3 Great Canadian ETFs for 2024 and Beyond

These medalist investment opportunities offer broad exposure and attractive risk-reward profiles without the high fees of similar mutual funds.

Bryan Armour 1 February, 2024 | 1:23AM
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Bryan Armour: Stocks and bonds turned in a solid year in 2023 despite inflation, rising interest rates and geopolitical tensions. Potential outcomes for 2024 remain wide-ranging. Inflation fears have cooled considerably, but geopolitical strife continues to heat up. Artificial intelligence and potential rate cuts could be a tailwind this year. The outlook for 2024 looks solid but fragile. When faced with a wide range of outcomes, investors benefit from a balanced approach to building a portfolio of stocks and bonds. Going all in on stocks could leave an investor open to shot to the jaw like Connor Bedard. Instead, the goal for 2024 is to position portfolios for another good year while hedging our bets. These three ETFs can help achieve just that.

The first ETF for 2024 and beyond is Vanguard All-Equity ETF Portfolio, ticker VEQT. This ETF of ETFs provides access to thousands of global stocks by holding four Vanguard ETFs that rate among the best in the respective region. The underlying ETFs combine into a well-balanced global stock portfolio that's geared towards Canadian investors, given its 30% allocation to Canadian stocks. VEQT builds its edge with low costs and broad exposure. Investors need to only pay 24 basis points per year for access to 12,000 global stocks. Market cap weighting, its holdings leverages the market's wisdom in pricing them, and leads to just 3% turnover per year, limiting trading costs for investors. This is an excellent option for the stock sleeve of an investor's portfolio. Vanguard also offers four other risk options within this allocation ETF series that build on the All-Equity strategy by adding in bonds. Investors looking for one-stop-shop ETF can choose the option in that series with the bond allocation they prefer.

The second ETF on my list is iShares Core Canadian Universe Bond ETF, ticker XBB. This Silver-rated strategy offers access to over 1,500 Canadian bonds for just 10 basis points. XBB's portfolio is representative of the Canadian bond market, which means it's heavy on government and government-related bonds. That pushes the portfolio into higher-quality bonds and category peers, giving this fund a bit of a defensive tilt. When stocks falter, high-quality bonds should perform well. This makes them a great pairing with VEQT or other stock ETFs.

The final ETF on my list is iShares MSCI Min Vol Canada ETF, ticker XMV. This Silver-rated fund offers downside protection that has earned it a very attractive risk/reward profile compared to the broader stock market. XMV draws from mid- and large-cap Canadian stocks and uses an optimizer to build its portfolio. Low volatility is achieved at the portfolio level, meaning XMV considers stocks' individual volatilities as well as how their performance interrelates with other holdings. Comprehensive portfolio constraints protect the fund from incidental risks and keep it diversified. Minimum volatility strategies have proven their efficacy. They will lag the broad markets in rallies and now perform during drawdowns. But XMV's key characteristic is it tends to capture more of the market's upside than downside. It is an effective ETF for investors that want stock market risk without a full dose of it.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar Rating
iShares Core Canadian Universe Bond ETF27.48 CAD-0.33Rating
iShares MSCI Min Vol Canada ETF40.22 CAD-0.05Rating
Vanguard All-Equity ETF Portfolio38.17 CAD-0.08Rating

About Author

Bryan Armour  Bryan Armour is director of passive strategies research for North America at Morningstar

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