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The ETF market continues to grow. Nine new exchange-traded funds were launched in March, bringing the total in Canada to more than 700.

Originally, ETFs were supposed to be a low-cost way to track the movement of major indexes such as the S&P/TSX Composite or the Dow. Those plain-vanilla ETFs are still available and popular, but in recent years the industry has introduced new products of increased sophistication.

For example, one of the March launches was the Desjardins RI Emerging Markets Multifactor – Low CO2 ETF (DRFE). A report from National Bank says it “avoids companies with the highest carbon intensities and constructs an Emerging Markets equity portfolio out of companies with notably lower carbon footprints compared than traditional indices.”

That pretty much sums up the direction in which the ETF industry is heading: more specialization and greater complexity.

So how do you decide which ETFs to buy? Start by assessing your own investment personality. You need to know what your goals are and your degree of risk tolerance before making a choice. Here are some suggestions. I’ll only discuss Canadian-based ETFs but of course the whole U.S. market is also open to you.

See also: ETF Buyer’s Guide 2019: The complete series

The penny-pincher.

You never want to lose a cent. Anything you invest in has to make money or, at worst, break even. Your best bet is a CDIC-protected GIC, but, if you want to stick with ETFs, here are three to consider.

iShares 1-5 Year Laddered Corporate Bond Index ETF (CBO). As the name suggests, this EFT invests in a portfolio of high-quality corporate bonds. One-fifth of the securities mature each year and the money is reinvested for a new five-year term. Distributions are paid monthly and are currently 4.1 cents a unit. The fund has made small profits for five consecutive years and is ahead 2.21 per cent this year (to April 11). The MER is 0.28 per cent.

BMO Ultra Short-Term Bond ETF (ZST). This fund has never had a losing calendar year since it was launched in 2011. It invests primarily in corporate bonds that will mature or reset in less than one year. It won’t make you a lot of money – the average annual return since inception is only 1.78 per cent. So far this year, it’s ahead 0.76 per cent (to March 31). That’s the price you pay for safety. Monthly distributions are currently 12 cents a unit. The MER is a modest 0.17 per cent.

Vanguard Short-Term Corporate Bond Index ETF (VSC). You’ll like the cost of this one: The MER is only 0.11 per cent. The fund tracks the performance of the Bloomberg Barclays Global Aggregate Canadian Credit 1-5 Year Float Adjusted Bond Index – which, distilled down, means it invests in bonds with maturities of less than five years. This is another low-performance fund – the total return by market price in 2018 was only 1.25 per cent. But it has never lost money in a calendar year since it was launched in 2012.

The cautious investor.

You’re willing to take a little risk – but not very much. If that describes you, check out these ETFs.

iShares Core Canadian Universe Bond Index ETF (XBB). If there’s one ETF that I believe belongs in every portfolio, this is it. The fund reflects the performance of the entire Canadian bond universe of corporate and government issues. It rarely loses money and has an annual return since inception (November, 2000) of 5.14 per cent. So far in 2019, it is ahead 3.31 per cent. Distributions are paid monthly and are currently 7.4 cents a unit. The MER is 0.19 per cent.

First Asset Canadian Convertible Bond ETF (CXF). This ETF provides market-cap weighted exposure to a portfolio of the largest and most liquid Canadian convertible bonds. These are bonds that can be switched into common shares if certain conditions are met, so they provide stock market exposure while generating interest income. This ETF, which receives top marks from two of Canada’s fund-rating agencies, has generated an average annual return of 4.32 per cent since it was launched in June, 2011. Distributions are paid monthly. The management fee is on the high side at 0.65 per cent.

The income-seeker.

To heck with capital gains! You want ETFs that provide cash flow, perhaps to feed your RRIF distributions. Here are two to consider.

BMO Canadian High Dividend Covered Call ETF (ZWC). This is a relatively new fund from BMO that invests in a portfolio of dividend-paying stocks and supplements the income by writing covered call options. It has only been around since February, 2017, and its performance history so far has been volatile – down 9.92 per cent in 2018, up 12.23 per cent so far this year. So, if you tend to worry about the day-to-day market price, this is not a good choice. But for cash flow, it’s one of the best. The current monthly payment is 11 cents a unit ($1.32 annually) to yield 6.74 per cent at Friday’s price of $19.58. The MER is a high 0.72 per cent.

First Asset Tech Giants Covered Call ETF (CAD Hedged) (TXF). This fund invests in a portfolio of the largest 25 American tech stocks, including companies such as Apple, Facebook, Amazon, Dell, Microsoft, etc. The managers then generate extra income by writing covered calls. This fund, which has been around since 2011, has a terrific record. The average annual return since inception is 14.56 per cent. As for cash flow, investors received $1.32 a unit in distributions in 2018. At Friday’s price of $16.62, that translates into a yield of 7.94 per cent. The management fee is on the high side at 0.65 per cent but, in this case, you’re getting good value for money.

The tightrope walker.

A high-wire artist needs perfect balance. That’s what some investors want in their portfolios – a risk-appropriate balance between stocks and bonds. Unfortunately, the ETF world hasn’t shown much interest in providing balanced offerings until recently.

Within the past two years, however, Vanguard has launched four balanced ETFs, with varying asset mixes. BMO has three and Blackrock (iShares) has two.

The iShares Core Balanced ETF Portfolio has the longest history, but until the end of December, it operated under another name (iShares Balanced Income CorePortfolio Index ETF) with a somewhat different mandate.

This effectively means that all the balanced entries I looked at are very new, so we don’t have much in the way of track records to compare results. That said, here are three to consider.

Vanguard Balanced ETF Portfolio (VBAL). This fund aims for the classic asset mix balance – 60-per-cent stocks, 40-per-cent bonds. It invests in seven underlying Vanguard ETFs covering Canadian, U.S., international and emerging-markets stocks plus bonds from around the globe. The fund was launched in January of last year and generated a respectable return of 5.3 per cent over the 12 months to March 31. The MER is 0.25 per cent.

BMO Balanced ETF (ZBAL). This fund also has a 60-40 asset allocation at present, but it may not always be that way. The managers employ a strategic asset allocation strategy, rebalancing the portfolio quarterly. This may occasionally result in a deviation from the 60-40 split although it is not likely to be significant. Like the Vanguard ETF, this is a fund of funds, investing in seven underlying BMO funds that invest in stocks and bonds from around the world. This is a brand-new fund, launched in February, so we have no idea of how it will perform over time. The MER is slightly less than that of the Vanguard fund, at 0.2 per cent.

iShares Core Balanced ETF Portfolio (XBAL). Because of the mandate change at the end of 2018, I would ignore past results. But so far in 2019, this ETF has been an impressive performer with a gain of 8.93 per cent. It, too, is a fund of funds, investing in eight iShares equity and bond funds. The current weighting is 61.3-per-cent stocks, 38.6-per-cent bonds, and a small amount of cash. Distributions are now paid quarterly instead of monthly. The management fee is 0.18 per cent.

Next week, in part Part 2, we’ll look at more aggressive investor profiles and suggest some appropriate ETFs for them.

Gordon Pape is editor and publisher of the Internet Wealth Builder and Income Investor newsletters.

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