The best ETFs for 2016

There are hundreds of flavours of ETFs on the market. Our panel samples them all to find the best for each major category

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by

From the February/March 2016 issue of the magazine.

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Investors could learn a thing or two from the ice cream business. Since 1945, Baskin-Robbins has released more than 1,300 flavours. Yet most of us opt for one of just a handful of classics, including chocolate, mint chocolate chip and pralines and cream. The single most popular flavour hands down? You guessed it. Vanilla.

A quarter century since exchange-traded funds arrived in Canada, there are more than 400 ETFs trading on the Toronto Stock Exchange alone, and at least 2,000 trading on stock exchanges around the world. Most will appeal to just a tiny percentage of investing palettes. Which is why our ETF All-Stars, now in its fourth edition, continues to shine a spotlight on old-fashioned, low-cost, broadly diversified ETFs—the crowd-pleasing vanillas of the investing landscape.

SUBSCRIBERS ONLY: View the ETF All-Stars 2016 FREE online »

Because ETFs passively track major stock indexes, our selection process is different from that of actively managed funds, where the focus is on overall performance. We’ve aimed to identify the funds most likely to harness the returns they track—primarily the traditional major equity markets of Canada, the United States and the world, plus fixed income—in the most efficient manner possible. The idea is to create an investible portfolio readers can buy and hold for the long run: broadly diversified, highly tax-efficient and, of course, at the lowest possible cost. If you subscribe to the “Couch Potato” philosophy of index investing, all you arguably need is one ETF in each of our four categories.

Our expert panel, which you’ll find on is nearly identical to last year’s. Joining for 2016 is Yves Rebetez, editor of the website ETF Insight. All were instructed to focus only on ETFs that trade on the Toronto Stock Exchange, which simplifies currency issues that arise when Canadians buy products that trade on foreign exchanges. We use management fees, rather than the slightly higher management expense ratios (MER), for ease of comparison. (The latter figure includes taxes and other incidental costs, but can’t be calculated until a fund has had a full 12 months on the market.)

Looking at the table, you may notice that 10 of last year’s 12 picks are back. This is no accident. The panel isn’t inclined to seek change for change’s sake, as frequent fund switches add trading costs and may cause investors to get whipsawed by futile attempts to pick narrow regional or sector funds. This year, our panel added two new All-Stars for a total of 14 picks.

If you’ve already built an ETF portfolio, it may not be worth incurring transaction costs solely to gain a few basis points of cost advantage. If you’re building a portfolio, you should understand that while not every pick was unanimous, all of them reflect a consensus among the panel. Any one of these funds would make a smart component of your long-term, tinker-free strategy.

SUBSCRIBERS ONLY: View the ETF All-Stars 2016 FREE online »

8 comments on “The best ETFs for 2016

  1. I am a subscriber, why can’t I find how to access articles on line?? John

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  2. Even when signed in the ETF All Stars is not acessible…..

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    • Hi there, To gain access to the ETF All-Stars, please go to the following link and add your magazine subscriber number to your web profile. http://www.moneysense.ca/signin/?action=register. This way, once you are signed in online, you can read unlimited articles. Sorry for the inconvenience. Let me know if you encounter any issues. Thanks.

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  3. I subscribed last year and had problems with accessing articles that is why I did not sign up this year maybe will try again

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    • Hi Dennis, I’m sorry to hear you’ve been having problems accessing articles. Please be sure to add your subscription number to your web profile on our site. This way, once you are signed in online, you can read unlimited articles with ease. http://www.moneysense.ca/signin/?action=register I hope this helps! Thanks for subscribing.

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  4. While I love the content, interacting with the Money Sense website is quite farcical. I bought the digital magazine subscription to access the subscriber-only content on the website & I’ve “invested” more time in trying to do that than I’m like to make or save following the magazines advice! Turned out the servers were down the day I bought the subscription so I had to wait 3 days for things to get back working before I could download my first magazine. Then it took several calls to the support team to find out the website & the magazine require separate sign-ups, I guess I missed something obvious there. The website doesn’t miss any opportunity to offer a new subscription but it fails to meet the needs of those that already have paid their subscription. Finally, when I was signed in to the moneysense.ca site & tried to update my moneysense.ca profile to reflect the fact that I was a magazine subscriber, it wouldn’t allow that because I didn’t fill in the “nickname” field. Since I was already logged in under my nickname, I don’t know why that was required but the kicker is … there was no nickname field! A call to tech support didn’t help & the problem is being forwarded to the web team.
    I have to admit to missing some very obvious things from time to time but I think there is a quagmire of confusion here that will deter many people from advancing their subscription process & I doubt all will have my level of resilience or persistence. I’d even be happy to show you how awful the process is from my side if it helps make it better.

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    • Hi Skough,
      Sorry to hear you’re having such difficulty logging in! Have the problems persisted? Let me know and I will look into it. Thanks! Prajakta

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