Author Topic: Please recommend ex-US ETF for Canadian DIY investor  (Read 3345 times)

crusher2015

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Please recommend ex-US ETF for Canadian DIY investor
« on: January 29, 2017, 07:08:29 AM »
Hi all,

Currently I'm have ~40K CAD invested in ETFs in a CPP-style portfolio (currently 20% VAB, 40% VXC, 40% VCN).

For various reasons, in my next purchases I'm hoping to decrease my allocation to US equities. I'm not quite determined enough to sell my current holdings however.

I'm hoping for some helpful comments on which ETFs I should look into. I want to buy in CAD on the TSX. I've come across VXUS and VEF. Any other suggestions?

Thanks a lot in advance for your advice!

Heckler

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Re: Please recommend ex-US ETF for Canadian DIY investor
« Reply #1 on: January 29, 2017, 08:30:27 AM »
I'm using XEF and VEE.  Both very broad and low cost, unhedged.  CPP has a few older articles on the benefits of XEF. 

http://canadiancouchpotato.com/2013/04/15/new-ishares-etfs-give-canadians-the-world/
« Last Edit: January 29, 2017, 09:04:47 AM by Heckler »

joonifloofeefloo

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Re: Please recommend ex-US ETF for Canadian DIY investor
« Reply #2 on: January 29, 2017, 09:55:41 AM »
Here's where I've landed so far, depending on the account (one of mine requires third-party admin, which restricts options).

TTP or VCN (Cdn index)
VXC or XAW (approx half in US stocks, half elsewhere ex Canada)
VIU or VDU or TPE (Europe, Japan, etc)
XEC or VEE (Emerging)

Per CCP, I will continue having US stocks at 30%, either via VXC, XAW, TPU, or VUN.

If I've paid attention correctly, all of the above align with CCP recommendations.

GreatLaker

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Re: Please recommend ex-US ETF for Canadian DIY investor
« Reply #3 on: January 29, 2017, 11:20:36 AM »
Your request brings up the question of why you want to decrease your exposure to USA. Sounds like market timing or guessing at the future, which tends to be a loser's game.

Do you want hedged funds? A lot of analysis says for long term investing they have additional costs and are less efficient than unhedged.
http://canadiancouchpotato.com/2016/03/07/ask-the-spud-is-it-time-to-hedge-currency/
http://canadiancouchpotato.com/2015/02/04/stepping-back-from-the-hedge/

Do you want emerging markets, or just developed markets? VXC includes developed and emerging.

VXUS is a Vanguard US ETF. It is not available in C$ or on the TSX.

VEF is hedged. It is also global ex-USA, which means it also has some Canadian exposure. VDU is the same except unhedged. Better choices may be VIU (unhedged) or VI (hedged) if you want global ex-North America developed. And add VEE if you want emerging.

Alternate choices from iShares are XEF+XEC, or from BMO ZEA+ZEM.

Note that the FTSE indices used by Vanguard consider Korea to be a developed country and the MSCI indices used by iShares and BMO consider Korea to be an emerging country. So VIU+XEC would double up on Korea. XEF+VEE would have no Korea.

It has been my experience that simpler portfolios are easier to manage and evaluate performance. I try not to have 2 different funds covering the same segment unless they are in different accounts. Example is VUN in non-registered and XUS in RRSP, since they are both USA funds but held in different accounts so it is no more difficult to manage than if I held VUN in both. If I had VXC or XAW I would not start second-guessing and adding geographic regions like ex-North America or Europe, or single country funds. But that's just my opinion. YMMV.

GreatLaker

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Re: Please recommend ex-US ETF for Canadian DIY investor
« Reply #4 on: January 29, 2017, 11:25:35 AM »
I'm using XEF and VEE.  Both very broad and low cost, unhedged.  CPP has a few older articles on the benefits of XEF. 

http://canadiancouchpotato.com/2013/04/15/new-ishares-etfs-give-canadians-the-world/

Note that the FTSE indices used by Vanguard consider Korea to be a developed country and the MSCI indices used by iShares and BMO consider Korea to be an emerging country. So VIU+XEC would double up on Korea. XEF+VEE excludes Korea.

crusher2015

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Re: Please recommend ex-US ETF for Canadian DIY investor
« Reply #5 on: January 29, 2017, 02:14:38 PM »
Thanks for the suggestions, especially to GreatLaker for your detailed reply. Your rundown of the options is extremely helpful!

I'm looking for unhedged and both emerging and developed. I do value simplicity, so I'm hesitant to give up my convenient 3 fund portfolio.

Your request brings up the question of why you want to decrease your exposure to USA. Sounds like market timing or guessing at the future, which tends to be a loser's game.


My intention is not to time the market. My horizon is 20+ years and my strategy is all buying, no selling (including rebalancing with new deposits, as much as is possible).

It's probably a whole separate discussion, but I'm sufficiently unhappy with Trump's antics so far that I'm toying with the idea of stopping my investment into US companies for a period of time. (I've already cancelled upcoming US travel plans.)  I'm not yet totally sold on this idea of mine but I want to look into the options anyway. I know there's a fair debate on whether "ethical investing" makes any difference. Also, so far I have continued to invest in the Canadian markets despite the heavy fossil fuels and minerals composition, which I'm also not crazy about. But again, that's really a separate discussion.

Heckler

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Re: Please recommend ex-US ETF for Canadian DIY investor
« Reply #6 on: January 30, 2017, 12:19:54 AM »
VEE vs XEC, I was aware of South Korea.  I already owned XEF, but I went with VEE  a year later because it has twice the number of holdings and like the greater diversity even if I miss out on Samsung.  4249 vs 1894 holdings.
« Last Edit: January 30, 2017, 12:29:25 AM by Heckler »