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Building a Well-Balanced ETF Portfolio

Earning 1-2% in a savings account or a GIC just doesn’t cut it these days. If you’re looking to save for the long term, you need to make sure your money is earning a solid return. With inflation sitting at around 2% if you are earning anything less than that you are actually losing purchasing power on your money.

For many people, millennials especially, investing can seem incredibly daunting. All of us remember the stock market crash in 2008, but what many of us fail to remember is the rebound that happened in 2009. The average annual return of the stock market since inception has been 10%1 and while it might seem the only way to achieve that is by taking a lot of risks, with ETFs there is a less risky, and more sound way of doing so.

ETFs, or Exchange Traded Funds, are easily available to Canadians through an online broker. They are marketable securities that track stocks and bonds in a specific index. For example, an ETF that tracks the S&P 500 would invest in the 90 stocks in that indices to mimic their performance. When you buy an ETF, you are getting a little piece of each company for a reasonable price, and often with lower fees, than what it would cost you to purchase each stock individually. ETFs are a great way for new investors to get into the stock market because one unit of a fund typically goes for around $20-$40, making it very affordable to get your foot in the door.

Ensuring you are invested across many countries and industries is the best way to mitigate your risk when it comes to investing. Traditionally, when looking at an investment portfolio you’d be looking to have a portion in fixed incomes, a portion in Canadian equities, and a portion in International equities. How much you put in each type of fund is determined by your risk tolerance and the length of time you plan on investing for.

For example, a 30-year-old that is starting to invest has at least thirty more years until they retire, and when investing for the long term you would typically weight your portfolio more on the equities side. A good rule of thumb is 100 – your age = the percentage of your investment portfolio that should be in equities. The remaining amount should be invested in fixed income. As you grow older and get closer to retirement the fixed income portion will grow larger because you don’t want there to be annual fluctuations.

The Canadian Couch Potato has a great list of model portfolios that you can base your portfolio off of, depending on who you bank with and what your risk tolerance is. The ETF portfolio is the lowest cost option for new investors and a great way to get exposure across many industries and companies. To leverage this type of a portfolio you need to purchase three funds; ZAG, VCN, and XAW. These three funds will ensure you are reaping the rewards of Canadian and international markets. Below are two examples on how one might invest $10,000 with these funds depending on age.  

Age 30

ZAG – Fixed Income – 30% / $3,000

VCN – Canadian Equity – 30% / $3,000

XAW – International Equity – 40% / $4,000

Age 60

ZAG – Fixed Income – 60% / $6,000

VCN – Canadian Equity – 20% / $2,000

XAW – International Equity – 20% / $2,000

At the end of the day, it’s important to start investing as soon as you can so that you have time and the power of compound interest on your side. You have to do what you are comfortable with while understanding that the market will ebb and flow. Investing for the long term (more than 5 years) means you will benefit from the gradual increase of the stock market and ensure that your money is working hard for you!


About the Author

Janine Rogan is a personal finance educator and CPA based in Calgary Alberta. She is passionate about sharing her financial knowledge with Canadians to help educate them to make money-smart decisions. Through her website, Youtube channel, and community engagement Janine shares solid financial advice that will make a difference in how you manage your money. Check out for more details.

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