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To Vanguard Canada: Please sir, we want some more (non-hedged US and International ETFs)

December 8, 2011 - 0 comments

Dan Bortolotti (a.k.a. The Canadian Couch Potato) recently wrote a post on the possibility of a Canadian investor paying US estate taxes if they hold US-listed exchange-traded funds (ETFs). He suggests that a prudent approach for someone vulnerable to this situation could be to stick to Canadian-listed ETFs for their foreign equity exposure.
The main issue with this strategy is that there are currently not many choices for investors looking for non-hedged U.S. or International equity exposure (the only ones that come to mind are listed below – with hefty MERs):

I am hopeful that Vanguard’s next Canadian product launch will include versions of the following US-listed ETFs (non-hedged):

It may seem a bit odd that I would want them to release anything other than a Canadian non-hedged version of VTI and VXUS, but there are a number of reasons taxable investors should prefer to have more than one low-cost choice for both their U.S. and International ETF selections:

  1. Having two very similar but not identical ETFs makes capital loss selling a breeze.
  2. If you currently hold an ETF that has a large capital gain, it may make sense to direct any new contributions to a different ETF that is more or less the same – that way, if/when markets go down, you’ll be able to harvest some of the newer losses (instead of simply being stuck with lower gains in the original ETF). 

It is anyone’s best guess what products Vanguard will come out with next – certainly their recent arrival to Canada should be viewed as a positive development for all investors.


By: Justin Bender with 0 comments.
Filed under: Funds
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