But, there are still good reasons to hold Canadian equity exchange-traded funds (ETFs) in your portfolio.
For one, they are tax-efficient in non-registered accounts because the dividend distributions they pay enjoy a lower tax rate than foreign dividends. Secondly, their dividend yield is higher (close to 3% right now) than either U.S. or international equity index ETFs. And finally, they offer diversification in the form of commodity exposure, which can be an inflation hedge.
This category used to be owned by the big three of index investing—iShares, BMO and Vanguard—but an interloper, TD’s Canadian Equity Index, vaulted to the top of our voting this year, thanks to its ultra-low management expense ratio (MER) of 0.05%. It also tracks the Solactive Canada Broad Market Index, an alternative to the more common S&P/TSX and FTSE Canada indices. That makes it possible to dodge superficial loss rules when buying or selling…
