Our First Etf – I’m From Canada Eh?

First Etf

Our First Etf

We got our first Etf a week or 2 ago.

Hey everyone

I hope 2020 has been treating you well so far. I haven’t made a post for my goals yet, but one that I knew I wanted to do this year was get into a Etf to help diversify our portfolio even more.

What is a Etf You may ask?

According to Wikipedia – An exchange-traded fund (ETF) is an investment fund traded on stock exchanges, much like stocks. An ETF holds assets such as stocks, commodities, or bonds and generally operates with an arbitrage mechanism designed to keep it trading close to its net asset value, although deviations can occasionally occur. Most ETFs track an index, such as a stock index or bond index. ETFs may be attractive as investments because of their low costs, tax efficiency, and stock-like features.

Essentially it’s a great low cost way to get a large basket of stocks and pay a very minimal fee to achieve this.

Warren Buffet himself remains bullish on etf’s and says most investors should go this route.

I still love the dividend growth investing route but want to work on our international exposure and get access to these high growth tech stocks as well – some of them don’t pay a dividend.

One of the easiest ways to improve in this department is a ex Canada etf. That means a etf that doesn’t have any Canadian stocks in it. I plan on holding the best Canadian dividend growth stocks individually in our tfsa’s and resp’s for tax efficiency. Clearly by maxing all those accounts we would be incredibly overweight in Canadian stocks. A typical situation for us Canadian’s. Home town bias kind of stuff.




Which Etf did we choose?

With sooooo many different etf’s out there, it’s hard to pick one. Certain etf’s focus on dividend growth stocks, pay monthly etc etc. Clearly those caught my interest, but lacked in the technology sector. I really feel we will continue to see massive growth amongst those kind of companies as we get into ai, smart homes, robots and more. (I just came back from the landscape show and 5 vendors had smart lawnmowers, last year there was probably 1)

Which companies will be the top dog? Of course you got those top tech stocks, but things are always changing.

I’ll be honest I’m no expert in Etf’s some fellow bloggers know way more than me in that department. Dale from Cut the Crap Investing specifically is always posting interesting stuff on etf’s.

I looked into a couple that I knew other’s were holding and I also asked twitter for suggestions on great Ex Canada etf’s. I decided that xaw.to was the etf for us at this point in time.

Xaw.to Fund Summary

The investment seeks to replicate, net of expenses, the performance of the MSCI ACWI ex Canada IMI. The index captures large, mid and small capitalization representation across 22 of 23 developed markets countries (excluding Canada) and 23 emerging market countries.
Instant Diversification!
The fund also had one of the lowest expense ratio’s and best year to date returns of some that I compared. 15% of the portfolio is tech stocks too. Which is fantastic considering this is where I want to put more of our capital towards.
The top holdings of the fund currently are Microsoft, Apple, Amazon, Facebook, Berkshire, Jpmorgan, Google, JNJ and Visa. All great holdings with a solid runway for growth.
The current dividend yields %2.04 and pays out only twice a year. June and December.

Goal

One of my goals this year was to start a etf and contribute at least $250 to it each month moving forward. You may ask 250? That’s nothing and not worth the trading fees!

Well I also started a account with questrade this month. They offer commission free etf purchases! well not 100% free think I paid 14 cents for my first purchase. They also offer a lot cheaper trading fees for stocks, which I’m still debating moving all my accounts over to now. I gotta play around with the questrade dashboard a little more and decide.

Insert Plug Here –

But wait there’s more… what if I told you I recently became a questrade affiliate and if you sign up with my link below you get 50$ in free trades? haha wow amazing right.

Disclosure – The link below is a affiliate link meaning at no additional cost to you If you click and sign up I will earn a little commission.

What a guy eh? =)

The Buy

You need 1,000 bucks to start a account with questrade so our first purchase was for 35 shares of xaw.to for just under $1,000 with a yield on cost of just north of 2%. We added roughly $20.00 to our forward dividends. Like I mentioned earlier I plan on adding to this position every month going forward.

Conclusion

Well there you have it, I am now in the etf game. It feels good and I look forward to seeing how this does. Its great to get so much exposure through one fund across the world. Now to beef up this position so I can at least start dripping it.

What are your thoughts? Do you own any etf’s?

Cheers!

19 Responses

  1. Great choice rob. A core holding my portfolio. Pays distributions twice a year too.
    Enjoy it…its a great fund.

  2. Hey Rob I think you made a great choice here, I know we Canadians are to invested in the Canadian market this ETF certainly helps. I have been thinking lately that I need more exposure outside of Canada. Questrade sounds like a good place to do this with zero fees when buying ETFs. Thanks for the post Rob you have given me something to think about.
    Matthew Freeman recently posted…December 2019 Dividend IncomeMy Profile

    • Rob says:

      hey Matt

      No problem, yeah one fund with sooo much diversification. Would of liked a little less financial exposure in the fund but i guess its typical.
      Got to love the low fees, makes these smaller purchases worth it.
      cheers Matt

  3. That’s a great first ETF to add to your portfolio. Instant diversification to the entire Global equity market with a low MER, yes please!

    I’m a big fan of ETFs and my entire portfolio is built around them šŸ™‚
    DGX Capital recently posted…What is Financial IndependenceMy Profile

    • Rob says:

      hey Dgx

      Thanks, I know lots of people who hold only etfs. Its a great strategy as well. Look forward to pumping up this position.
      cheers

  4. Questrade does not pass along the DRIP discount on stocks. For example, Emera has a discount of 5% on shares with reinvested dividends. You can choose which positions to DRIP. Questrade’s DRIP involves purchasing on the open market. Upside, his you can drip any position and receive new shares or units if enough dividends or distributions to purchase a whole share or unit.

    Another Questrade benefit is their option exercise or assignment fee is less than the big Banks.

    For disclosure, I have been with Questrade since 2009.

    Congrats on the purchase of XAW. Great diversification in one shot!
    Investing Pursuits recently posted…Dividend Income Update : December 2019My Profile

    • Rob says:

      Ahhhh thanks pursuit a lot of things I didn’t know about them. Those drip discounts can be a big factor if you have a large enough portfolio for sure.

      Thanks for schooling us all. 11 years with questrade is great.
      cheers Ip

  5. German says:

    Hey Rob! Very nice move to diversify your assets. Love the top holdings of that ETF. They are solid businesses globally. And it doesn’t cost a lot to start owning those companies. Imagine how much money you would need to start a position of 1 share of Apple, Amazon, Google, Facebook, Microsoft, JNJ, Visa, MC, etc. This is something I will look into when I’m ready to invest in US stocks.
    German recently posted…Maxed out my TFSA, No Nore Monthly Contributions, and New Stock PurchasesMy Profile

    • Rob says:

      hey German
      Thanks, yeah exactly Id drop a monthly investing purchase on just 1 share of amazon. That wouldn’t feel too good. haha
      cheers man

  6. Samantha says:

    I think that the US stock market and several other markets in the developed world are very overvalued at this point, and I will wait for a better entry point before I deploy any capital there. I think it’s time for a serious market correction…
    Samantha recently posted…2020 Canadian Economic OutlookMy Profile

    • Rob says:

      hey Samantha

      Welcome and thanks for commenting.

      You may be right, but there are values out there. I’ve seen lots of people selling all their equity’s or stockpiling cash for the last 3 years. A recession is coming they would say. Here we are today and the market keeps running and people have missed out on a tonne of gains. With the upcoming American election I could see some market turmoil as well, especially if Trump doesn’t get re elected. But who knows?

      Time in the market is better than timing the market in my opinion.

      All the best Samantha
      cheers

      • Samantha says:

        Thanks Rob!

        You are correct that staying out of the markets for the last few years was not the best decision. I’m invested in several stock markets (never fully out), but what I meant is that investing fresh capital at this point doesn’t seem appealing to me. I just don’t see much value at these valuations…
        Samantha recently posted…How to Use Credit Cards SmartMy Profile

  7. Looks like you have found a good compromise, an ETF with a dividend.

    Have been with Questrade for a few years and really like it so far although to be honest Iā€™m learning new things just from reading these comments. I really like a broad based ETF because I just want to set it and forget it ha ha.
    Maria @ Handful of Thoughts recently posted…20 Goals for 2020My Profile

    • Rob says:

      hey Maria

      Another qt user, they are everywhere. Haha yeah etfs definitely have that set it and forget it feel to them. very nice indeed.

  8. John says:

    Good choice Rob.

    I tend to mix and match ETF’s in order to save a bit on management fees and foreign withholding taxes in my RRSP. VTI/HXS for the US market, XEF for developed international and IEMG/XEC for emerging markets. But you can’t beat the simplicity of something like XAW!

    Questrade is great for ETFs generally, with free buys. I’ve been very happy with them.

    Cheers,

    John

    • Rob says:

      hey John

      Its crazy to see and hear how many people have been using questrade already. I looked into 1 or 2 of those if i recall right. All good funds.
      cheers John

  9. Congrats on the first ETF, Rob. It’s a great way to diversify, for sure. Your position should grow nicely since you are adding $250 a month.
    Already making moves in the new year. I love it.
    Engineering Dividends recently posted…2020 Portfolio GoalsMy Profile

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