Best ETFs in Canada for 2019

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Welcome to the 7th edition of the MoneySense ETF All-stars. Despite some major changes in our panel of experts, this year’s ranking has in the main affirmed most of our “All-star” picks from previous years and in particular 2018.  PWL Capital’s Dan Bortolotti and Justin Bender have departed from the panel this year, but fear not: PWL’s perspective is still there through the Ottawa-based duo of Cameron Passmore and Ben Felix.

The other departure was of Forstrong Asset Management (Tyler Mordy and Karen Tsang) but again we have ably filled those shoes with Robb Engen, a fee-only planner and blogger for Boomer & Echo; former Tangerine advisor Dale Roberts (the blogger behind CuttheCrapInvesting) and Dave Nugent, chief investment officer of robo adviser Wealthsimple.

Returning panelists are Mark Yamada, CEO of PUR Investing and his colleague Ioulia Tretiakova, who provides our only female perspective this year; also back are Yves Rebetez, formerly of and Alan Fustey of Adaptive ETF.

Based on our conversations and debates on the Slack collaborative tool, I think I can say our refreshed panel shares the philosophy of the ETF All-stars established when Dan Bortolotti and I first conceived of it back in 2013.

A ‘set it and forget it’ ETF portfolio

Our core principles remain low cost, broad diversification and tax efficiency. From the get-go the idea was to create a low-cost “set it and forget it” portfolio of funds that only rarely needed to be tweaked year over year. So if you’re looking for flavor-of-the-month “hot” new ETFs covering faddish sectors like marijuana or blockchain technology, look elsewhere. Your exposure to them will be limited to whatever the index weightings in our model portfolio hold.

That said, the All-stars continue to evolve over time. Our list this year is an elite 25 picks, chosen from a universe of 833 ETFs now available on Canadian stock exchanges (according to Morningstar Direct). Our 25 All-Stars are up just four from the previous year, although as you’ll see we have added nine more individual picks from each panelist. Last year, we added the new category of One-Decision Portfolios, as the panel was unanimous in embracing Vanguard’s three asset allocation ETFs. On February 5, 2019 Vanguard added two more to the lineup: an all-equity ETF, VEQT; and a very conservative fund, VCIP, dubbed the Vanguard Conservative Income ETF Portfolio, which is 80% in fixed income. (The previous most conservative entry, VCNS, was 60% fixed income). Both new ETFs are now trading on the TSX.

A year ago, we described these products as a “game changer.” Indeed, competitors have since jumped on the trend. First up was Horizons Exchange Traded Funds, which in August 2018 unveiled a suite of two asset allocation ETFs, with similar-sounding ticker symbols to Vanguard’s: HBAL and HCON; those are the tickers for Horizons Balanced TRI ETF Portfolio and Horizons Conservative TRI ETF portfolio respectively. (TRI stands for Total Return Index.)

Next, in December of 2018, was BlackRock’s iShares, which unveiled two one-fund solutions called XBAL and XGRO. As with the Horizons entries, the tickers are reminiscent of Vanguard’s VBAL and VGRO, and with similar stock allocations: 60% and 80% respectively. XBAL and XGRO are respectively the ticker symbols for the iShares Core Balanced ETF portfolio and the iShares Core Growth ETF Portfolio. Unlike Vanguard, these aren’t really brand new: they’re revamps of two ETFs launched back in 2007: the iShares Balanced Income Core Portfolio Index ETF (CBC) and iShares Balanced Growth Core Portfolio Index ETF (CBN).

Finally, just a few weeks ago, BMO followed suit with three portfolios comparable to the original three Vanguard products. Again, there are similar ticker symbols: against Vanguard’s VBAL is BMO’s ZBAL, against Vanguard’s VGRO is BMO’s ZGRO. True, BMO has a more memorable ticker for its conservative entry: ZCON, versus Vanguard’s VCNS.

In most cases, the newcomers’ fees are slightly lower, as low as 17 or 18 basis points, a tad below Vanguard’s 22 bps management fees on its suite of (now) five asset allocation ETFs. There are also more subtle differences, as the iShares fixed-income ETF provide only Canadian, not international, bond exposure. And the iShares have slightly more exposure to US equities than the Vanguard equivalents.

All-in-one ETFs versus picking individual ETFs

I have to admit there is some irony in admitting these One-Decision ETF solutions to the All-star lineup because in a way, choosing any given portfolio obviates the need to cherry-pick individual ETFs, whether All-star or otherwise. But as we explore below, there are still gaps in the asset classes: notably real estate or REITs. Of course, any veteran investor with a good amount of wealth will likely have so many legacy holdings (whether individual stocks and bonds, GICs, or other ETFs or funds) that it’s not a simple exercise including these One-Decision products into a portfolio. They are arguably more suitable to a blank slate, such as confronts brand new young investors or rare situations of coming into a sudden inheritance, selling a business or other windfall.

The question for our expert panel was how many, if any, of these new offerings should be added to the category. We were unanimous in retaining the Vanguard products as ETF All-stars, including the two new ones, since Vanguard enjoys first-mover advantage and in the first year gathered $1 billion in assets in the funds. We’re comfortable with our original call to make the Vanguard suite All-stars and will monitor whether the newcomers deserve equal status in future editions. There are not huge differences between Vanguard and its recent imitators, so for now we’ll confer an “Honorable Mention” to the iShares and BMO entries.

As if that were not enough, one of the world’s premier active money managers, Franklin Templeton unveiled a suite of low-cost passively managed, market-cap weighted regional and country ETFs. It said fees for these new passive ETFs are amongst the lowest in the industry, ranging between 5 to 9 bps. Then at the end of February Franklin Templeton announced a mutual fund structure aimed at the MFDA channels to meet client demand for ETFs and similar asset allocation services. It unveiled three portfolios: Franklin Conservative Income Portfolio, Franklin Core ETF Portfolio and Franklin Growth ETF Portfolio. Fees are 40 basis points for F class (sold through fee-based advisors), 140 bps for the two more aggressive portfolios if sold through Series A and Series T, and 110 bps for the more conservative portfolio, Series A and T. The panel did not choose to make these All-Stars this year but suffice it to say it’s more evidence that the pioneering approach of Vanguard is a trend that’s not going away.

This year, we considered adding REIT ETFs. As noted in last year’s edition, former All-star panelist and certified financial planner Fred Kirby generally likes the Vanguard ETF allocation ETFs but finds them quite underweight REITs: only about 1%.  The panel was almost evenly split on whether we should create a new REIT ETF category to help overcome this deficiency.

The feeling is that while real estate (or REITs, or ETFs holding Real Estate Investment Trusts) is a valid alternative asset class to the big two of stocks and bonds, most of our broad ETF picks already have some exposure to real estate. Even so, some panelists – like Dale Roberts – argued that because of its attractive yield, inflation-fighting characteristics and partial correlation to stocks, some investors may want to have more than index exposure to real estate: to perhaps 10% or more of a total portfolio. Roberts notes the major North American indexes have roughly 3% exposure to real estate but that many ETF portfolio builders top that REIT exposure  up with another 5 to 10%. “It’s an asset class with very unique qualities and a very good portfolio ‘diversifier.’ US-based REITs held up well in the 2000-2002 correction, not so much in 2008-2009 given the nature of the correction.” Roberts likes North American REIT ETFs like the Vanguard FTSE Canadian Capped REIT Index ETF (ticker VRE/TSX); the iShares S&P/TSX Capped REIT Index ETF, trading on the TSX as XRE; BMO Equal Weight REITs Index ETF (ZRE) and – for the United States – the Vanguard Real Estate ETF (VNQ/NYSE ARCA.). You won’t find these on this year’s All-star list as a majority of panelists did not “vote” for them but readers are of course free to make their own call on this asset class.

As was the case last year, we again considered adding global bonds as a new category. Here again, the Vanguard asset allocation ETFs do provide exposure to US and global bonds, hedged back to the Canadian dollar; some (but not all: the iShares suite does not) of the newer asset allocation ETFs do the same. Dale Roberts argued “developing market bonds offer better diversification compared to US bonds, and greater yield.”

Again, the panel wasn’t able to come to unanimity on this but for investors who want to have more exposure to the asset class than the Vanguard AA ETFs provide, we considered standalone Vanguard ETFs like VBG (Vanguard Global ex-US Aggregate Bond Index) and VBU (Vanguard US Aggregate Bond Index), both hedged back to the C$. PWL’s Ben Felix said that while he likes global fixed income, “I don’t know if the products are there yet in terms of fees and costs. While these products are innovative and backed by good research, the fees are still on the high side, and there are additional costs from foreign withholding tax built in.”

Some fresh picks in our new “Desert Island” feature

For readers who may feel frustrated by the fact so many of our All-Star picks are the same as previous years, we have added a new feature in this edition called Desert Island picks. These provides nine other picks, each championed by an individual panelist.  Because the panel has grown to nine members (I don’t count myself as one), it wasn’t always easy coming to consensus on some of our picks, what with the ever-growing number of new launches in this space.

If you’re an ETF expert, it can be frustrating not to be able to highlight a particular perspective on which you may have unique insights. Yves Rebetez, for example, would like to see more factor ETFs and specialized funds, even while recognizing the need for the broadly diversified low-cost ETFs that the All-Stars are known for epitomizing.

Recognizing that, each panelist gets to champion one presumably all-weather ETF that he/she felt would stand up for even close relatives: the assumption being that you’re stranded on a desert island and have to choose just one pick that can’t be changed for a few decades, like the fictional character Rip Van Winkle. The example I might have used was VBAL from Vanguard, a simple Balanced Fund and in fact one of our panelists, Alan Fustey, chose just that as his Desert Island pick. More on this below.

Meet the MoneySense 2019 ETF All-Star Panel

Alan Fustey is a portfolio manager at Adaptive ETF in Winnipeg.

Yves Rebetez, CFA, is former editor of and Consultant with CREDO Consulting.

Mark Yamada is CEO of Toronto’s PUR Investing Inc., which provides the ETF Screener for the TMX Money website. Mark writes about investment issues for Advisors Edge/, appears regularly at ETF conferences and publishes academic papers with colleague Ioulia Tretiakova about advanced pension strategies.

Ioulia Tretiakova is vice president and Director of Quantitative Strategies at PUR Investing Inc. She specializes in risk management, quantitative portfolio construction, and is lead author of several peer-reviewed papers in the Rotman International Journal of Pension Management and the Journal of Retirement

Robb Engen is a fee-only financial planner and founder of the award-winning Boomer & Echo personal finance blog. He’s based in Lethbridge, Alberta.

Dale Roberts is a former investment advisor with Tangerine and founder of the CutTheCrapInvesting blog.

Ben Felix is a Portfolio Manager with PWL Capital in Ottawa. He joined the firm in 2013. Ben has a bi-weekly YouTube series called Common Sense Investing, and co-hosts the Rational Reminder podcast, a weekly podcast. PWL is a Canadian wealth management firm managing $2.7 billion in client assets using low-cost ETFs and index funds.

Cameron Passmore joined PWL Capital in 1997. He is a partner in the firm as well as a Portfolio Manager in Ottawa. Cameron co-hosts the Rational Reminder podcast.

Dave Nugent is Chief Investment Officer and a Portfolio Manager with Wealthsimple. Dave co-founded the company in 2014 and leads its B2B business. Wealthsimple operates in Canada, the U.S. and the U.K., and is backed by Power Financial Corporation, a global management and holding company. Prior to joining Wealthsimple, Dave was an investment advisor with RBC Dominion Securities.

Jonathan Chevreau is founder of the Financial Independence Hub, author of Findependence  Day and co-author of Victory Lap Retirement. He can be reached at

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