One family member suggested the following ETFs (mostly due to the low cost of fees I believe)
VOO, VEQT, QQQ and S&P500 (which I don't know, supposedly has .05% fee)
(and suggested that 20% goes into QQQ)
Looking at your recommendations for ETF's from the questions asked, I have seen XIC, SPY, CDZ, XIC, CDZ, XGRO, QQQ, VGRO, VIG, ZSP, (to name a few).
I think there are more ETF's than there individual stocks. It would be great to have some coverage across Canada and the US.
We have a few questions:
1. Do you think the list provided by the family member is acceptable?
2. Could you provide your recommendation of ETF's (with a short description of the ETF) that fits the risk level of the mentioned individual (while simultanously providing a little risk). What % of each ETF would you recommend (i.e. buy equal amounts of each of the recommended ETFs or ...).
3. Do you believe that it is the right time to buy ETFs. With the recent run up, is it preferable to wait for a pullback and buy on dips or acquire all today or .....
Please deduct as many questions as deemed necessary.
Thanks.
1 - We don't have much to take issue with here except from what might be some overlap. VOO is already an S&P 500 tracking ETF, so owning that on top of another S&P 500 fund might be redundant. Similarly, 44% of VEQT also holds a Vanguard US total market ETF which, while a bit different from an S&P 500 ETF, is likely to move similarly to the S&P 500. So, there might be a bit of redundancy or stacking of exposures across some of those names.
2 - We can't really get into specific allocations given the scope of the Q&A but as always, with more return potential comes more risk. Cash/GICs yielding 5% is a bit tricky because rates increasingly look like they are going to come down. So while the 5% yield on cash looks attractive for now, it might be a bit like sand slipping through your fingertips (while markets potentially grind higher) and won't be a realistic risk/reward opportunity going forward. This unfortunately means that in order to get 5%+ returns going forward is probably going to require taking on materially more risk (i.e. something like pure equity exposure). The crux here is that benchmarking/expecting a reliable 5% return with low risk might not be a realistic expectation over the next 12 months or so. A bit of a non-answer here, but there is not a whole lot that provides a risk profile similar to cash that also offers a return in excess of what cash yields. Bonds or maybe preferred shares might be one area to consider here.
3 - We think more returns are missed by investors 'waiting for a pullback'. Most studies we have seen tend to show lump sum investig as being the right approach as it maximizes time in the market and letting the power of compounding start to work. Psychologically however, we tend to find dollar cost averaging as more realistic and helps alleviate tension around invesotrs being concerned about investing 'at the top' of the market.