Many investors choose to have the bulk of their assets in a simple Canadian ETF that tracks the TSX Composite Index, Canada’s benchmark stock index.
There are two main choices for these investors. One is the iShares S&P TSX Capped Composite Index Fund (TSX:XIC), with a market cap of $2.55 billion. The other is Vanguard’s offering, the Vanguard FTSE Canada All Cap Index ETF (TSX:VCN), which has a market cap of $558 million.
The iShares ETF caps individual stocks at a maximum weighting of 10%, which guards against one company having too much influence on the fund. It has a total of 240 different positions with the management expense ratio a miniscule 0.06%. That’s a fee of just 60 cents for every $1,000 invested.
The Vanguard ETF is a little less diversified, holding 218 different stocks. Both ETFs have very similar top holdings, with nine out of ten companies the same. Percentage weighting of each top holding is similar as well. Vanguard’s Canada All Cap ETF doesn’t offer a maximum weighting of 10%, although this isn’t an issue today. It’s top holding--Royal Bank--is less than 7% of assets.
The Vanguard fund has an identical 0.06% management fee. It suffers from a lack of liquidity compared to the iShares fund--it trades an average of 24,300 shares per day compared to nearly 100,000--but this shouldn’t be a big deal to a retail investor.
Both ETFs are good choices for a passive investing strategy, but the capped weighting and additional liquidity offered by the iShares TSX Index Fund makes it the slightly better choice.
