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Finally, some diversification benefit for Canadian investors holding international stocks.

While both the Canadian and U.S. markets were down a bit for the year to Feb. 28, the benchmark MSCI EAFE Index made 4 per cent in Canadian dollars. Feeling the excitement?

If you check out the EAFE index’s five-year returns, maybe not. But shorter-term numbers do show clearly that stocks from outside North America are worth having. The diversification they supply is real, not just investing theory.

For help in picking an international equity fund, check out this fourth installment of the 2023 Globe and Mail ETF Buyer’s Guide. A change for this year: Global equity funds have been dropped and international dividend funds added. Money flows suggest investors prefer to augment their Canadian equity holdings with separate U.S. and international funds. Global funds are a catch-all for stock markets outside Canada.

All funds presented here are core funds, which means they’re suitable as your one and only international or global fund. Many of these funds come in versions with and without currency hedging, which mutes the effect of fluctuations in the value of our dollar on returns. Unhedged funds are more popular and thus are the focus in this edition of the ETF guide.

It’s widely thought that hedging is unnecessary if you’re a long-term investor holding a diversified group of international stocks, but hedged funds performed better over the past year. With hedging, your returns from non-Canadian stocks won’t be undermined when our dollar rises, nor will they be enhanced when the dollar falls. Unhedged funds do better when our dollar is falling and lag when the dollar rises.

This year’s ETF Buyer’s Guide has so far covered Canadian equity and bond funds and U.S. equity funds. Still to come: Canadian dividend funds and asset allocation funds.

For the tax implications of holding funds in a non-registered account, consult our ETF tax primer.(tgam.ca/ETF-tax-primer).

Click here to download an Excel version of the guide.

Notes: Market data as of Mar. 28, 2023. Returns to Feb. 28, 2023. Source: Rob Carrick; ETF company websites; Globeinvestor.com; Morningstar Canada; TMX Money



Here’s a look at the investing terms used in the ETF Buyer’s Guide:

Assets: Shown to give you a sense of how interested other investors are in a fund.

Management expense ratio (MER): The main cost of owning an ETF on a continuing basis; published returns are shown on an after-fee basis. The other cost component is the TER, or trading expense ratio.

Yield: An annualized number based on the latest dividend payout.

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: Gives you an indication of whether a fund offers broad stock market coverage, or holds a more concentrated portfolio that may behave differently than benchmark indexes.

Sector weightings: Included to help you verify how well a global or international equity ETF will diversify your Canadian holdings with exposure to various sectors, such as tech and health care.

Launch date: The older an ETF is, the more likely it is that you can look back at a history of returns through good markets and bad.

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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 16/04/24 1:32pm EDT.

SymbolName% changeLast
ZEA-T
BMO MSCI EAFE ETF
-0.72%22.1
ZDI-T
BMO International Dividend ETF
-0.69%23.18
FLUR-NE
Franklin International Equity Index ETF
-0.54%27.47
HXDM-T
Horizons Intl Dev Mkts Equity Index ETF
-0.73%44.75
CIE-NE
Ishares Intl Fundamental Index ETF
-0.62%24.05
XEF-T
Ishares Core MSCI EAFE IMI Index ETF
-0.76%36.48
QDX-T
Mackenzie International Equity Index ETF
-1.63%114.35
TPE-T
TD International Equity Index ETF
-0.79%21.38
VIDY-T
Vanguard FTSE Dev Ex Na High Div Yld ETF
-1.09%29.82
VIU-T
Vanguard FTSE Dev All Cap Na ETF
-1.07%33.31

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