Most Canadian self-directed investors are hybrid investors. They build a blue chip Canadian stock portfolio, they diversify with U.S. and International ETFs. They might choose a Global X-Canada ETF that covers the international markets in one ETF. The hybrid approach is a mix of stocks and ETFs. It’s a wonderful way to build wealth; the key is to ensure sensible geographic asset allocation. There are many options when looking to add what might be the best basket of companies on the planet – U.S. stocks. We’re heading south, looking for U.S. ETFs on the Sunday Reads.
The good news for Canadian self-directed investors is that Canadian blue chip stocks beat the crap out of the TSX Composite. We simply have to buy enough of ’em, invest on a regular schedule and then get out of our own way. In our household we use a version of a Canadian Wide Moat Portfolio.
Ya, ya, past performance does not guarantee future returns.
The one stop shop for International exposure
It’s quite common to see Canadian investors use iShares XAW-T to cover the globe, X-Canada. The ‘X’ meaning it excludes Canada. It’s a Canadian Dollar ETF, meaning you don’t have to worry about currency conversions. Though you will take a very minor (and inconsequential) tax hit on U.S. and International dividends. You’ll pay withholding taxes on the foreign dividends. The current yield for the ETF is 1.6%, so let’s call the tax hit next to nothing.
If you want a U.S. Dollar version, check out XAW.U.
You could also look to the Vanguard VXC-T Global X-Canada. That’s a Canadian Dollar ETF.
Core U.S. Equity ETFs
If you’re looking to capture the returns of the S&P 500 in Canadian Dollars.
- iShares XUS-T
- Vanguard VFV-T
- BMO ZSP-T
- Global X HXS-T
HSX is a corporate class ETF meaning, it can be very tax efficient. They have a U.S. Dollar version available as well.
iShares XSP-T is currency hedged, meaning you won’t get the benefit of a strong U.S. Dollar. On the flip side of the Loonie you won’t face the ‘risk’ of a strong Canadian Dollar bringing down your U.S. equity ETF.
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If you’re looking for a broader market ETF.
- iShares XUU-T
- Vanguard VUN-T
Those funds will add a few more mid and small cap stocks, typically lessening the exposure (modestly) to U.S. technology and other mega caps.
Lowering the volatility
For retirees and those that desire lower volatility we can look to BMO’s U.S. Low Volatility – ZLU-T. That’s a Canadian Dollar ETF. Here’s the link to the BMO page.
In retirement, I like the idea of layering in some lower volatility or defensive sector stocks, while maintaining some exposure to growth and core market ETFs. Think of it as a valuation hedge as the U.S. markets are historically expensive.
You’ll see that the BMO Low Vol ETF is concentrated in the three most defensive sectors – consumer staples, utilities and healthcare. We mention defensive equities often at Retirement Club for Canadians.
I use the iShares U.S. Core Quality Dividend ETF XDU-T for a value and quality tilt.
There are so many options when looking for ETFs, of course and it can become overwhelming for some investors. Here’s the full iShares Canadian ETF product list. You can see the many options for U.S. equities.
U.S. Dollar ETFs
For U.S. Dollar ETFs you’re likely best to head to the U.S. ETF providers. For example iShares offers IVV, an S&P 500 ETF with a MER (fees) at 0.03%. A total world (global) ETF from Vanguard VT has an MER of 0.06%.
When you hold those in your U.S. Dollar RRSP you can bypass the withholding taxes on U.S. Dividends. You’ll find more on tax treatment along with asset allocation ideas on the ETF model portfolio page. You can get preferential treatment in a taxable account as well, though you’ll need to tick the right boxes when you file your taxes.
Here’ a good list from Morningstar Canada …
Using U.S. stocks for international diversification?
There is the school of thought that investors can use U.S. stock exclusively, given that so many U.S. stocks derive half of their income (or more ) from foreign markets. While we’ll see many figures bandied about, this post from Isabelnet (sourcing Goldman Sachs) suggests that 28% of the revenues are from ‘over there’.
Warren Buffett invests almost exclusively in U.S. stocks. One of his most repeated quotes is …
Never bet against America
Are we to argue with the world’s greatest investor? Perhaps not.
The Food Professor (a must follow on Twitter / X) offered this take, and with a trade war spin…
We can take that indirect foreign exposure into consideration, but I still think some direct non-U.S. international is prudent. Given the valuation levels for the U.S. market I would have nothing against equal amounts of :
Canada / U.S. / International
To accomplish that you’d have to put to work an International ETF of course. In the asset allocation page I keep it simple with XEF-T.
Of course we’ll need to rebalance our portfolios.
Other related posts –
Who makes your ETFs, how do ETFs work?
Feel free to reach out with any questions on U.S. ETFs or portfolio construction. Use the Contact Dale button. I’m happy to help.
More Sunday Reads
At Findependence Hub, why most advisors underperform by 3% annual.
Researchers analyzed data from more than 4,000 financial advisors managing nearly half a million Canadian investment accounts over a 14-year period. They found that advisors persistently preferred expensive, actively managed mutual funds, exhibited frequent trading, chased recent returns, and remained consistently under-diversified.
After witnessing the portfolios of hundreds upon hundreds upon hundreds of advised Canadians, I can confirm the above. I found it even worse. For most, but not all Canadians, learning the investment basics and managing your own portfolios is one of the most beneficial things you can do. It will be life changing. You’ll likely retire, twice as rich, three times as rich. And then you can keep them out of your pocket in retirement.
That what this blog is all about. I’m happy to show you how to break free, break from fees. Once again, use that Contact Dale button. I’ll respond to the emails. There’s no charge for that or for a quick chat. You can learn how to build a simple portfolio, or perhaps use one of the all-in-one, well-diversified asset allocation ETFs. Those are global portfolios available in one fund, one ETF. The fees are super low in the 0.20% area.
When you need more comprehensive advice and planning you can look to an advice-only planner. You’ll pay a flat fee for conflict-free advice.
At stocktrades.ca Dan looks at 10 of his favourite Canadian blue chips.
Nice to see with CVS
Dividend Hawk had a busy week keeping track of his portfolio with lots of dividends flooding in and earnings reports a plenty.
Here’s one I was happy to see …
CVS Health Corporation (CVS) Reports Second Quarter 2025 Results; CVS reported second-quarter non-GAAP EPS of $1.81, down 1.1% year over year but surpassing analyst expectations by $0.35. Revenue totaled $98.92 billion, an 8.5% increase from the same period last year and $4.33 billion above estimates. Management raised its full-year 2025 adjusted EPS guidance to a range of $6.30 to $6.40, up from the previous outlook of $6.00 to $6.20. Additionally, the forecast for cash flow from operations was increased to approximately $7.5 billion, up from the prior estimate of $7.0 billion.
I’ve been patient with CVS for over a decade.
Banker on Wheels weekend reads begins with a wonderful quote.
Like riding a bike, investing is all about balance. Too fast, and you crash. Too slow, and you never reach your destination.
In the mix from Banker – The big secret to long term investment success.
At Tawcan Bob delivers his 2025 goals resolutions update.
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Here’s Canada’s top-performing Robo Advisor, Justwealth. You can get advice, planning and low-fee ETF portfolios all at one shop. You can have it all.
Consider Justwealth for RESP accounts. That is THE option in Canada with target date funds that adjust the risk level as the student approaches the College or University start date.
OUR SAVINGS ACCOUNTS
Make your cash work a lot harder at EQ Bank. RRSP and TFSA account rates are at 1.75%, other savings rates up to 3.0%. You’ll find some higher rates on GICs up to 3.60%. They also offer U.S. dollar accounts at 3.0%. We use EQ Bank, they have been awesome.
OUR CASHBACK CREDIT CARD
We make between $40 to $70 every month! And that’s on everyday spending. There are no fees with …
The Tangerine Cash Back Credit Card
For June we received $55.13 in cash from everyday spending. You can select 3 categories for 2% cash back. The rest pays at 0.50%.
That cash went into my TFSA account to help buy some CBIL-T and VDY-T.
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Make sure you’re doing retirement right. It’s also suitable for those who are approaching retirement. Use Contact Dale if you’d like more info, or to sign up for the next group.
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I think for the US corp class ETF from Global X, you mean HXS, not HSX?
Yes, thanks Jeff.
Another great post BTW. The low volume high quality suggestions are good as well. I have HXS as a core holding, and have ZLU and XDU to smooth the ride…
Cheers 🙂
Thanks Jeff. Enjoy the rest of your weekend.
Dale
Low-volatilty, not low volume. Dang autocorrect…