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It’s been a mixed bag for stocks so far this year. Some sectors continue to struggle, especially those that are interest-sensitive like telecoms and utilities. But other sectors have picked up the slack, including energy. And some overseas markets are also doing well.
Many investors prefer using ETFs instead of selecting individual stocks. This allows for the creation of a diversified portfolio at minimal cost. Here are four ETFs that I’ve selected for readers of my Internet Wealth Builder newsletter. All have turned in good results so far in 2024. Prices are as of the close on April 19.
iShares India Index ETF (TSX: XID). This fund invests in a portfolio of the top 50 Indian stocks by market cap – the “Nifty Fifty” index, as it’s commonly known. The fund was launched in January 2010 and has $107 million in assets under management. The management expense ratio (MER) is high for an ETF, at 1.03%.
India is benefitting from an influx of foreign capital as more investors and corporations move to profit from its burgeoning economy and growing population. BlackRock, which distributes the iShares funds, gives it a medium-high risk rating.
The fund invests in units of the U.S.-based iShares India 50 ETF (NSD: INDY). It’s heavily weighted to financials, which make up one-third of the assets. Other large sectors include information technology (12.85%), energy (12.69%), and consumer discretionary (9.23%). The U.S. banking firm Jefferies recently published a report saying that India will become the world’s third-largest economy by 2027, surpassing Germany and Japan. It currently sits at number five with a GDP of US$3.4 trillion. Jefferies predicts the Indian GDP will reach US$10 trillion by 2030.
The price has been volatile over the past year, but the overall trend is up. We’ve seen a gain of 10.2% since the units were recommended last October. The three-year average annual compound rate of return to April 30 is 12.8%.
The fund makes semi-annual distributions although they are normally very small or even zero. The December 2023 payment was $0.164 per unit.
CI First Asset Morningstar Canada Value Index ETF (TSX: FXM). This fund invests in stocks of the largest and most liquid Canadian public issuers based upon proprietary research by Morningstar. It is designed to provide diversified exposure to stocks that are considered as “good value” based on characteristics like low price-to-earnings ratio and low price-to-cash flow ratio. The fund was launched in February 2012 and has $310 million in assets under management. The MER is 0.65%. The company rates the fund risk as medium to high.
The fund bumped along at around $20 from October to early February. It has been gradually edging higher since. During the first quarter of this year, it gained 5.7%. The three-year average annual compound rate of return to April 30 was 7.5%.
The portfolio composition is quite balanced. Utilities are the number one sector, at 19% of assets. Financials account for 16%, energy 14%, consumer staples 13%, and basic materials 11%. The portfolio is equally weighted with no stock holding accounting for more that 3.71% of total assets. Top holdings include Kinross Gold, Teck Resources, and Finning International.
Distributions are made quarterly and can vary significantly. The trailing 12-month total payout was $0.606 for a yield of 2.9% at the current price. This fund has performed well, and the portfolio composition is altered on a regular basis to reflect market conditions.
Harvest Tech Achievers Growth and Income ETF (TSX: HTA). The fund invests in an equally-weighted portfolio of 20 large-cap tech companies such as Micron Technology, Applied Materials, Meta Platforms, and Oracle. The ETF is designed to provide a consistent and competitive monthly income with an opportunity for growth. The managers write covered call options to generate income.
The fund was launched in April 2015. The original units are Canadian dollar hedged but there are also unhedged units (HTA.B) and U.S. dollar units (HTA.U). The fund has $590 million in assets under management. The management fee is 0.85%. That’s on the high side for ETFs, but this is an actively managed fund.
The fund has been on a steady upward trend for most of the past year. As of the end of April, it was ahead 6.9% for 2024, with a three-year average annual compound rate of return of 12.3%.
The portfolio is equally weighted with each holding representing about 5% of total assets. All the positions are U.S. companies. There are concerns about a tech bubble, but the rapid emergence of AI is fueling a new growth spurt. We rate it the risk as high. Tech stocks have been doing well this year but many look pricy at current levels. The covered call strategy does mitigate the risk to some extent.
Distributions are made monthly and are currently running at $0.12 per unit. If that continues, investors will receive $1.44 in distributions this year for a yield of 7.8% at the current price.
iShares Core S&P U.S. Total Market ETF (XUU-T). This ETF tracks the entire U.S. market, including small-, medium-, and large-cap stocks. It comes in both a hedged version (XUH) and an unhedged version (XUU). The fund was launched in February 2015 and has $2.7 billion in assets under management. The MER is a very low 0.07% so almost all your money is working for you.
The fund has been on an uptrend for most of this year and was showing a year-to-date gain of 10.29% as of April 15. We have a capital gain of 147% since our original recommendation in March 2015.
This is a fund of funds. It invests in four U.S. ETFs, the largest of which are the iShares Core S&P 500 (47.57% of total assets) and the iShares Core S&P Total U.S. Stock (45.76%). The rest of the portfolio consists of small positions in small- and mid- cap ETFs and a limited amount of cash.
In sector terms, the fund has a 28.2% exposure to information technology. Other large positions are financials (13.42%), healthcare (11.71%), and consumer discretionary (10.46%).
Distributions are made quarterly, and the amounts vary considerably. The latest was $0.131 per unit, which was paid in March. Over the past 12 months, distributions have totaled about $0.55 per unit, for a trailing yield of 1.1% at the current price. This is not a fund to own if you need steady cash flow.
This is an all-stock ETF so returns will reflect what is happening in the U.S. equity markets. They have trended higher for much of this year. Long-term, this is a core holding for anyone who wants exposure to the broad U.S. market.
Gordon Pape is one of Canada’s best-known personal finance commentators and investment experts. He is the publisher of The Internet Wealth Builder and The Income Investor newsletters, which are available through the Building Wealth website.
Follow Gordon Pape on X at X.com/GPUpdates and on Facebook at www.facebook.com/GordonPapeMoney.
Notes and Disclaimer
Content © 2024 by Gordon Pape Enterprises. All rights reserved. Reprinted with permission. The foregoing is for general information purposes only and is the opinion of the writer. Securities mentioned carry risk of loss, and no guarantee of performance is made or implied. This information is not intended to provide specific personalized advice including, without limitation, investment, financial, legal, accounting, or tax advice. Always seek advice from your own financial advisor before making investment decisions.
Image: iStock.com/Caiaimage/Martin Barraud
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