Three discount brokerages in Canada now offer a menu of commission-free ETFs. Scotia iTrade pioneered this feature in Canada last September, then Qtrade Investor announced a similar offering about a month later, followed soon after by Virtual Brokers.
While index investors welcomed this development, the lineup of ETFs eligible for commission-free trades at all three brokerages is less than ideal. Narrowly focused funds dominate all three lists, which is fine if you want to invest in copper futures, Indian large caps, or the Australian dollar. But if you’re a long-term Couch Potato investor, you have to look a little harder for appropriate ETFs.
To help with that task, I’ve compiled a checklist of commission-free ETFs available from each of the brokerages, limiting the selection to broadly diversified funds that cover core asset classes. Funds that use currency hedging are marked with an asterisk (*).
|iShares 1-5 Year Laddered Gov’t Bond||CLF||x||x||x|
|iShares 1-5 Year Laddered Corp Bond||CBO||x||x||x|
|BMO Mid Federal Bond Index||ZFM||x|
|BMO Long Federal Bond||ZFL||x|
|BMO Long Corporate Bond||ZLC||x|
|iShares Advantaged Canadian Bond||CAB||x||x||x|
|iShares DEX Real Return Bond||XRB||x|
|BMO Real Return Bond||ZRR||x|
|iShares Advantaged High Yield Bond *||CHB||x||x||x|
|Horizons S&P/TSX 60||HXT||x||x||x|
|iShares S&P/TSX Completion||XMD||x||x||x|
|iShares S&P/TSX SmallCap||XCS||x|
|iShares Dow Jones Canada Select Value||XCV||x|
|iShares Canadian Fundamental||CRQ||x||x|
|iShares S&P/TSX Cdn Dividend Aristocrats||CDZ||x||x|
|iShares S&P/TSX Cdn Preferred Share||CPD||x||x|
|Horizons S&P 500||HXS||x||x|
|BMO US Equity *||ZUE||x|
|iShares US Fundamental Index *||CLU||x||x|
|iShares US Fundamental Index||CLU.C||x||x|
|iShares S&P US Dividend Growers *||CUD||x|
|International and global equity|
|iShares International Fundamental||CIE||x||x||x|
|BMO International Equity *||ZDM||x|
|Vanguard MSCI EAFE *||VEF||x|
|iShares Global Monthly Adv Dividend||CYH||x||x|
|iShares Global Real Estate||CGR||x||x||x|
|Emerging markets equity|
|iShares MSCI Emerging Markets||XEM||x|
|iShares Broad Emerging Markets||CWO||x||x|
|BMO Emerging Markets Equity||ZEM||x|
A breakdown of each asset class
Fixed income. If you’re looking for a broad-based ETF that includes both government and corporate bonds of all maturities, there simply isn’t one. (CAB appears to fit this description, but it is a non-traditional fund that is appropriate only for taxable accounts.) All three brokerages offer CLF and CBO, which are excellent short-term bond ladders, but only Virtual Brokers includes ETFs with longer maturities. Two of the three brokerages offer a real-return bond fund.
Canadian equity. You’re pretty well covered here. While none of the brokerages include the iShares S&P/TSX Capped Composite (XIC), they all offer HXT and XMD, which work well in combination. HXT includes the 60 largest companies in the S&P/TSX Composite Index, while XMD includes the remaining 190 or so. You can hold about 75% in HXT and 25% in XMD to mimic the Composite index, or split them 50-50 to give yourself a small-cap tilt.
US equity. The US equity offerings are limited from all three brokerages. They all have a large-cap option that includes currency hedging, plus Scotia iTrade and Virtual Brokers also offer the iShares US Fundamental Index (CLU.C), which does not use hedging. Note that there are a few US-listed options that I have not included in the table above: Virtual Brokers offers the Vanguard S&P Small Cap 600 ETF (VIOO), while Qtrade has included several Vanguard, iShares and SPDR sector funds.
International equity. Some decent choices here. All three brokerages offer the iShares International Fundamental (CIE) which does not use currency hedging and would be a good choice as a core holding. Scotia iTrade and Virtual Brokers include traditional cap-weighted options from Vanguard and BMO, respectively, both of which are hedged to the Canadian dollar.
Emerging markets equity. All the brokerages offer good choices in emerging markets: Virtual Brokers even offers two options, one fundamental and the other cap-weighted. All Canadian-listed ETFs in this asset class are quite costly, but there is no good mutual fund alternative, so these are as good as you can get without using US-listed ETFs.