This article is part of the Morningstar Retirement Week special report.
Earlier this week, we talked about how, before picking funds, it is important to understand the asset class and its corresponding risk/return profile. Just as important as contributing new assets into the tax shelter, is to review your overall asset mix and ensure that the asset mix is still suitable to your risk profile. There is no one-size-fits-all formula for what the right asset allocation should be, but broadly speaking the older your get (and the lower the amount of risk you can take on) the less you have in equities (stocks).
So assuming you have a sense of where you want your assets to go, here is a list of some of the best rated ETFs available in Canada, sorted in no particular order aside from the Morningstar Category (representing the broad asset class that the fund invests in). The funds displayed here must scored at least three stars in the Morningstar Rating overall (a backwards looking report card based on risk-adjusted returns) and at least a Silver medal based on Morningstar’s Analyst (MAR) or Morningstar’s Quantitative Rating (MQR) (our forward looking assessment of a fund’s ability to outperform the category to which it belongs in the future). In the tables below you’ll see the ratings as well as Morningstar’s Risk Rating (lower is better).
Important Note: This is a great list of ETFs for you to conduct your own research on but does not constitute financial advice. It is always recommended to speak to an advisor or investment professional before investing.
Dividend & Income Equity
The funds in this category invest in dividend-paying securities which continues to be a popular style of investment in Canada. To qualify, funds most hold at least 70% in domestic Canadian equities.
| Name | Morningstar Star Rating |
MQR |
Morningstar Risk Rating |
1-yr Returns |
3-yr Returns |
5-yr Returns |
10-yr Returns |
|
iShares S&P/TSX Cdn Div Aristcr ETF Comm (CDZ) |
4 Stars |
Gold |
Average |
19.34 |
7.37 |
6.11 |
8.86 |
Morningstar Direct Data as of Dec 31, 2019
Equity
The funds in this category must invest 90% in Canadian equities that are generally larger in size.
|
Name |
Morningstar Star Rating |
MAR/MQR |
Morningstar Risk Rating |
1-yr Returns |
3-yr Returns |
5-yr Returns |
|
CI First Asset MSCI Canada Quality ETF (FQC) |
5 Stars |
Gold |
Below Avg |
18.17 |
10.75 |
|
|
iShares Edge MSCI Min Vol Canada ETF (XMV) |
5 Stars |
Silver |
Low |
19.07 |
8.16 |
7.09 |
|
Invesco S&P/TSX Composite Low Vol ETF (TLV) |
5 Stars |
Silver |
Low |
19.06 |
8.81 |
8.07 |
Morningstar Direct Data as of Dec 31, 2019
Fixed Income
This bond category houses funds with 90% investment grade Canadian dollar bonds, with up to 30% in foreign bonds that are hedged back to Canadian dollars.
|
Name |
Morningstar Star Rating |
MAR |
Morningstar Risk Rating |
1-yr Returns |
3-yr Returns |
5-yr Returns |
10-yr Returns |
15-yr Returns |
|
iShares Core Canadian Universe Bond ETF (XBB) |
4 Stars |
Silver |
Above Avg |
8.48 |
4.51 |
2.64 |
4.15 |
4.44 |
|
BMO Aggregate Bond ETF (ZAG) |
4 Stars |
Silver |
Above Avg |
8.46 |
4.47 |
2.67 |
4.13 |
|
Morningstar Direct Data as of Dec 31, 2019
Fixed Income Balanced
A close cousin of the Fixed Income category, funds in this category can hold up to 40% in stocks (read: 60% in bonds). At least 70% of the fund must be invested in Canadian stocks or Canadian dollar denominated bonds.
|
Name |
Morningstar Star Rating |
MQR |
Morningstar Risk Rating |
1-yr Returns |
3-yr Returns |
5-yr Returns |
10-yr Returns |
|
iShares Diversified Monthly Income ETF (XTR) |
5 Stars |
Silver |
High |
10.55 |
5.18 |
4.19 |
6.20 |
Morningstar Direct Data as of Dec 31, 2019
Global Equity
Funds in this category will give investors exposure to larger cap stocks from around the world. A broad category, as 10-90% of holdings can technically be domiciled in North America. Of note are VXC and XAW which exclude Canadian companies, which can be a good diversifier to a Canadian-only equity portfolio.
|
Name |
Morningstar Star Rating |
MAR/MQR |
Morningstar Risk Rating |
1-yr Returns |
3-yr Returns |
5-yr Returns |
|
Vanguard FTSE Global All Cap ex Can ETF (VXC) |
4 Stars |
Gold |
Average |
15.42 |
10.86 |
9.05 |
|
CI First Asset MSCI WldLRWgtETFUnHdgComm (RWW.B) |
4 Stars |
Gold |
Low |
18.83 |
11.98 |
10.03 |
|
iShares Core MSCI ACty Wld exCan ETF (XAW) |
4 Stars |
Gold |
Average |
15.20 |
10.88 |
|
Morningstar Direct Data as of Dec 31, 2019
Global Neutral Balanced
This category of funds contains roughly a 50/50 split between stocks and bonds (ranging from 40-60%) with at least 30% invested outside of Canada.
|
Name |
Morningstar Star Rating |
MQR |
Morningstar Risk Rating |
1-yr Returns |
3-yr Returns |
5-yr Returns |
10-yr Returns |
|
iShares Core Balanced ETF Portfolio (XBAL) |
3 Stars |
Gold |
Below Avg |
12.85 |
6.21 |
4.76 |
6.22 |
Morningstar Direct Data as of Dec 31, 2019
US Equities
The bellwether of last year’s market rally, US equity funds must have 90% of their holdings in US-domiciled stocks.
|
Name |
Morningstar Star Rating |
MQR |
Morningstar Risk Rating |
1-yr Returns |
3-yr Returns |
5-yr Returns |
|
CI First Asset MSCI USALRWgtETFUnHgdComm (RWU.B) |
4 Stars |
Gold |
Below Avg |
25.00 |
14.84 |
12.89 |
|
Vanguard US Dividend Appreciation ETF (VGG) |
4 Stars |
Gold |
Below Avg |
22.87 |
15.34 |
12.45 |
Morningstar Direct Data as of Dec 31, 2019
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