Two ETFs for gains from global stocks

According to BloombergBusinessweek, the number of market indexes now exceeds the number of U.S. stocks. Many of these new benchmarks are created just so they can be tracked by an exchange-traded fund. From these thousands of ETFs, the Money Reporter has selected 13 which it recommends as the main building blocks of your fund portfolio. Here are two of its 13 recommended ETFs that invest in foreign stocks.

Exchange-traded funds (ETFs) offer attractively low management fees. Plus, the best of them offer well-diversified, high-quality and tax-efficient portfolios. But quality among ETFs varies widely. Here are two foreign ETFs we like:

Vanguard FTSE Global All Cap ex Canada ETF (TSX—VXC) is an exchange-traded fund that tries to match the return of the FTSE Global All Cap ex Canada China A Inclusion Index. It invests directly or indirectly in large- mid- and small-capitalization stocks of companies located in developed and emerging markets, excluding Canada.

The fund’s geographic breakdown is as follows: North America, 55.0 per cent; Europe, 21.1 per cent; Pacific, 14.2 per cent; and emerging markets, 9.6 per cent.

The fund’s top holdings are Apple Inc. (U.S.: computer), 1.6 per cent; Microsoft Corp. (U.S.: software), 1.1 per cent; Amazon.com Inc. (U.S.: internet), 0.8 per cent; Exxon Mobil (U.S.: petroleum), 0.8 per cent; Johnson & Johnson (U.S.: medical supplies), 0.8 per cent; Facebook Inc. (U.S.: internet), 0.7 per cent; Berkshire Hathaway (U.S.: insurance), 0.7 per cent; JP Morgan Chase (U.S.: bank), 0.7 per cent; General Electric (U.S.: diversified), 0.6 per cent; and AT&T Inc. (U.S.: telecommunications), 0.6 per cent.

The fund’s industry breakdown is as follows: financials, 22.2 per cent; industrials, 13.9 per cent; consumer goods, 13.1 per cent; technology, 12.3 per cent; consumer services, 11.0 per cent; health care, 10.5 per cent; oil and gas, 5.8 per cent; materials, 4.9 per cent; utilities, 3.3 per cent; and telecommunications, 3.0 per cent.

Vanguard Global All Cap ex Canada was started on June 30, 2014. The fund has a one-year performance of 27.1 per cent, a top-quartile performance in the global equity category.

Its management expense ratio is 0.27 per cent.

If you want just one passive foreign investment, this ETF is an excellent choice. Its stands to benefit from stronger global growth.

Vanguard FTSE Global All Cap ex Canada is a buy for long-term growth if you can tolerate medium investment risk.

iShares Global Monthly Dividend ETF (CAD-Hedged) (TSX—CYH) is an exchange-traded fund that aims to track the Dow Jones Global Select Dividend Composite Canadian Dollar-Hedged Index. Stocks in the index are chosen on the bases of company size, dividend history, dividend growth and payout ratios.

iShares Global Monthly Dividend ETF, invests in over 20 countries. Its geographic breakdown includes: the U.S., 50.9 per cent; the U.K., 9.3 per cent; Australia, 6.4 per cent; France, 4.0 per cent; Italy, 3.0 per cent; Taiwan, 2.5 per cent; Canada, 2.4 per cent; Finland, 2.1 per cent; New Zealand, 1.7 per cent; and China, 1.6 per cent.

iShares Global Monthly Dividend’s top holdings are: iShares Select Dividend ETF (U.S.: multi-sector), 2.3 per cent; Lockheed Martin (U.S.: aerospace), 1.9 per cent; AstraZeneca plc (U.K.: drug), 1.8 per cent; iShares International Select Dividend (non-U.S. developed markets: multi-sector), 1.7 per cent; U.S.-dollar cash, 1.5 per cent; CME Group (U.S.: brokers), 1.5 per cent; Macquarie Group (Australia: investment banking), 1.3 per cent; Commonwealth Bank of Australia, 1.2 per cent; Royal Dutch Shell (Netherlands: petroleum), 1.1 per cent; and Philip Morris (U.S.: tobacco), 1.1 per cent.

The fund’s industry breakdown is as follows: financials, 21.5 per cent; utilities, 21.2 per cent; consumer discretionary, 13.3 per cent; industrials, 9.0 per cent; energy, 8.5 per cent; consumer staples, 6.3 per cent; telecom, 6.0 per cent; materials, 5.3 per cent; health care, 4.0 per cent; and technology, 3.2 per cent.

The ETF pays a dividend of $0.66 a share and yields 3.5 per cent.

iShares Global Monthly Dividend ETF is a buy for income and long-term growth if you can tolerate low to medium investment risk.

This is an edited version of an article that was originally published for subscribers in the May 19, 2017, issue of Money Reporter. You can profit from the award-winning advice subscribers receive regularly in Money Reporter.

Money Reporter, MPL Communications Inc.
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