Simple Low Cost Diversified ETF Portfolios Examples 2022 (2023)

We’ve been writing about low-cost ETFs in Canadian index portfolios since 2008. Below is our 2022 update.

Unless you have been living under a rock (which we would actually understand considering the times we are in), you have definitely heard of diversified indexing. Diversified indexing is a popular investment strategy for a lot of reasons.

For now, here’s the short of it.

A diversified portfolio is one that contains many different assets, including stocks and bonds from all over the world. Geographical and asset type diversity is beneficial for a number of reasons, including the fact that it offers a certain level of protection if one of the stocks you hold crashes and burns.

When you have a diverse portfolio with a wide range of stocks, ETFs, mutual funds, and bonds you give yourself a better chance at not losing as much if something does in fact crash.

(Video) 4 ETF Portfolios for 2022 (SIMPLE STOCK PORTFOLIO CONSTRUCTION)

Fortunately, ETFs make it so easy for DIY and investors to diversify their portfolio without worrying too much about choosing the perfect stock. It’s also a great way for beginners to get started.

ETFs are exchange-traded funds that include a number of companies within them, so when you purchase an ETF, you’re not putting your eggs all into one basket, but you are spreading your eggs into multiple baskets. You can also read our guide for the best ETFs in Canada to find the ones we like best.

The great thing is that these baskets are usually made up of some pretty impressive multi-national companies, and you know how those folks like to make revenue.Some of the easiest ways to get onto the low cost ETF portfolio train is by using one of our favorite online Canadian brokers Qtrade or Questrade.

What Does a Good Low-Cost ETF Portfolio Look Like?

This is a great question, and one that with a some fundamental understanding of how investing in ETFs works, you’ll be able to create a solid portfolio that will likely grow, and not cost you a lot to do so.

Here we show you some ETF portfolio examples of our favorite options when it comes to having a solid diversified ETF portfolio. You will note that we use both CAD and USD here.

If you want to learn more on choosing the Best Canadian Dollar (CAD) ETFs for U.S Equities, have a look at our full article.

(Video) The Perfect All ETF Investment Portfolio

Note: MER stands for Management Expense Ratio, and measures how much of a fund’s assets are used for administrative and other operating expenses. So, the lower the number, the more of your money you get to keep.

The Diversified Low-Cost ETF Portfolio (mix of CAD and USD)

IndexETFMER
Canadian IndexXIC (CAD) or VCN (CAD)0.06%
Total U.S MarketVTI (USD)0.03%
70% Europe, 30% PacificVEA (USD)0.05%
94.3% Emerging Markets, 5.3% Pacific, 0.20% North AmericaVWO (USD)0.10%
Canadian Short Term Bond IndexVSB (CAD)0.11%

Update December 2021: For your international exposure, consider VXUS which also has some small cap coverage.I like VXUS because it has broad international exposure and has a low MER (0.08%), however, the drawback is that it includes some Canadian coverage (duplication). VXUS would replace VEA and VWO above, reducing the total number of ETFs to 4.

Let’s take a look at what that would look like.

IndexETFMER
Canadian IndexXIC (CAD) or VCN (CAD)0.06%
Total U.S MarketVTI (USD)0.03%
70% Europe, 30% PacificVEA (USD)0.05%
94.3% Emerging Markets, 5.3% Pacific, 0.20% North AmericaVWO (USD)0.10%
Total International IndexVXUS(USD)0.08%
Canadian Short Term Bond IndexVSB (CAD)0.11%

Update November 2021, I added this table below as a lot of readers want to avoid the FX conversion from CAD to USD (needed to purchase USD based ETFs). Vanguard and iShares have a number of ETFs that are low cost, in CAD, and non-hedged (hedging is known to underperform over the long term).

CAD only (non-hedged) Diversified Low-Cost ETF Portfolio

IndexETFMER
Canadian IndexXIC (CAD) or VCN (CAD)0.06%
Total U.S MarketVUNXUU(CAD)0.160.07%
International Index (MSCI EAFE)XEF (CAD)0.22%
Emerging Markets IndexVEE (CAD)0.24%
Canadian Short Term Bond IndexVSB (CAD)0.11%


Update January 2021
, If you would like to simplify even further, you could replace XUU, XEF, VEE with iSharesAllCountry Worldex-Canada Index ETF (XAW). With a MER of 0.22%, you could reduce your portfolio to three ETFs and still maintain a reasonably low MER.

Simplest CAD only Diversified ETF Portfolio (only 3 ETFs)

IndexETFMER
Canadian IndexXIC (CAD) or VCN (CAD)0.06%
Total U.S MarketXUU (CAD)0.07%
Developed ex North America IndexXEF (CAD)0.22%
Emerging Markets IndexVEE (CAD)0.24%
All-World ex-Canada IndexVXCXAW(CAD)0.270.21%
Canadian Short Term Bond IndexVSB (CAD)0.11%

What Are My Other Options For a Low-Cost ETF Portfolio?

There are lots of ways to tweak the portfolio. I chose XIC over XIU because of the lower MER which is the same reason why I chose a combination of XEF and VWO instead of using VEU or XIN.

(Video) The ALL ETF Portfolio - The Simple Strategy that can BEAT the Market!

VTI, the total U.S market, is a steal in my opinion as it covers the whole U.S market without having to purchase separate

XIN.

VTI, the total U.S market, is a steal in my opinion as it covers the whole U.S market without having to purchase separate funds for the Russell 2000, S&P 500, DJIA, and Nasdaq. If you’re looking for a higher potential return and willing to take on a bit more risk, you may want to purchase a U.S small cap ETF separately. To see more about low-cost US ETFs, check out our guide on how to build a simple low cost portfolio in USD.

VSB, a Canadian short term bond index, was chosen because short-term bonds are known to have a lower correlation with the equity markets than long-term bonds. Having a bond portion in the portfolio will reduce volatility while only slightly reducing potential returns. The bond portion will start out small (maybe non-existent) in the early years but increase in percentage as the portfolio gets closer to funding retirement. An alternative would be to choose the total Canadian bond index using VAB (MER 0.13%).

What About Dividend ETFs?

It’s also prudent to mention that there are some great dividend earning ETFs out there as well, such as the The iShares Core MSCI Canadian Quality Dividend Index ETF, which offers a 5.2% dividend yield and a low MER at 0.11%.

For US ETFs, you have options like the Columbia Research Enhanced Value ETF, which offers a whopping 21.94% annual dividend yield at a low MER of 0.19%. To read more about our picks for The Best Canadian Dividend ETFs, check out our full article.

(Video) 3 ETFs for a Diversified, Low-Cost Portfolio

What is the best way to allocate funds for a beginner’s ETF portfolio?

As a rule of thumb, beginner investors who are a little more aggressive may want to start at a bond allocation at 20-25% of their portfolio and those a little more conservative 40%+.

There are a number of “balanced” mutual funds that hold 40% bonds. As another example, Canada Pension Plan holds 30% bonds with a “retirement” timeline of 75 years. Bond allocation typically increases with age to reduce the impact of a large market correction when you are withdrawing from your portfolio during retirement.

To see the latest of the “easy” ETF portfolios, check out Vanguard’s newest products, VGRO and VBAL. Essentially all in one balanced ETF portfolios that have very low MERs.

There Are Many Options When Choosing How to Build an ETF Portfolio

Today we shared some of our best recommendations to start diversifying your portfolio with a few simple ETFs. The Bogleheads, a hard-core group of Vanguard fans, swear by the 3-fund portfolio. This portfolio holds only 3 US ETFs and actually performs decently with a 10.9% compound annual return in the last 10 years.

Whether you want 3, 5 or 10 ETFs in your portfolio, we hope you now have all the information you need to get started right away. If you’re ready, check out our top low-cost brokers, Qtrade, which offers 100 free ETFs, and Questrade where you can get ETFs for free.How do our ETF portfolio examples look to you? What would be your picks for a diversified low-cost ETF portfolio?

Discover the best free ETF brokers in Canada

View our detailed Canadian broker analysis

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(Video) The 2 ETF Portfolio for ALL AGES | Simple Index Fund Portfolio

FAQs

How many ETFs are needed for a diversified portfolio? ›

Experts agree that for most personal investors, a portfolio comprising 5 to 10 ETFs is perfect in terms of diversification. But the number of ETFs is not what you should be looking at. Rather, you should consider the number of different sources of risk you are getting with those ETFs.

How do I diversify my portfolio in 2022? ›

How to diversify your portfolio: 8 strategies
  1. Understand asset classes. ...
  2. Diversify by asset class. ...
  3. Diversify within asset classes. ...
  4. Invest in an ETF. ...
  5. Consider fixed-income investments. ...
  6. Follow a buy-hold strategy. ...
  7. Keep investing over time. ...
  8. Regularly rebalance your portfolio.
11 Aug 2022

How do you build a well diversified ETF portfolio? ›

One option you can consider would be using two ETFs to help provide a balanced, diversified portfolio of stocks and bonds: A total world stock market ETF.
...
1. Keeping it simple
  1. Treasury bonds.
  2. Government-agency bonds.
  3. Mortgage-backed bonds.
  4. Investment-grade corporate bonds.
  5. Some dollar-denominated international bonds.

How much should a beginner invest ETF? ›

ETFs have a low hurdle to invest

Also, it doesn't take much to construct a balanced portfolio. You can put $500 in a stock ETF and $500 in a bond ETF to achieve a diversified two-asset-class portfolio which, though simple, can be a great start toward building a portfolio appropriate for your goals.

What is a good portfolio for a 60 year old? ›

A great hands-off choice for retirees is the 60/40 portfolio of stocks and bonds. Traditionally, this meant an allocation to U.S. stocks, Treasurys and investment-grade corporate bonds. Stocks drive strong returns during bull markets, while bonds reduce volatility and provide protection during market crashes.

How much portfolio diversification is enough? ›

As a general rule of thumb, most investors would peg a sufficiently diversified portfolio as one that holds 20 to 30 investments across various stock market sectors. However, others favor keeping a larger number of stocks, especially if they're riskier growth stocks.

What is a good fund size for an ETF? ›

Level of Assets: To be considered a viable investment choice, an ETF should have a minimum level of assets, a common threshold being at least $10 million. An ETF with assets below this threshold is likely to have a limited degree of investor interest.

How much of your portfolio should be ETFs? ›

According to Vanguard, international ETFs should make up no more than 30% of your bond investments and 40% of your stock investments. Sector ETFs: If you'd prefer to narrow your exchange-traded fund investing strategy, sector ETFs let you focus on individual sectors or industries.

What investment is the easiest way to diversify your portfolio? ›

Use index funds to boost your diversification

Purchasing ETFs or mutual funds that track broad indexes such as the S&P 500 allow you to buy into a portfolio for almost nothing. This approach is easier than trying to build a portfolio from scratch and monitoring which companies and industries you have exposure to.

What is the best portfolio for beginners? ›

The best investments for beginners
  • 401(k) or employer retirement plan.
  • A robo-advisor.
  • Target-date mutual fund.
  • Index funds.
  • Exchange-traded funds (ETFs)
  • Investment apps.
18 Aug 2022

What is a good investment strategy for 2022? ›

Some of the best types of investments for 2022 include high-yield savings accounts, government I-bonds and well-diversified ETFs. Investors who can afford more risk may also look into alternative investments like commodities and cryptocurrencies to boost their returns.

What is the best performing ETF of all time? ›

Over the past ten years, the U. S. stock market has been most favorable for large-cap growth investments. The large-cap growth-styled Invesco QQQ Trust ETF (QQQ), with an annualized return of 17.0%, is the best-performing ETF in the U. S. equity category.

Which portfolio is most diversified? ›

A mutual fund or index fund provides more diversification than an individual security does. It tracks a bundle of stocks, bonds, or commodities.

What are the best tips ETFs? ›

STIP, VTIP, and PBTP are the top TIPS ETFs

They are the iShares 0-5 Year TIPS Bond ETF, the Vanguard Short-Term Inflation-Protected Securities ETF, and the Invesco PureBeta 0-5 Yr US TIPS ETF.

What ETFs should a beginner invest in? ›

The first ETF that could be a good option for beginners is the BetaShares NASDAQ 100 ETF. This ETF provides investors with access to 100 of the largest non-financial companies listed on the famous exchange.

Can I buy ETF with little money? ›

ETFs have lower minimum investment requirements

This means ETFs are accessible to virtually every investor, no matter how deep or shallow their pockets are. On the other hand, most mutual funds have much higher fees that require a minimum investment of hundreds or thousands of dollars.

How do I choose my first ETF? ›

How to choose an ETF
  1. With so many ETFs of all shapes and sizes now available on the market, finding the right one to invest in can sometimes be a difficult choice for investors. ...
  2. Align to allocation. ...
  3. Know your provider. ...
  4. Compare the costs. ...
  5. Don't trade the trends.

What should my portfolio look like at age 62? ›

At age 60–69, consider a moderate portfolio (60% stock, 35% bonds, 5% cash/cash investments); 70–79, moderately conservative (40% stock, 50% bonds, 10% cash/cash investments); 80 and above, conservative (20% stock, 50% bonds, 30% cash/cash investments).

Where should a 70 year old invest his/her money? ›

What should a 70-year-old invest in? The average 70-year-old would most likely benefit from investing in Treasury securities, dividend-paying stocks, and annuities. All of these options offer relatively low risk.

What is the safest investment with highest return? ›

Here are the nine best safe investments with high returns:
  • High-yield savings accounts.
  • Certificates of deposit.
  • Money market accounts.
  • Treasury bonds.
  • Treasury Inflation-Protected Securities.
  • Municipal bonds.
  • Corporate bonds.
  • S&P 500 index fund/ETF.
18 Nov 2022

What is the ideal portfolio mix? ›

Income Portfolio: 70% to 100% in bonds. Balanced Portfolio: 40% to 60% in stocks. Growth Portfolio: 70% to 100% in stocks. For long-term retirement investors, a growth portfolio is generally recommended.

How many shares of ETF should I buy? ›

Generally, you'll need to buy at least one whole share when placing an order. However, if you use a broker that allows fractional shares, you can put any amount of money to work, regardless of the ETF price. In many cases these brokers do not charge a trading commission either.

How many stocks and ETFs should I have? ›

The average diversified portfolio holds between 20 and 30 stocks. Diversifying your portfolio in the stock market is an investing best practice because it decreases non-systemic, or company-specific, risk by ensuring that no single company has too much influence over the value of your holdings.

How long should I hold ETFs? ›

Holding period:

If you hold ETF shares for one year or less, then gain is short-term capital gain. If you hold ETF shares for more than one year, then gain is long-term capital gain.

How do I choose an ETF portfolio? ›

Look at the ETF's underlying index (benchmark) to determine the exposure you're getting. Evaluate tracking differences to see how well the ETF delivers its intended exposure. And look for higher volumes and tighter spreads as an indication of liquidity and ease of access.

Can you make a lot of money from ETF? ›

An exchange-traded fund as simple as the SPDR S&P 500 ETF Trust (SPY 0.54%) -- an investment in the broad market itself -- can do the trick. Given its average annual return of 9% per year, a $5,000 annual investment made in the index fund annually for 33 consecutive years will leave you with $1 million at the end.

What is a 60/40 rule? ›

Historically, one of the most popular allocation strategies has been to allocate 60% in stocks and the remaining 40% in bonds.

What are 3 ETF portfolios? ›

A three-fund portfolio aims to diversify your portfolio across three asset classes: domestic stocks, international stocks, and domestic bonds. You can use a three-fund approach in most 401(k) accounts. Investors choose the allocation of funds that suit their goals.

Should you invest all your money in ETFs? ›

Should you invest in ETFs? Since ETFs offer built-in diversification and don't require large amounts of capital in order to invest in a range of stocks, they are a good way to get started. You can trade them like stocks while also enjoying a diversified portfolio.

How do you build a diversified portfolio for beginners? ›

To achieve a diversified portfolio, look for asset classes that have low or negative correlations so that if one moves down, the other tends to counteract it. ETFs and mutual funds are easy ways to select asset classes that will diversify your portfolio, but one must be aware of hidden costs and trading commissions.

What are some examples of a diversified portfolio? ›

For instance, a diversified investor's portfolio may include stocks consisting of retail, transport, and consumer staple companies, as well as bonds—both corporate- and government-issued. Further diversification may include money market accounts and cash.

Are ETFs a good way to diversify a portfolio? ›

Nowadays, you can even invest in multi-asset allocation ETFs that give you exposure to various asset classes. ETFs are useful for diversification as they spread your money across various assets at lower entry points.

What should I put in my portfolio if I have no experience? ›

How to Build a Portfolio With Little Or No Experience
  • Is Non-Paying Work Ever OK? ...
  • Ways to Build Portfolio Pieces with No Experience.
  • Blogs and Content Sites. ...
  • Article Marketing. ...
  • Write for Non-Profits. ...
  • Write Mock Pieces. ...
  • Using the Sale to Build Your Portfolio. ...
  • Start Building Your Portfolio.

What is the easiest portfolio website? ›

  • Top 5 Portfolio Website Builders 2022.
  • GoDaddy.
  • Weebly.
  • Squarespace.
  • Wix.
  • WordPress.com.
  • Forbes Advisor Ratings.
  • Methodology.
19 Oct 2022

What 5 things should be included in your portfolio? ›

What Should My Portfolio Contain?
  • Table of Contents.
  • Career and professional development goals, tailored for each interviewer.
  • Work philosophy statement; personal mission statement.
  • List of areas of expertise.
  • Works in progress (activities and projects)

What ETFs should I invest in in 2022? ›

The Best ETFs of November 2022
Fund Name & TickerExpense Ratio
Invesco RAFI Strategic US Small Company ETF (IUSS)0.23%
Vanguard International Dividend Appreciation ETF (VIGI)0.15%
Vanguard Short-Term Inflation-Protected Securities ETF (VTIP)0.04%
Fidelity Total Bond ETF (FBND)0.36%
3 more rows

What is the safest investment in 2022? ›

Overview: Best low-risk investments in 2022
  1. High-yield savings accounts. ...
  2. Series I savings bonds. ...
  3. Short-term certificates of deposit. ...
  4. Money market funds. ...
  5. Treasury bills, notes, bonds and TIPS. ...
  6. Corporate bonds. ...
  7. Dividend-paying stocks. ...
  8. Preferred stocks.
1 Nov 2022

What is a reasonable return on investment 2022? ›

Most investors would view an average annual rate of return of 10% or more as a good ROI for long-term investments in the stock market. However, keep in mind that this is an average. Some years will deliver lower returns -- perhaps even negative returns.

What are the top 5 ETFs to buy? ›

Simplify Interest Rate Hedge ETF (ticker: PFIX)
  • Energy and rates still rule Wall Street as Big Tech continues to stumble. ...
  • Simplify Interest Rate Hedge ETF (ticker: PFIX) ...
  • Invesco DB US Dollar Index Bullish Fund (UUP) ...
  • Energy Select Sector SPDR Fund (XLE) ...
  • iShares MSCI Brazil ETF (EWZ)
3 Nov 2022

Which ETF will grow the most? ›

Best growth ETFs
  • iShares Russell Top 200 Growth ETF (IWY) ...
  • Schwab U.S. Large-Cap Growth ETF (SCHG) ...
  • Vanguard Russell 1000 Growth ETF (VONG) ...
  • Vanguard Mega Cap Growth ETF (MGK) ...
  • iShares Russell 1000 Growth ETF (IWF) ...
  • SPDR Portfolio S&P 500 Growth ETF (SPYG)
14 Nov 2022

What are the top three ETFs? ›

PXE, IEO, and FCG are the best ETFs for Q4 2022
  • They provide an easy access point to a wide variety of sectors, industries, and strategies.
  • They tend to minimize many of the risks inherent in investing in individual stocks.

What is a well diversified ETF? ›

Diversified Portfolios ETFs offer investors exposure to multiple asset classes through a single ticker. These funds vary in investment objectives and risk/return profiles, but typically invest in a mix of equities and fixed income securities.

What is a good diversified portfolio? ›

Diversification does, however, have the potential to improve returns for whatever level of risk you choose to target. To build a diversified portfolio, you should look for investments—stocks, bonds, cash, or others—whose returns haven't historically moved in the same direction and to the same degree.

What is the fastest growing ETF? ›

For example, year to date, the $241 billion Vanguard S&P 500 ETF (VOO) and the $277 billion iShares Core S&P 500 ETF (IVV) have had the largest inflows, totaling $24 billion and $16.2 billion, respectively.
...
related ETFs.
TickerNameYTD%
VOOVanguard S&P 500 ETF-15.64%
WEATTeucrium Wheat Fund11.91%
8 more rows
21 Jun 2022

Why are 3x ETFs risky? ›

However, 3x exchange-traded funds (ETFs) are especially risky because they utilize more leverage in an attempt to achieve higher returns. Leveraged ETFs may be useful for short-term trading purposes, but they have significant risks in the long run.

What is the best performing ETF in last 5 years? ›

SOXX is both a top performer over the past 10 years and over the past 5 years. It's also the largest ETF in its sector, with more than $2.6 billion in assets under management (AUM).

What is the Boglehead 3 fund portfolio? ›

A three-fund portfolio is an approach to portfolio management that focuses on using three funds to invest in three asset types, typically U.S. stocks, international stocks, and bonds. This strategy is popular among the “Boglehead” community, who follow investing principles championed by Vanguard founder John Bogle.

What are two disadvantages of ETFs? ›

Disadvantages of ETFs
  • Trading fees. Although ETFs generally have lower costs compared to some other investments, such as mutual funds, they're not free. ...
  • Operating expenses. ...
  • Low trading volume. ...
  • Tracking errors. ...
  • Potentially less diversification. ...
  • Hidden risks. ...
  • Lack of liquidity. ...
  • Capital gains distributions.

What is the best lazy portfolio? ›

A popular choice is a three-fund lazy portfolio using Vanguard funds.
...
There are many ways to allocate the three funds, but here is one way to do it:
  • 40% Vanguard Total Stock Market Index Fund.
  • 30% Vanguard Total International Stock Index Fund.
  • 30% Vanguard Total Bond Market Index Fund.
30 Jan 2022

What is the most efficient portfolio? ›

Markowitz says an efficient portfolio should have a combination of at least two stocks above the minimum variance portfolio (a portfolio with the lowest possible risk level for the rate of expected return).

What is a 33 33/33 investment portfolio? ›

As the alternative industry becomes increasingly accessible and transparent, evidence is emerging for a new portfolio allocation strategy: 33/33/33. A portfolio that is split between stocks, bonds and alternatives has historically performed well, often outperforming other allocations.

Which ETF has best return? ›

100 Highest 5 Year ETF Returns
SymbolName5-Year Return
VONGVanguard Russell 1000 Growth ETF80.09%
IGMiShares Expanded Tech Sector ETF80.04%
IWFiShares Russell 1000 Growth ETF79.47%
RYTInvesco S&P 500® Equal Weight Technology ETF79.18%
92 more rows

What are the most stable ETFs? ›

7 best long-term ETFs to buy and hold:
  • SPDR Portfolio S&P 500 ETF (SPLG)
  • iShares Core S&P Small-Cap ETF (IJR)
  • Vanguard Information Technology ETF (VGT)
  • iShares Core Dividend Growth ETF (DGRO)
  • Invesco S&P 500 High Dividend Low Volatility ETF (SPHD)
  • Vanguard Total International Stock ETF (VXUS)

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