Author Topic: Investing in Canada: Help Picking a Product for International Diversification  (Read 369 times)

NorthernBlitz

  • Bristles
  • ***
  • Posts: 297
Looking for some help re: International ETFs available for Canadian investors. I moved from Canada to the US before I got into index investing, so I'm not super familiar with products available north of the border.

A member of my family has a legal financial responsibility to help oversee the finances of someone they are close to.

When they were given this responsibility, they changed advisers because the previous firm charged a management fee between 2-3% (which I think is not far from theft). They are not comfortable with the additional legal liability that would come with DIY'ing this portfolio (reasonably, I think).

They sent me a list of ETFs the new adviser sent them for a portion of the portfolio and asked for my thoughts on the products. They all seemed to be US and International products, so my guess is that the purpose here is to diversify to international markets. I wasn't a huge fan of the list as many were active funds and / or specific sector bets (e.g. US Healthcare). It might be because I'm DIY with my own finances, but I much prefer passive, broad, low cost products.

If they lived in the US, I know products that I would recommend, but I was hoping that I could get some input from the community here re: good choices in Canada for international exposure.

Of the options given, I think the most attractive was a BMO hedged ETF that tracks the SP500 (ZUE). I think that you can't go too wrong with a low cost SP500 index. But, I'm not sure what the difference between hedged and unhedged is (I think it's something re: exchange rate protection). And while I don't mind the argument that the SP500 has faux international diversification because the companies have lots of global sales, I personally diversify globally in my own portfolio.

None of the options seemed to be as broad as the  iShares (XAW) recommended by the Canadian Couch Potato (which includes global stocks minus Canadian stocks). This seems like a good bet, but it wasn't in the options provided by the adviser (although there were other iShares products).

They also didn't recommend any Vangaurd ETFs (like VUN or VUS). I don't know if the adviser has access to Vangaurd products but I suggested asking.

I know that there have been some good discussions on here about financial products from a Canadian perspective. Does anyone feel comfortable sharing mutual funds or ETFs they use to get international exposure? I'd also appreciate any advice on hedged vs. unhedged. Or even dealing with choosing lower cost passive products when dealing with advisers (as I manage my own simple 3 fund portfolio myself).

Thanks
« Last Edit: August 09, 2018, 08:18:18 AM by NorthernBlitz »

daverobev

  • Magnum Stache
  • ******
  • Posts: 3056
  • Location: Canada
Hedging is 'bad' - it protects from something that doesn't need protecting from; over a long timespan, volatility is good. There is a cost to hedging. But yes, basically hedge = take currency fluctuations out of the equation. Normally, if an index in the US goes up and CAD:USD goes up, the increase is offset. If CAD goes up, the effect is multiplied. With a hedged fund, some/most of the currency fluctuation is removed.

If they list BMO ETFs, I like ZEA (which is EAFE, Europe + Japan mostly, also Australia & NZ). BMO no doubt have an unhedged US ETF as well... well, here: https://www.bmo.com/gam/ca/advisor/products/etfs

ZSP, ZEM, ZEA and ZCN would make up 'the world'.

I had some ZPR til recently, if that fits with the risk profile (ie, not bonds but also not stocks).

I would ask them why the hell they give a hedged US ETF but not the straight ones, if that is in fact the case.

NorthernBlitz

  • Bristles
  • ***
  • Posts: 297
Thanks for the response.

The one's I saw on the list were un-hedged (at least the ones I noticed).

I'll pass along your suggestions.
« Last Edit: August 09, 2018, 04:11:20 PM by NorthernBlitz »

K-ice

  • Pencil Stache
  • ****
  • Posts: 764
  • Location: Canada
For international exposure I only have VXC.

I wonder why they canít pick Vanguard. I suspect the advisor still wants to steer them towards something with a commission.

Perhaps get them to look into the new Vanguard funds.

https://www.vanguardcanada.ca/individual/etfs/about-our-asset-allocation-etfs.htm?cmpgn=PS0117CABAPDS0006

My SO does not want to deal with rebalancing either so I am going to point them in that direction.

NorthernBlitz

  • Bristles
  • ***
  • Posts: 297
For international exposure I only have VXC.

I wonder why they canít pick Vanguard. I suspect the advisor still wants to steer them towards something with a commission.

Perhaps get them to look into the new Vanguard funds.

https://www.vanguardcanada.ca/individual/etfs/about-our-asset-allocation-etfs.htm?cmpgn=PS0117CABAPDS0006

My SO does not want to deal with rebalancing either so I am going to point them in that direction.

Thanks. I have passed on the advice of asking if the can add Vanguard products.

YoungInvestor

  • Bristles
  • ***
  • Posts: 385
For international exposure I only have VXC.

I wonder why they canít pick Vanguard. I suspect the advisor still wants to steer them towards something with a commission.

Perhaps get them to look into the new Vanguard funds.

https://www.vanguardcanada.ca/individual/etfs/about-our-asset-allocation-etfs.htm?cmpgn=PS0117CABAPDS0006

My SO does not want to deal with rebalancing either so I am going to point them in that direction.

Thanks. I have passed on the advice of asking if the can add Vanguard products.

XAW by iShares is pretty much the same thing as VXC. If that's a possibility that's where I would go.

I think it was even slightly more tax efficient last time I checked due to holding its European allocation directly in Canada rather than through a US ETF, but don't write me on this.

Retire-Canada

  • Walrus Stache
  • *******
  • Posts: 6742
Does anyone feel comfortable sharing mutual funds or ETFs they use to get international exposure? I'd also appreciate any advice on hedged vs. unhedged.

My portfolio is:

- VUN/VTI = 50%
- VCN = 20%
- VIU = 15%
- VEE = 15%

Last time I checked my weighted MER was ~0.11%.

I don't see any value in hedged funds so I don't own them.