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It almost sounds too easy to just buy some good ETFs and hold on to them, but the strategy flat-out works.

This first instalment of the 2024 Globe and Mail ETF Buyer’s Guide makes the case quite well for the simplicity of buy-and-hold investing with exchange-traded funds. Each of the 12 Canadian equity funds included here delivered annualized returns of roughly 9 to 10 per cent over the past five years of dramatic stock market ups and downs.

Through all stock market conditions, ETFs are sensible option for investors because they’re cheap to own, transparent in the stocks they hold, and reliable in providing at least some degree of diversification. The dozen ETFs in this edition of the buyer’s guide should be considered as candidates for people who want exposure to the Canadian stock market in a single fund.

The funds included here differ in the indexes or stock-screening strategies they follow, and that means variations in fees, sector weightings and returns. A couple of low-volatility ETFs are in the mix – they focus on stocks that are more stable that the broader market.

Five more instalments of the ETF guide will appear on alternating weeks over the next couple of months – they’ll cover funds holding Canadian bonds, U.S. stocks, global/international stocks, dividend stocks and asset-allocation funds, which are a fully diversified portfolio packaged into a single fund.

Where possible, the guide focuses on ETFs with at least five years of history and a significant investor following as measured by assets and/or trading volumes.

You’ll need a digital brokerage account or trading app to invest in ETFs. For help on that, consult the 2024 Globe and Mail digital brokerage ranking. Also consider robo-advisers, which can build and manage a portfolio of ETFs for you at a reasonable cost.

Here’s an explanation of investing terms used in the ETF Buyer’s Guide:

Assets: Shown to indicate how popular a fund is. A $1-billion fund is a whale, while $100-million is a decent size.

Management expense ratio (MER): The main cost of owning an ETF on a continuing basis; returns are shown on an after-fee basis both here and on ETF company websites.

Trading expense ratio (TER): The cost of stock-trading commissions incurred by the managers of an ETF as they maintain the portfolio. Add the TER to the MER for a complete picture of a fund’s cost.

Yield: Based in most cases on distributions paid over the previous 12 months. Distributions are primarily dividend income, but may also include a return of capital.

50-day trading volume: Average number of shares traded daily over the previous 50 days; it’s easier to buy and sell at competitive prices if an ETF is heavily traded.

Number of holdings: Offers some perspective on the level of diversification. In the Canadian equity category, there are funds with a tight focus on large companies and those that include medium and smaller companies as well.

Sector weightings: A key differentiator between Canadian equity ETFs. Financial stocks account for roughly one-third of the Canadian stock market, but some funds are deeper into the sector than others.

Returns: The ETF guide shows total returns, which reflect price changes in the stocks that a fund holds as well as dividends paid by those stocks.

Beta: A measure of volatility that compares funds with the benchmark index (in this case, the S&P/TSX Composite), which always has a beta of one. A lower beta means less volatility on both the up and down side.

Download the source excel here.

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Tickers mentioned in this story

Study and track financial data on any traded entity: click to open the full quote page. Data updated as of 19/04/24 3:10pm EDT.

SymbolName% changeLast
BMO S&P TSX Capped Comp ETF
BMO Low Volatility CAD Equity ETF
Horizons S&P Tsx60 Index ETF
Ishares Core S&P TSX Capped Comp ETF
Ishares S&P TSX 60 Index ETF
Ishares Edge MSCI Min Vol Can ETF
Mackenzie Canadian Equity Index ETF
TD S&P TSX Capped Comp Index ETF
Vanguard FTSE Canada Index ETF
Vanguard FTSE Canada All Cap ETF

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