MER for XAW and VEQT is 0.22%. You'll pay it on 75% of your portfolio (your equity allocation).  


There are no fees on GICs.


Your cost for the first year would be $8.25 (plus commission on the ETF, if your online broker charges commission).  5000 times 75% times 0.22%.

  • ​​Canadian equity: XIC, ZCN, VCN, or VCE
  • US equity: XUU
  • International equity developed markets: XEF or ZEA
  • ​Emerging markets: VEE or ZEM
  • ​Canadian bonds: ZAG or VAB (or you can buy a GIC as in the first example)
  • ​As for other bonds than Canadian, it's not easy to find inexpensive ETFs.  It's okay to stick to Canadian bonds / GICs.

find ETFs  that fit your asset mix​​


Your asset mix is the percentage of fixed income and equity in your portfolio. Let's say you've decided on 25% fixed income / 75% equities.​​ To build the equity portion of your portfolio, you'll need to find a few suitable equity ETFs.  On the fixed income side, you have a choice of fixed income ETFs or GICs (guaranteed investment certificates).


Here are some real-life examples using the same 25%/75% asset mix.  The ETFs / GICs we mention can be found in our research tables on the previous pages (choose - ETFs / choose - GICs).

Whatever you do, avoid too many ETFs, especially when you have a small investment portfolio. 


The more ETFs you have, the more complicated rebalancing is.

And, if you pay commission, the higher the cost.


​It would be slightly higher in Example 3 (assuming you also used Canadian bonds only) because the emerging markets ETF MER is higher.​

WHAT DOES IT COST?

​​​Let's say that you have invested $5,000 for one year (and you did not incur any penalties or account fees).

​​​

Professionally managed portfolio index mutual funds often follow this template:

  • ​Canadian, or other, bond markets (like US or global)
  • Canadian equities
  • US equities
  • International equities (which usually means rich countries outside Canada and the US)
  • ​Emerging market equities (less wealthy but fast-growing countries).​​

build your ​portfolio 

OTHER IDEAS TO EMULATE 


​You can follow some simple ETF model portfolios recommended by financial advisors, like in this blog:

www.canadiancouchpotato.com​​​​​


Here’s a series of videos on how to build ETF portfolios on several Canadian online broker platforms:

​https://www.youtube.com/playlist?list=PLovWMWBk4UZnaH0Z2hBvtDidGsur2xDf7​​​

EXAMPLE II:  MIMIC PROFESSIONAL ASSET MANAGERS

Your portfolio will look like this:

An asset-allocation ETF may look like this:

EXAMPLE I: BUY 1 ETF AND GICs


For your equity allocation, buy 1 global equity ETF in your online broker account.


For your fixed income allocation, buy a GIC (guaranteed investment certificate) directly from the issuing bank​​, choosing one that offers a good interest rate. GICs come with less risk than bond ETFs.

You would pay the following MERs (on the portions of your portfolio invested in each fund shown above).  

  • ​Canadian equity 0.06%
  • US equity 0.07%
  • International equity 0.22%
  • Emerging markets 0.24-0.27%, depending which ETF you choose
  • Canadian bonds 0.09-0.13%​

A portfolio index mutual fund 

​may look like this:

  • Global equity ETFs:  XAW or VEQT (an asset-allocation ETF that is 100% equity).
  • GIC: ​​​consider the 5-year term (the longest insured maturity).  Choose a shorter GIC if the 5-year rate is only marginally better than a shorter rate, like a 3-year. 
  • Both ETFs invest in the US and international developed and emerging markets. 
  • XAW excludes Canada but you live and work here, and your fixed income will be Canadian​, so you should be all right. 
  • ​VEQT, on the other hand, is about 30% Canadian equities.  Just so you know, Canadian equities make up about 4% of global equities. ​

​Your cost for the first year would be (excluding any commission) $5.50 -6.70 in Example 2, depending on which bond ETF you choose, and $3.40-5.00 if you used GICs instead of a bond ETF.​