed ex North America IndexXEF (CAD)0.22%
Emerging Markets IndexVEE (CAD)0.24%
All-World ex-Canada IndexVXC XAW(CAD)0.27 0.21%
Canadian Short Term Bond IndexVSB (CAD)0.11%

What Are My Other Options For a Low-Cost ETF Portfolio?

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


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. To see more about low-cost US ETFs, check out our guide on how to build a simple low cost portfolio in USD.

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%).

What About Dividend ETFs?

It’s also prudent to mention that there are some great dividend earning ETFs out there as well, such as the The iShares Core MSCI Canadian Quality Dividend Index ETF, which offers a 5.2% dividend yield and a low MER at 0.11%.

For US ETFs, you have options like the Columbia Research Enhanced Value ETF, which offers a whopping 21.94% annual dividend yield at a low MER of 0.19%. To read more about our picks for The Best Canadian Dividend ETFs, check out our full article.

What is the best way to allocate funds for a beginner’s ETF portfolio?

As a rule of thumb, beginner investors who are a little more aggressive may want to start at a bond allocation at 20-25% 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 Vanguard’s newest products, VGRO and VBAL. Essentially all in one balanced ETF portfolios that have very low MERs.

There Are Many Options When Choosing How to Build an ETF Portfolio

Today we shared some of our best recommendations to start diversifying your portfolio with a few simple ETFs. The Bogleheads, a hard-core group of Vanguard fans, swear by the 3-fund portfolio. This portfolio holds only 3 US ETFs and actually performs decently with a 10.9% compound annual return in the last 10 years.

Whether you want 3, 5 or 10 ETFs in your portfolio, we hope you now have all the information you need to get started right away. If you’re ready, check out our top low-cost brokers, Qtrade, which offers 100 free ETFs, and Questrade where you can get ETFs for free. How do our ETF portfolio examples look to you? What would be your picks for a diversified low-cost ETF portfolio?

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FT is the founder and editor of Million Dollar Journey (est. 2006). Through various financial strategies outlined on this site, he grew his net worth from $200,000 in 2006 to $1,000,000 by 2014. You can read more about him here.
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3 years ago

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.

3 years ago
Reply to  FT

Thanks for the explanation, that makes sense. Mike

Mike B
4 years ago

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.

5 years ago

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!

6 years ago

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.

6 years ago

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.

6 years ago

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??


Mark Kantor
6 years ago

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.

7 years ago

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.

Sam B
7 years ago

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.

7 years ago

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?