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How to Build an ETF Portfolio

October 3, 2016 - 6 comments

DIY investing can be intimidating. Sure, I post model ETF portfolios on my blog that readers can download and implement at their favourite brokerage, but novice investors may still find the process overwhelming.

That’s why I’ve decided to set-up a DIY investing channel on YouTube (the videos have been produced by Tara Hunt and edited by Unbuttoned Media). My initial videos will focus on the basics of implementing an ETF portfolio at each of the big bank discount brokerages. Viewers will learn how to calculate the number of ETF shares to purchase and also how to place limit orders (this is great stuff for beginners). Please be sure to subscribe so that you don’t miss any of them – the videos are scheduled for release over the next few weeks.

Although I’ve used the actual ETFs from my model portfolios, please feel free to substitute any of the recommended ETFs for similar ones in the same asset class (I’ve included a list below of alternative ETF choices).  

Alternative ETF choices

Asset Class BlackRock Canada Vanguard Canada Bank of Montreal
Canadian Bonds iShares Core High Quality Canadian Bond Index ETF (XQB) Vanguard Canadian Aggregate Bond Index ETF (VAB) BMO Aggregate Bond Index ETF (ZAG)
Canadian Stocks iShares Core S&P/TSX Capped Composite Index ETF (XIC) Vanguard FTSE Canada All Cap Index ETF (VCN) BMO S&P/TSX Capped Composite Index ETF (ZCN)
U.S. Stocks iShares Core S&P U.S. Total Market Index ETF (XUU) Vanguard U.S. Total Market Index ETF (VUN) BMO S&P 500 Index ETF (ZSP)
International Stocks iShares Core MSCI EAFE IMI Index ETF (XEF) Vanguard FTSE Developed All Cap ex North America Index ETF (VIU) BMO MSCI EAFE Index ETF (ZEA)
Emerging Markets Stocks iShares Core MSCI Emerging Markets IMI Index ETF (XEC) Vanguard FTSE Emerging Markets All Cap Index ETF (VEE) BMO MSCI Emerging Markets Index ETF (ZEM)
       
Global ex Canada Stocks iShares Core MSCI All Country World ex Canada Index ETF (XAW) Vanguard FTSE Global All Cap ex Canada Index ETF (VXC) N/A

Sources: BlackRock Canada, Vanguard Canada, BMO

If you’re an investor with a smaller portfolio, you may also want to consider swapping out your US, international and emerging markets ETFs for a single global fund, such as the iShares Core MSCI All Country World ex Canada Index ETF (XAW) or the Vanguard FTSE Global All Cap ex Canada Index ETF (VXC) (the Canadian Couch Potato uses VXC in his model ETF portfolios). This should help reduce trading commissions as you continue to manage your new ETF portfolio.

The first video in the series will be on How to Build an ETF Portfolio at TD Direct Investing.

By: Justin Bender with 6 comments.
Comments
  14/11/2016 10:42:15 AM
Justin Bender
@Derek: We tend to use more shorter term fixed income holdings (like 1-5 year GICs) for retirees that require cash flow. For investors in the accumulation phase, I also post model ETF portfolios with broad-market bonds on my personal blog:
http://www.canadianportfoliomanagerblog.com/model-etf-portfolios/
 
  12/11/2016 7:44:55 PM
Derek
Hi, great website, just wondering why for bonds on this page you have ones like VAB listed, but when I look at the model portfolio tab the bonds listed there are shorter duration e.g. VSB Thanks
 
  17/10/2016 11:39:47 AM
Justin Bender
@Dave: I believe I answered this in the response to Sam below: VTI is more tax-efficient than VUN in RRSP accounts, so I tend to hold VTI instead (VUN simply holds VTI, so they are essentially the same fund).
 
  17/10/2016 10:51:20 AM
Dave
Justin, kindly advise why you prefer vun to vti? Thanks
 
  04/10/2016 9:25:33 AM
Justin Bender
@Sam: For larger RRSP accounts, I tend to swap out the Canadian-listed foreign equity ETFs (VUN, XEF, XEC) for their US-listed counterparts (VTI, IEFA, IEMG), to reduce the foreign withholding tax impact (I use the Norbert's gambit strategy to do this cost-effectively).

For TFSA accounts, the posted model ETF portfolios would be fine.

For taxable accounts, I tend to use the same equity ETFs as my model portfolios, but I swap out VAB for ZDB. For short term bond ETF holdings (like VSB), I swap it out for BXF or 1-5 year laddered GICs.
 
  03/10/2016 10:13:00 PM
Sam
Would be great to see your model ETF portfolios based for RSP, TFSA and US$ accounts too!
 



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