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Rob Carrick's 2017 ETF Buyer's Guide: Best U.S. equity funds

You can fix a lot of what's wrong with the Canadian stock market by getting some exposure to U.S. stocks.

Canada is loaded with resource stocks and financials and has only token exposure to technology and health care.

The U.S. market is loaded with tech and health-care stocks, and has only a small weighting in energy and mining stocks. The Canadian and the U.S. markets just go together, especially when you buy them using exchange-traded funds.

In this edition of the ETF Buyer's Guide, we look at core U.S. equity funds that let you buy the broad U.S. market in a single convenient package. Canadian equity funds were covered on March 11 and Canadian bond funds on March 25. To make this list, an ETF must:

Have at least three years of returns to consider;

Track a wide swath of the U.S. market rather than a sector or type of stock (dividend stocks will be covered later);

Have an average daily trading volume of 5,000 shares over the past 30 days, which is sufficient to indicate a fund has at least something of a following and is not an orphan.

An important distinction in choosing U.S. equity ETFs is whether to buy a fund with currency hedging, which means it's unaffected by changes in the value of the Canadian dollar against its U.S. counterpart. Hedging means your U.S. returns won't be undermined when our dollar rises, nor will they be enhanced when the dollar falls. If you forgo the hedge, you lose out when our dollar rises and benefit when it falls. Many of the funds in this list come in both hedged and unhedged versions – just one version for each ETF is shown here.

It's widely thought that hedging is of little value for long-term investing, but there's no question that currency fluctuations can have a big impact on short-term results. Can't decide whether to go hedged or unhedged? Consider a 50-50 mix.

ETFs are a low-fee version of mutual funds that trade like a stock. Traditionally, ETFs tracked major stock and bond indexes; today, many funds follow more obscure indexes or have a manager who picks stocks. To invest in ETFs, you need a brokerage account. For help on that, consult my latest ranking of online brokers. For help in deciding what type of account to put your U.S. equity funds in, consult our ETF tax primer.

Here is an explanation of some of the terms you'll find in the ETF Buyer's Guide:

Assets: Shown to give you a sense of how interested other investors are in a fund; the smallest funds may be candidates for delisting.

Management expense ratio (MER): The main cost of owning an ETF on an ongoing basis; as with virtually all funds, published returns are shown on an after-fee basis.

Trading expense ratio (TER): The cost of trading commissions racked up by the managers of an ETF; add the TER to the MER for a fuller picture of a fund's cost. Note many ETFs do so little trading that their TERs round down to zero.

Dividend yield: Mainstream indexes can be a good source of dividend income; shown here are yields based on recent payouts.

Sector weightings: Check this column to verify how well a U.S. equity ETF will diversify your Canadian holdings with exposure to sectors such as tech and health care.

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Ticker key: AAPL: Apple; MSFT: Microsoft; AMZN: Amazon; MCD: McDonald's; T: AT&T; RSG: Republic Services; CWST: Casella Waste Systems; OSUR: OraSure Technologies; IDXX: Idexx Laboratories; GTN: Gray Television; IRDM: Iridium Communications; JBL: Jabil Circuit; ADP: Automatic Data Processing; JNJ: Johnson & Johnson; MMM: 3M Co.; XOM: Exxon Mobil

Click here to download an Excel version of this table

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