A man looks at a retirement planning brochure Monday, January 13, 2014 in Montreal. The federal government plans to introduce an option for voluntary contributions to a person’s CPP account.Ryan Remiorz/The Canadian Press
Why wait to see how the debate over opening up the Canada Pension Plan to extra contributions turns out? Using exchange-traded funds, you can invest right now like the CPP does.
Here's the asset allocation model the CPP Investment Board outlined in its 2015 annual report:
- Foreign developed market stocks: 37 per cent.
- Bonds and cash: 26.1 per cent.
- Real estate: 11.5 per cent.
- Canadian stocks: 7.3 per cent
- Other debt: 6.5 per cent
- Emerging market stocks: 5.9 per cent
- Infrastructure: 5.7 per cent
Now, let's build a similar portfolio using ETFs. The funds used here are just examples – there are others to consider as well.
- Foreign developed stocks: iShares Core MSCI All Country World ex Canada Index ETF (XAW)
Gives you exposure to 99 per cent of the global stock market outside Canada, including large, medium and small stocks. Just over half the assets are in U.S. stocks.
- Bonds and cash: Vanguard Canadian Aggregate Bond Index ETF (VAB)
The Canadian bond market in its entirety – federal and provincial government bonds, and corporate bonds.
- Real estate: iShares Global Real Estate Index ETF (CGR)
Exposure here to real estate companies from the United States (accounts for almost half the assets), Japan, Hong Kong, Australia, the United Kingdom, France and several other industrialized countries.
- Canadian stocks: BMO S&P/TSX capped composite index ETF (ZCN)
You're buying Canada's benchmark stock index here.
- Other debt: BMO High Yield U.S. Corporate Bond Hedged to CAD Index ETF (ZHY)
Bonds issued by companies that don't have top-tier financial solidity. You could also use emerging market bonds, or blend emerging market and high yield bonds 50-50.
- Emerging market stocks: Vanguard FTSE Emerging Markets Index ETF (VEE)
China, Taiwan and India are the top countries in this ETF, while South Africa and Brazil next.
- Infrastructure: iShares Global Infrastructure Index ETF (CIF)
This ETF holds the shares of engineering firms, bridge builders, power utilities and more.
Want a simpler, more streamlined ETF portfolio? Check out my three-fund Freedom 0.15 ETF portfolio, introduced in this recent column.
Rob Carrick