The Canadian Investor - 10 ETFs on Our Watchlist For the New Year

Episode Date: December 26, 2024

In this episode, we dive deep into the U.S. Federal Reserve's latest rate cut announcement, bringing the fed funds rate down by 25bps for their final decision of the year. We discuss why markets reacted sharply to the news and what it means for investors.  We also spotlight 10 ETFs to watch for 2025. From strategies to hedge against the "Magnificent Seven" in the S&P 500 to leveraging rate-sensitive sectors like utilities, we cover it all.  Tickets of ETFs discussed: ZGLD.TO, ZLB.TO, CLU.TO, PRF, RSP, FBTC.TO, ZEO, HXE, HUTS.TO, UBIL-U.TO Check out our portfolio by going to Jointci.com Our Website Canadian Investor Podcast Network Twitter: @cdn_investing Simon’s twitter: @Fiat_Iceberg Braden’s twitter: @BradoCapital Dan’s Twitter: @stocktrades_ca Want to learn more about Real Estate Investing? Check out the Canadian Real Estate Investor Podcast! Apple Podcast - The Canadian Real Estate Investor  Spotify - The Canadian Real Estate Investor  Web player - The Canadian Real Estate Investor Sign up for Finchat.io for free to get easy access to global stock coverage and powerful AI investing tools. Register for EQ Bank, the seamless digital banking experience with better rates and no nonsense.See omnystudio.com/listener for privacy information.

Welcome back into the show. This is the Canadian Investor Podcast, made possible by our friends and show sponsor, EQ Bank, which helps Canadians make bank with high interest and no fees on everyday banking. We also love their savings and investment products like GICs, which offer some of the best rates on the market. I personally, and I know Simone as well, is using the GICs, which offer some of the best rates on the market. I personally, and I know Simone as well, is using the GICs on a regular basis to set money aside for personal income taxes in April of every year. Their GICs are perfect because the interest rate is guaranteed, and I know I won't be able to touch that money until I need it for tax time. Whether you're looking to set some money aside for a rainy day or a big purchase is

coming through the pipeline or simply want to lower the risk of your overall investment portfolio, EQ Bank's GICs are a great option. The best thing about EQ Bank is that it is so easy to use. You can open an account and buy a GIC online in minutes. Take advantage of some of the best rates on the market today at eqbank.ca forward slash GIC. Again, eqbank.ca forward slash GIC. This is the Canadian Investor, where you take control of your own portfolio and gain the confidence you need to succeed in the markets. Hosted by Brayden Dennis and Simon Belanger. Welcome back to the Canadian Investor Podcast. I'm here with Dan Kent. We are recording a little bit different day. So we're recording on December 23rd. So getting ready for the Christmas, the holidays and get an episode in a little bit of news but then about the fed obviously what happened last

week but also we'll be talking about 10 etfs um on our radar for 2025 is probably the best way to put it right yeah i mean there's a lot of interesting ones a lot of uh it's crazy the amount of new etf issuances that are coming out now oh yeah i mean and all different types like you know a lot of people want to get into like passive investing with etfs and then you're just slammed in the face with like 2500 different etfs tracking different indexes indexes with leverage indexes with covered calls index it's crazy yeah a lot of unfortunate a lot of trash, I think, out there. Just Wall Street, Bay Street trying to just get higher fees with these new products. Yeah. Usually it's a sign, right?

When, you know, Wall Street, Bay Street get really excited with a certain kind of product, it means because there's, you know, they don't care how it returns. Money to be made. Exactly. They want their fees. Like, if you make money on the, you know, on top of that, good. If not, you know, they're still fine as long as there's not too many outflows happening in that fund. So something to keep in mind.

I mean, don't get me wrong. I have some ETFs. There's a lot of good one out there. But I think the list we have kind of gives people a few ideas, you know, just to look at for 2025. Some that are available in Canada and some in the US, it'll be interesting. But let's get started, you know, so we can shut this off and go spend some time with our families. So the first thing here on the docket is the US Fed ascending markets lower. So I'm sure that most would know by now the Fed reduced the Fed's fund rate by 25 basis points.

The current rate is now between 4.25% and 4.5%. They've now cut a total of 100 basis points for 2024. A lot less than the Bank of Canada at their 175 basis point. But what really I think shook the markets a little bit, and I'll talk about how the markets reacted in a minute here, the dot plot, which is just where the committee members for the Federal Market Open Committee, I think the rates will be in the next several years. Obviously, people tend to focus more on the upcoming year. And the median expectation for next year is that the Fed will cut two times or 50 basis

point in total. So that's a bit of a surprise because I think most were expecting more rate cuts for next year. I think as recently as just a couple of months back, they themselves were expecting for three to four rate cuts in 2025. Now, this can definitely change. I can't remember what they had projected for 2024, but I do remember that that was probably off or I'm going to assume it was probably off. It usually is. And Powell said that they are projecting a slower pace to rate cuts because inflation and inflation expectation have remained higher than expected. The key takeaways is that in order to cut rates next year, they want to see more progress on inflation. Inflation has been below the 3% mark, even the core PC or core CPI that they look at.

However, it's I guess the last mile, right, in terms of inflation has been a bit longer to achieve than the, let's say the first 80, 90%. So getting it from, you know, I'm just, I don't have the numbers here, but from around 9%, I think it was. 9 to 3 or whatever, yeah. Yeah, exactly. A couple of years ago now down to below 3%, but it's getting closer to that 2% that seems to be more difficult. And looking at the CME FedWatch tool, the most probable outcomes in 2025 is either one or two rate cuts with each having a bit more than 30 percent probability. And, you know, the CME FedWatch tool is definitely super interesting to look at. I know we mentioned it quite a bit. I'll just share my screen here for joint TCI subscribers. They'll be able to see it. So the in blue basically is the most likely outcome. However,

for each rate decision, as you'll see, there are different outcomes. So for example, in the January 29th meeting, so the next meeting for the Fed, it is a 91.4% outcome that they stick to where they're at right now. But there is a 0.6% chance that they actually lower 25 basis point. And then the following meeting in March, it's 56% or let's just say 57 that they stay right now and 40% that they lower. All that to say that the main takeaway here is that they're gonna be lightly cutting but slower than expected yeah and i mean i think the the main thing here is i mean their economy is not as weak as ours i think it's actually like going along quite fine right now i mean definitely doesn't look like they need the recuts whereas we do and i mean it's gonna be interesting if they hold in january and march

and canada cuts in january and march they've kind of said that they don't really they said actually i guess all they did say was like the jumbo rate cuts were over like the 50 basis point cuts i think they said that they do still need to cut from what i remember but yeah yeah, I think they're still looking to I'm going on memory too, but still looking to cut probably not as fast. But again, the Bank of Canada also, you know, is way ahead of the Federal Reserve in terms of that where the rate stands right now. So we just talked about it. They cut way more this year. I think most people are expecting at least a cut for the first meeting next year 25 basis points um i've heard people say even they'll do 50 because things are that bad in

canada we'll have to see but yeah it'll be interesting what happens especially with the canadian dollar yeah something that we're we we are we'll be touching on for our bold prediction oh yeah just yeah just uh struggling a little bit just because we're trying to figure out the timing. Timeline, yeah. Yeah, exactly. The episodes will be released. But, you know, the bold predictions are coming up. There is one of them that is about the Canadian dollar.

And then looking at the Fed meeting. So, the S&P 500 was down more than 3% last week after the announcement. I haven't looked really at markets this morning but i think they're either flat or down a little bit yeah i think the they're like right flat the dow is down the dow is actually having a really rough while but i didn't i don't really pay attention to the dow too much yeah i don't yeah i don't really either so um it is, you're right. It's down like half a percentage point. So Bitcoin definitely got hit, drop as much at 13%. It recovered a little bit.

I think it's down a little bit today. But again, Bitcoin is going to be very volatile. So that's not surprising. As soon as there's a move that's a bit more pronounced, you tend to get liquidations that are triggered as well. So liquidations, if you as well. So liquidations, if you're relatively new to the concept, it's just people that are betting that Bitcoin will be on leverage that will continue to increase in the future. So you can get liquidation when the price

goes down. But there's the other way around, right? If people are betting that Bitcoin will go lower on leverage, but then it starts ripping up higher, then it's the same kind of thing. You get liquidations on the other side and then a bit like a short squeeze, it pushes the price of Bitcoin back up. So it's not that surprising. I mean, if you can't handle 13%, 13, 15% swings, you should not hold a Bitcoin. I'll just be that frank about it because that's like a nothing burger like these happen all the time yeah exactly and the u.s 10-year actually spiked as much as 20 basis point following the announcement so clearly the markets i think it's saved that there was talk i think you probably saw that too that the fed would likely be slowing the pace of rate cuts before the meeting. But from what we saw from the market

reaction, I think it was more hawkish than people were expecting, than investors were expecting. Yeah. So I think that's what really dragged it down. Now we've said it time and time again, the market has been very, very wrong on where interest rates would go in the last two years. I mean, I remember, I think some of the first episodes we did, I think I had a, I was looking here. Yeah. So I think I took the Fed, uh, CME FedWatch tool. It was like in January of this year. So 2024, early February. And it was looking like there'd be a first rate cut. It would have happened in May. Yeah.

And obviously, we know it happened later on. I think the first one was in September, 50 basis points in the US. So, you can see. And this was actually not too bad in terms of probabilities. It was actually, you know, there was more priced in. I remember in 2023, at some point, they were pricing in rate cuts in March. So, it just goes to show that the markets are, you know, they like to think, they like to predict the future. But of course, as things kind of change over time, it will adjust. So,

I think we talk about these probabilities quite a bit, but I think it's important to take them with a grain of salt. Before I continue, anything you want to add? No, I mean, I guess the only thing I'll say with the rates is, I mean, nobody can predict, like even the best economists in the world can't predict this type of stuff. So, I mean, you shouldn't really spend too much time fussing over it, but I mean, definitely don't like structure your portfolio on these types of predictions i mean exactly yeah it's they're impossible to figure out that's it and i think we touch on it a little bit it'll be interesting to see what happens with the canadian dollar i think what it's trading now i always look at the rate from a usd2 canadian dollar perspective

so it's at 144 i don't know what the opposite is, but I think it's below 70 cents, right? Yeah. See, I've always done the opposite. It's like 60, 69.3 cents. So I mean, we could break 69 cents pretty soon. Yeah, it's pretty nasty. No, it's been pretty crazy, but that's kind of the gist of it. That's why markets have been pretty volatile. I mean, there's just a lot of uncertainties. So I think, you know, you have to get used to volatility. It's just what it is. We'll have to see whether the Santa rally, the Santa Claus rally continues. I know now the S&P is under, you know, 6,000 points. We'll have to see whether we hit that threshold before year end. But I think the best thing to do is just, yeah, make sure you know what you own. You know,

if you're primarily in equities, make sure you own good businesses. And I think I've tried to build my portfolio so it's resilient no matter what we find ourselves into. You know, I think that's the best way to approach it i know some people all kind of approach it differently but that's how i do it yeah and i mean i guess a little perspective isn't bad either a lot of people are kind of freaking out over the three or four percent drop but you know the s&p is still up 24 the nasdaq's 30 The TSX is 17.5%. So it's been a pretty good year. I mean, I don't think it can get too, too ugly now because we only have a few more days of trading probably until 2025. But it looks to be a pretty good year. Yeah.

And I guess the last thing here I'll mention, as this time of year too, a lot of like mutual fund, actively traded funds. There's a lot of distributions that happen, you know, before the end of the year. So also fund managers, the active ones will tend to, you know, if they're out of the max seven, they may want to, you know, have a position in it so they can show what their holdings were at year end. So there's a lot of stuff kind of happening sometimes while that is happening towards the end of the year, people taking losses so they can use those for their taxes. So there's a lot of stuff happening towards the end of the year that will have some impact on the markets

that's not typical for the rest of the year. So I think it's something else to consider when you see these market movements just a few days from the new year. Yeah, definitely. Well said. As do-it-yourself investors, we want to keep our fees low. That's why Simone and I have been using Questrade as our online broker for so many years now. Questrade is Canada's number one rated online broker by MoneySense. And with them, you can buy all North American ETFs, not just a few select ones, all commission-free, so that you can choose the ETFs that you want. And they charge no annual RRSP or TFSA account fees. They have an award-winning customer service team with real people that are ready to help if you have questions along the way. As a customer myself,

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So I'll start with the first one. Oh yeah, I'm sure we'll fill it. We'll fill it. Okay. So the first one is ZGLB. So it's the BMO Gold Bullion ETF. Now, full disclosure, BMO will be a new sponsor for the podcast in 2025. So I just want to make sure that people are aware of this. The reason I took the BMO Gold Bullion ETF was because from what I can see, it's the lowest fee in terms of Gold Bullion ETF out there listed on the TSX. So that's why I put it there. It's in Canadian dollars as well. I own the Sprott Gold Trust ETF since I have my holdings in USD. But when I do start buying gold with CAD, that's probably the

one I will be using just because of the fees are so much better. But again, do your own research. If you're interested in a gold bullion ETF, you know, look at the fun facts, understand what they are. They do list whichever one you're looking at. They should be listing where they actually physically hold the gold. And that's really important. hold the gold and that's really important. Now, if you've been listening to the podcast for a while, you know I've been putting money into physical gold, but also have some gold ETF there in my registered account. Not a huge position, it's around 5%, but the case for it to me is pretty

simple. It has a long history of being used as money. Over long periods of time, it has preserved and even increased purchasing power. It cannot be diluted like government-issued money or fiat. More and more central banks are buying gold in order to diversify away from the U.S. dollar and U.S. treasuries. This has definitely accelerated. We've seen an acceleration of this ever since the U.S. froze Russian assets after the start of the Ukraine war. less froze Russian assets after the start of the Ukraine war, something that was very critical about because, yeah, it's not a good strategic move from a global standpoint. And we're seeing that Russia is still able to do trade with around that system. So anyways, that's those are the main reasons that I think gold is is a good thing to own. If you don't want to hold in physically a

gold bullion ETF like ZGLD would make a whole lot of sense, especially if you're not looking at Bitcoin at all. I think to me, it's a no-brainer. Again, everyone's different and this is not investment advice, but to me, it's a no-brainer to have a little bit of a gold position, especially if you don't have any Bitcoin exposure as insurance against fiat and our financial system. Yeah. I mean, they've often said, single allocation towards gold inside your portfolio is not a bad idea. I don't own any. I kind of wish I did. I used to own Agnico, which is a producer. I ended up selling it.

I never owned physical gold, but I did own the producers for a while. I mean, this is definitely the fastest growing gold ETF right now because I think in Canada there's only a few options. I believe iShares has CGL, which is, I mean, it's like more than double the fees. So I think BMO's is 23 basis points, whereas the iShares is close to 60. So definitely fee-wise, you're getting a bit better deal here. I don't know if ZGLD is hedged. I didn't really, I couldn't check.

No, I think ZGLD is just screen CAD. Yeah. Because CGL is hedged, which would be the other thing i mean you're paying more fees probably for that yeah hedging but uh yeah it's um it's a pretty good fund i mean there's definitely not a lot of choice here in canada for just straight gold etfs yeah and if you're gonna have gold like i don't know really why you want to have it hedged to be honest like yeah i really don't see the point of having that hedge like that's just my personal opinion just because you're really banking on the the gold asset so whether you want to look at it from a usd or canadian perspective um you know

it should do well in whichever currency so it's really a hedge against a fiat system so i don't know why you'd really want to hedge the canadian dollar on top of that but that's just me i mean i guess if the canadian dollar got so weak that you wanted to hedge it in case it recovered i don't know i guess so difficult to say i mean hedging is so unique to everybody like i personally don't hedge at all but i know some people who hedge exclusively so yeah i mean i guess it just all depends yeah exactly so uh let's move on to the next one here so um well and it's no in no particular order i think that's important it's not because i talked about the uh zgld first that i think you know it's number one on the list. It's just no particular order. So I think it's just important to remember that. So you want to go ahead another BMO fund here?

Yeah. So this is a fund that I've actually liked for a very long time in terms of, you know, some people maybe who don't want to, you know, index by a broad-based TSX fund would be the BMO Low Volatility Canadian Equity ETFf so this fund actually had one of its rare years of underperformance relative to the tsx and i do believe that the bulk of that was probably driven by the uh stronger returns in the material sector it didn't underperform by that much but it did underperform a bit obviously it's a little i was surprised because last time i i keep forgetting about this fun and I know last time we looked at it I think it was probably mid of this year yeah we did an ETF

one on it and it was it was doing quite well yeah it was outperforming I'm pretty sure so I was kind of expecting that I'm not expecting to see it because I I'm showing here for joint TCI next to XIC which is the TSX-60 here just to give an idea of the the performance pretty close though so yeah last five years it's um xic is up 68 percent if i round up 56 for the zlb and then year to date again xic 21 and 16 for zlb yeah i think um the main issue with zlb right now would be that it doesn't have any material stocks it also doesn't have any tech uh so i'd be i think shopify has been on quite a huge run in in 2024 so i mean the only thing is is this has returned better risk-adjusted returns than the TSX-60. Even this year, it's got significantly lower volatility.

And over the last decade, when we go to the last decade, it's beat the TSX by around 0.65% annually. And as I mentioned, it actually has provided better risk-adjusted returns and lower volatility than something like XIU, which would be the TSX 60 fund. And again, one of the main reasons for this low volatility is, you know, obviously it's low volatility when we look to energy, when we look to technology, when we look to the material sector, it just doesn't have any of these holdings because they're far from, you far from low volatility. It does have a bit of basic materials exposure, no energy exposure, and very little tech exposure. In terms of tech holdings, I imagine it owns, I guess, yeah, a few probably blue chip lower volatility tech holdings. It wouldn't own something like Shopify just because of how

volatile it is. And on the material end, it would own probably, again, a blue chip, like maybe Barrick. But I mean, it's been a pretty good fund. And I do think it's a strong alternative to a Canadian Intex fund if people want to eliminate the volatile segments of the market that really have not put up all that strong of long-term performances. I mean, you can think material, you can think energy. They've had their years over the last while. But if strong of long-term performances i mean you can think material you can think energy they've had you know they've had their years over the last while but if you look long term they really haven't provided all that strong returns just because they're so cyclical the only downfall i see here is the lack of tech you know they don't have any they don't have shopify constellation

software cgi things like that but i mean it, we don't really have a lot of technology options here in Canada. So you could probably get those on your own if you wanted to. But yeah, it's been a pretty strong fund that's had a rough year, a rare rough year. So yeah, I definitely like it. I've liked it for quite a while. Yeah. Yeah. I mean, not a bad year, but definitely underperform. And I guess the other thing is you'd be able to, I don't know what the fees are for the TSX 60 funds. I think they're what, like around 20 basis points or something. I believe so. Yeah. Yeah. Yeah. 20, 18 to 20.

20. So obviously when you have an index, you'll get lower fees. So this one is a bit higher at 0.39%. So that will be, you know, it is higher. It's almost double the fees. You are getting low volatility. The returns are, you know, a bit under what the index is. But at the same time, you know, over time, it may end up doing better or slightly worse. Who knows? But just, you know, to be as transparent as possible, that's one of the downsides. But if you're looking for a bit less volatility, different exposure, and some exposure to the TSX, this could be an alternative to some of the TSX-60 funds. Yeah. The returns I've mentioned would have been net of fees.

So, I mean, these are like you're never really going to get low fees on actively managed factor funds, almost ever. I mean, this is not an index fund whatsoever. It's just a straight up actively managed fund. And I know a lot of people, there's kind of a negative stigma on actively managed funds overall because, yes, the vast majority of them do underperform. They charge you high fees and underperform but zlb has kind of been an instance of one that's charged higher fees and is outperformed it's just like the performance over the last i would say like five months and the thing is is like when the markets go like full i i would say speculative like we are right now like these funds are not going to be very popular. Who wants to own a low volatility equity ETF in Canada?

So, I mean, yeah, it's had a rough go now, but I still like it. Yeah, exactly. I mean, it kind of, it is a good segue to the next one that I have on my list. So, a little bit in kind of like the same kind of vein here. So, there's two that I have. I gave two alternatives because one is Canadian listed. So there's the Invesco FTSE RAFI US 1000 ETF or the iShares Fundamental Index ETF. So the iShares, the Invesco is ticker PRF.

It is listed in the US. iShares is CLU if you're looking for the Canadian hedge or CLU. US. iShares is CLU if you're looking for the Canadian hedge or CLU. I think C if I remember correctly for the non-hedge version. Now, the MER for all concepts. Okay, perfect. So, the management expense ratio or the fees for the Invesco one. So, PRF is 0.39%. So, exactly the same as the BMO one, which is definitely higher than what you could get on something like the S&P 500. I mean, you can get below 10 basis points. So below 0.1% in terms of fee for an S&P 500 index fund. Same thing if you're looking at total market US funds, you can get them very low fees. The fees are higher at 0.72% if you're looking at the iShares one,

but it does offer you, you know, whether you want a Canadian hedge or just the Canadian dollar version, it does offer that. And what makes this CTF interesting is that looks at the US stock market based on a fundamental approach. So companies are weighted based on their total cash dividend, free cash flow, total sales, and book equity value. So I don't know the full methodology because that's what they look at. I don't know exactly what weighting they actually put on each of them. But based on that criteria, I think it seems fair to say that you end up with a lot less concentration, but still some quality when you look at it. And I will show

what it looks like. And it's a pretty stark contrast because people will probably be used to if they have S&P 500 or think total market US ETF, they'll be used to a lot of concentration. It's not just those two, right? And I think it's important to remember that there's a lot of concentration. It's not just those two, right? And I think it's important to remember that there's a lot of concentration in these market cap weighted indices. So if you look at the FTSE 1000 compared to the FTSE USA all cap index, but feel free to use the total market US market, for example, in the S&P 500, the comparison, the top names will be very similar in terms of weighting. And you're looking here at Apple for this one with a 2.33% weighting as of the end of November versus close to 6% in the big indices. So you're starting to see, right, like it's not the same weighting and Apple's a top weighted name. JP Morgan is number two at 2.22% compared to 1.24%. So it actually is

more weighted for this one. And then the list goes on. So XM Mobile is number three, Microsoft number four, Microsoft 1.8% versus 5.44% in the index. So it does give you still some exposure to those big names, which is what I like. I don't know if you want to be completely out of those names because if the market just keeps ripping the way it is and you're completely out of the mag seven, you know, you'll be trailing. And I like this approach compared to the market cap weighted because it does give you more balance versus let's be honest. I mean, we've talked about this for a while at the risk of sounding like a broken record but if there is a correction with the mag 7 i mean the whole market's going down like it's that simple yeah it's just so heavily weighted and i like it better and i know you'll talk about the equal weight smp 500 um et. I like this one better just because it weighs a bit more to quality,

whereas the equal weighted is just, you know, equal weight the whole 500 names where this one still puts a higher weight on better quality name, at least with the methodology they're using. But, you know, it still provides more diversification than just the regular index. And the fees, I mean, especially if you're using the US one, again, they are higher. But I think for what you get, it makes sense. I mean, in a lot of ways, it's almost like an American version of the BMO low value. And, you know, it kind of reminds me of that a little bit. Yeah. And BMO has a few, well, actually a lot of, I believe even, there's a few funds, fund managers in Canada that have high quality US funds, which would be probably similar to what this is. It's just a quality factor fund. It's interesting because

most of the high quality factor funds that I've seen mostly use returns on equity, returns on invested capital, things like that, and earnings growth. So this is definitely a different way to look at it. I mean, cash, free cash flow, total sales, things like that. But yeah, I mean, during the 2022 market, I mean, it definitely, this one faced lower volatility than just the outright S&P. So, I mean, obviously the MAG7 are very heavily weighted. And as a result, if you look to a chart of this ETF versus the S&P 500, it's underperformed by quite a bit. But I mean, obviously it's moving forward you know if you're

worried about the concentration of that mag 7 inside of the s&p 500 then this one is definitely definitely a solid solid one to add to a watch list um obviously it contains doubled companies i mean it's it's a thousand versus 500 so yeah it looks like a pretty interesting ETF. I didn't know about it. I mean, these, this is kind of what I mean by the new issuances. I mean, this one's been around quite a while. It looks like, uh, 2000, 2006, but you see a lot of these high quality, all these factor funds that are coming to market recently. And it's, uh, there's a lot more options for, for investors who just, you know, they want to passively invest, but not just necessarily in an index.

Yeah. Yeah. Because I think it's easy to forget that if you're looking at an index that's so heavily weighted towards the largest market caps, if selling, if people start selling out of these indices and I do apologize if you hear my dog, uh, you know, whimpering a little bit. He's recording with me, Leroy here. Yeah. And if you start getting people like in waves selling their index funds, well, you know, the biggest names are going to sell the most because their market cap weighted. So I think that's always going to be a risk. And for here, for people that are on joint TCI, you'll see I'm comparing SPY, which is an

S&P 500, just the classic one, market cap weighted. I have PRF and as well RSP, which is the equally weighted. So PRF has actually performed better than RSP, but not as good as, you know, the regular S&P 500. Pretty much in most scenarios most scenarios here yeah so it seems to be that that order depending on the different time frames but i'll you'll lead us into rsp and say why uh you think that's a good one to hold so i mean obviously we've discussed it a bit but this would be the invesco s&p equal weight etf rsp so obviously&P 500, it's about as concentrated as we've ever witnessed at the top. It makes sense to at least, I'm sure a lot of people are considering an equal weight option. So RSP effectively holds all the holdings inside of the S&P 500, but it's instead equal weighted

instead of market cap weighted. So the reason why you've probably seen something like the ETF we talked about before, I can't remember the ticker PRF, I believe it was. The reason that's outperformed is probably because it does have heavier weighting to quality, whereas RSP, which is equal weight, absolutely everything. So no matter if you're the largest company in the US or the 500 largest, you have within reason, a few basis points, it's all equal weighted. So the key thing here, if I compare RRSP to times expected free cash flow, while SPY is trading at 22.5 times expected earnings and 19.5 times expected free cash flows. So there is a huge difference in terms of valuations, which is why when you look at the MAG7, how heavily concentrated

they are in the top end of the S&P 500, which is obviously pushing valuations much higher. So the only difficult thing we have here, and this would probably factor into the Invesco, the US 1000 ETF we just talked about, is the returns on equity are 33% on SPY versus just 21% on RSP. And the overall expected revenue and earnings growth are much higher on spy and again that's due to its you know the mag 7 being crazy you know profitable efficient expected to still grow a lot moving forward so you're paying for this you know you're

paying for this higher quality you know so valuations are higher but you know growth is still higher if the mag so pretty much what this means is if the mag 7 continues to perform well it's likely you know the premium valuation on the s&p 500 will be worth it but you know if you're worried about the fact that it's so concentrated at the top these two etfs can definitely provide you know an alternative either the higher quality or the RSP, like the outright equal weight. RSP is generally underperformed. Obviously, I mean, both of these funds have underperformed the S&P 500 just because of, again, repeating it over and over again, but that concentration. But it's shown outperformance during periods of volatility and bear markets. So I mean, in 2022, it lost around 11%,

while the S&P 500 lost 19%. So you're talking not double, but pretty close to double. And the interesting thing here is, this is one of the fastest growing S&P 500 ETFs in the United States this year. So with fund flows, they sit at nearly 17.5 billion in 2024. So the funds assets under management have grown by 32% this year. So when we look to something like SPY or VOO, they've grown by around 6.6%, 9% respectively. So I mean, this fund equal weight, clearly this is a trend that I'm not just noticing. It's actually happening. There's a lot of fun flows going into equal weight way more in terms of total dollar basis there's still more going into funds

like uh spy and voodoo just because they're so large yeah i was gonna say i feel like it could be a function as well that the you know the base was much smaller but also there's not as many options right like rsp is the best well known i'm sure there's other ones but they're probably just not they don't have a lot of a um whereas the s p 500 options there's like i don't know how many of them there are but there's probably you know there's quite a few dozens yeah there's probably 20 30 40 probably more than that that are almost exactly the same except for the the fees potentially and the the name of the company issuing it yeah it'd be interesting to

see like if you take all the s&p 500 etfs like how much is flowed in i mean spy and vo or they got to be the two most popular i mean i think i think vo is like at 1.1 trillion in AUM. So, I mean, they're pretty big. The fact that RSP has grown by 32%, though, I mean, there's clearly, that's a big bump in AUM over the course of a year. So, I mean, equal weight is definitely something that people are eyeing. And, you know, I looked this up. It's one of the biggest inflows percentage-wise of all US ETFs this year. I'm looking here at the BlackRock one. So IVV is about 600 billion in assets.

Yeah. That's a pretty big one too, but not as big as the other two. Yeah. As do-it-yourself investors, we want to keep our fees low. That's why Simone and I have been using Questrade as our online broker for so many years now. Questrade is Canada's number one rated online broker by MoneySense. And with them, you can buy all North American ETFs, not just a few select ones, all commission-free so that you can choose the ETFs that you want. And they charge no annual RRSP or TFSA account fees. They have an award-winning customer service team with real people that are ready to help if you have questions along the way. As a customer myself, I've been impressed with Questrade's customer service. Whenever I call or email, every support

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style education lessons that are completely free. You can search up Blossom Social in the app store and join the community today. I'm on there. I encourage you go on there and follow me, search me up. Some of the YouTubers and influencers and podcasters that you might know, I bet you they're already on there. People are just on there talking, sharing their investment ideas and using the analytics tools. So go ahead, blossom social in the app store and I'll see you there. Here on the show, we talk about companies with strong two-sided networks make for the best products. I'm going to spend this coming February and March in an Airbnb in South Florida for a combination of work and vacation and realized, hey, my place could be

a great Airbnb while I'm away. Since it's just going to be sitting empty, it could make some extra income. But there are still so many people who don't even think about hosting on Airbnb or think it's a lot of work to get started. But now it is easier than ever with Airbnb's new co-host network. You can hire a local quality co-host to take care of your home and guests. It's a win-win since you make some extra money hosting on Airbnb, but can still focus on enjoying your time away. Find a co-host at airbnb.ca forward slash host. That is Airbnb.ca forward slash host. So now let's move on to something a bit different here. Next on the list, a Bitcoin ETF. So the one that I could find, and Dan, correct me if I'm wrong. I know you're a lot in the ETF space,

but FBTC from Fidelity seems to be the best Canadian option if you're looking to just buy a Bitcoin ETF with CAD that is a spot Bitcoin ETF. So I was able to, their MER is at 0.69%. So I think that's by far, or at least by like 20 basis point, the lowest. It's one of the lower ones. Yeah. Yeah. So the reason I'm saying that is, especially if you don't want to convert to usd which you know i understand you know right now and but you still want to get exposure to bitcoin that could be an option um if you're fine or if you have usd available um i would then recommend one of the us options because they are much lower in fees you're looking probably around like paying a third of the fees for most of them compared to this. So that like, you know, and you can go around,

there's a lot of big players, whether it's BlackRock, I have the Bitwise one, but there's other, you know, pretty prominent in the US Fidelity has one as well in the US. So just just compare fees at the end of the day, they're going to be pretty much similar. So you'll have to look at what the best fees are. I've said it it time again again we talked about bitcoin a little bit earlier is that you know you have to be comfortable with volatility it's not unusual to see 50 plus drawdowns with bitcoin and what we're seeing right now around 15 20 is actually very frequent only invest a percentage in Bitcoin that you are comfortable losing. Again, I'll say it, I don't think it will happen, but I think it's the right mindset to have

to not panic when you see these big drawdowns. I still prefer owning actual Bitcoin, but I do have some Bitcoin ETF exposure because they are registered account friendly. So you can have them in TFSA or RSP if you choose to do so. And, you know, there's more reasons why to hold Bitcoin and why I personally hold it. Again, if you're not sure about the asset class, I would say do your homework, read up on it. There's a lot of good resources out there that explain how it works, that explains the benefit of it from a more macro perspective. We've done a few episodes in the last four or five months or so where I've done some segments on Bitcoin.

And I do go over some of the reasons why I own Bitcoin. But again, build your own conviction, because if you don't have it, you end up buying Bitcoin right now. Let's say it's trading at like ninety four thousand US and then it drops, you know, 20, 30 percent, whatever it is you ends up selling and then you just see it going up you know from that point on and then you just end up having a loss even though that you did have exposure to the assets just your timing was bad ended up panicking i've seen that time and time and again not just for bitcoin but other stocks as well right other

assets where people don't have conviction they buy buy it, it drops, it corrects 20, 30%, whatever it is. They panic sell just to then, you know, a year later, see that actually rebounded and then some. So, buy high, sell low. Just be careful. Yeah, exactly. Buy high, sell low. But I think it's the important thing about conviction, right? I think when you have conviction, you know what you invest in. You don't panic when there's drawdowns or you actually sell because there's a good reason to sell because you know the business well enough and there's been a material change in the thesis. Yeah, I think a lot of people kind of get caught up in having almost too much conviction, I guess. The stock price keeps dropping dropping dropping yeah yeah i if anything i'm not afraid to just cut ties but also um i know what i

own very well so i mean you know i if you do that you can sometimes you know have a lot better idea as to whether or not you could you should sell obviously bitcoin is going to be something that you know as you mentioned it's pretty much guarantee, we're going to go through another huge drawdown. I mean, we're going through one. Yeah, I wouldn't say huge right now. It's relatively minor, but it's definitely something you definitely have to, you know, not panic. And just again, that all comes down to, you know, the allocation you set. If you make 10% of your portfolio Bitcoin, and that's way too much, you will definitely panic when it falls 50%. But I mean, if you make it 1% or 2%, maybe that's not as big a deal. That's definitely dependent on the individual.

Yeah. And if there is no allocation that can be right for you, that you won't panic, then just don't own it. That's fine. Just don't own it. That's okay. You can do whatever you want with your portfolio. Now, the next one on the list, one I thought about putting, and then I saw when you did your note that you put it, so I'm like, okay, good job, Dan. I like this one. Yeah, so this is the GlobalX zero to three-month T-bill ETF. So effectively, what this owns is US treas. treasuries, like short-term U.S. treasuries. So these ETFs came out, it had to be probably a couple of years ago now.

They have CBIL and UBIL. So CBIL would be the Canadian treasuries and UBIL would be the U.S. And for a while, they yielded pretty much the same. But now, you know, there's starting to be a big gap just because of how the Bank of Canada is dropping rates. And obviously, the U. the US is not as much. So this is more of a mention on pretty much a risk-free ETF that is expected to produce higher returns than any risk-free ETFs here in Canada simply due to policy rates. So obviously, these are ETFs that contain treasuries backed by the government.

So they're about as close to... I would say risk-free from the principal perspective in USD. I think it's just important just to qualify that because, you know, there is the interest rate, the exchange rate between the two countries. There's definitely currency risk there. Yeah, there's definitely currency risk. I just wanted to mention that because if the canadian dollar unexpectedly becomes way stronger then you won't have you know you're gonna you're gonna find that a little bit more difficult yeah exactly yeah i mean like risk-free solely from the underlying assets like the treasury so obviously they're backed by the

government i mean they pretty much the yeah, they're risk-free, the asset itself. So, I mean, we're now sitting at a 1.25% gap in policy rates between the Fed and the Bank of Canada, which is leading to more attractive rates on fixed income investments south of the border. This is why you see something like UBIL yielding around 4.07%, while CBIL, which is, again, that's the Canadian zero to three month treasuries. They yield around 3.24%. So there's quite a big gap there. The only difficulty, as you mentioned, is this will, I think this fund is primarily used for US dollar savings. So you still could convert and buy this fund either if you expect to hold US dollars for a

long time, or you expect the canadian dollar to go lower but i i'm not sure i'd be chasing this 75 basis points in yield in terms of you know exchanging your canadian to us just to earn this higher yield because i mean as mentioned if the canadian dollar strengthens this can wipe out wipe out that gap in yield and even you know eat into your main returns quite a bit so again i just brought this up mostly if you have u.s dollar savings or you know maybe you have some u.s dollar equities you're looking to trim some back into cash because you think the market is overvalued or you know you're looking to hold a cash position this is a great etf to get you know i'm not really

sure there's much that yields higher in terms of like a you know again like that risk-free treasury style yeah a fun i'm sure they have some covered call there's a bunch of different similar yeah options in the u.s i think what i like about you bill and i wasn't sure until i bought in my tfsa is that actually you get the full yield. You don't get the withholding tax because it is traded in Canada, where if you have something like a bill, which is U.S. traded, you actually get the withholding tax applied. So I think it's just something I wasn't sure how it would be treated. I've had it now for, I think, over a year, if not more, in my TFSA,

and it's great for that is you don't get taxed on it if you have in your tfsa of course if you have it in your like taxable account it'll be interest income yeah and our i wonder rsp no they don't do it in rsp tfsa do they do it uh no they don't do it in tfsa so i would imagine for those two accounts global x probably has to pay that i would imagine it's charged at the fund level probably that's interesting i'm not sure yeah yeah but it doesn't you know how it says it every single time like uh withholding tax applied it's never applied for me so um i assume they must do something to you know to make it tfsa friendly yeah yeah my my knowledge here

if you got u.s it's, it's a pretty attractive ETF. Again, just, I wouldn't go converting like, you know, Canadian dollars you want to earn interest on. I wouldn't go converting it to us just to get that 75 basis points. I mean, if you're going to buy this, I would either us dollar savings or money you're converting and you plan to hold an USD for, for a long time yeah it could be too you own us stocks right and you end up like selling some of it yeah and you want to just keep it in us dollar for now it's just a really good way to park your cash until you find something else to invest or maybe you just want to lower your risk and i keep in usd for a while because it pays monthly yeah yeah So you get a monthly distribution as well.

Yeah. Yeah. No, that's it. So next on the list, so I put energy ETFs. I have like two in mind here. So the Global X ETF, HXE, and then the BMO Equal Weight Oil and Gas Index, ZEO. So slightly different here for the two. First of all, the HXE much lower in terms of fees than the BMO one. So it's 0.27%. And the BMO one is 0.6%. So

about half of the fees, a bit more than half of the fees. Now, the tradeoff and a lot of the things are tradeoffs with the Global X one. So it's their bold focus on oil and gas. But the Global X is based on an index for the TSX-60 for the oil and gas sector. And the reality is it's super heavily weighted in two names. I would say you can even go as far as the top four names, but the top two names, it's Suncor Energy and Canadian Natural Resources. Just to keep it simple, it's basically half of the fund right there. And then you add in Synovus Energy and Termaline, and then you're looking about like close to like, what, two thirds of the fund

in those four names. So yes, you get lower fees, but I think it's important to know that you get a lot of concentration. And if you get that much concentration, you know, there's always the question to ask, well, why don't you just own those names outright? Like the top, yeah, two, three names and just kind of build that within your portfolio where if you compare it to the bmo option here so zedio then it's a bit more different so it's a lot like it's an equal weight so pretty much every name is between like eight and ten percent in terms of weighting the top names are inbridge arc resources kay, Kayera, TC Energy, Termaline, Suncor. So if you're looking to get something that gives you broader exposure to the sector, I think this is definitely a better option. But again, the trade-off is the higher fees. So it really depends on what you want to

achieve. If you just want broader exposure and the peace of mind not to have to really do anything about it, then this is probably the better option if you're fine with the higher fees. If you still want to own an index one and Global X1 is what you're looking for, then sure it has lower fees, but again, it's more concentrated. But given that oil and gas has really struggled this year, underperformed the markets, prices are still low. I think we could find ourselves into another year of underperformance, but I don't think it's a bad thing personally to have some exposure to that in your portfolio. I mean, full disclosure, I own Canadian Natural Resources and Termaline.

Together, it's about 5% of my portfolio. So it's not a big, big exposure, but I think it is something that I'm happy to have. They both pay a nice dividend, so I'm fine to hold it while I'm waiting. I'm getting paid, and these are very profitable companies, at least those two, that should do well if energy prices should do actually very well if energy prices go up, but they are very profitable as it is as well. Yeah, I think the equal weight of ZEO has actually helped it over the last while. I've just been kind of looking up performances wise. And I know like the heavy, I don't think producers have done all that well this year, whereas like pipelines and they've done quite well on falling rates.

So, I mean, I think the equal weight nature of it has actually helped it quite a bit. Energy is obviously not done that well this year. I mean, there's not a lot of interest in the sector either. I know I had mentioned this a few times in previous ETF videos, but XEG, which would be iShares Energy ETF. It's pretty much, I think it's very similar to HXE. It's like an indexing one. It's top heavy, extremely top heavy, but they've seen the lowest inflows in their history. And that's a fund that's been around a very long time, I believe like 20, 25 years. So obviously, it's a pretty beat up sector right now. Obviously,

the economy is not doing very well and energy tends to suffer during periods of that time but they're definitely solid funds if i if i were to probably choose one i would probably go equal weight instead of you know top heavy but i mean that's ultimately up to uh up to the individual yeah and we said it before there's tons of etf options out there before, there's tons of ETF options out there. So if there's something you're looking for, there's probably an ETF for it. Yeah. I think we'll finish with this last one, Dan, that you have on the list because we're running a bit long and had some toilet issues this morning.

So we have a plumber coming in that I just got a call. So I think I'm going to have to wrap this up. Yeah, exactly. All right. So this one is actually a very interesting option. It's from Hamilton. So it's their Enhanced Utilities ETF. So it trades under the ticker H-U-T-S.

And it's a bit of an interesting plan. It's one that primarily revolves around rate-sensitive stocks. So fair warning, what the enhanced effectively means is they're utilizing leverage. So they're utilizing, just a warning, 25% leverage. This is an amount that I'd view as relatively conservative, but it would certainly be something you'd need to be comfortable with. It's a leverage fund, which means obviously during the good times, it'll perform better. But during drawdowns, it will have more volatility to the downside. The idea here would be relatively simple.

They take a leverage position in stocks that have typically low volatility anyway. So that would be utilities, pipelines, telecoms in order to take advantage of falling rates and bond yields when they do drop here in canada and you know this wouldn't really be something that i would look to hold long term but would could definitely be a fun you could add to your watch list if you expect a lot of these stocks that haven't done all that well in a higher rate environment to kind of rebound on lower rates if you look to its major holdings, we see Brookfield Infrastructure, TC Energy, Enbridge, Hydro One, Amerifortis, Altagas. It owns all of the, I'm not sure if it

owns all of the Canadian telecoms, but I know it owns Telus. I saw that on the top holdings, but obviously, leverage fund, utilities, there's no guarantee that utilities will perform better as rates continue to drop. But generally they do. They're obviously, you know, pretty much every single company inside of this portfolio is going to be debt heavy, rate sensitive. Most of them are high income payers, high dividend payers. So the fund actually does yield quite a bit and i do actually believe they utilize that leverage component to kind of generate more yield back to investors so uh during you know the fund hasn't really that would make sense yeah the fund hasn't really um been around long enough to kind of judge like you know what

the distribution makeup is going to be but i like, you know, what the distribution makeup is going to be. But I would imagine, you know, when times are going good, and this fund is earning a lot, they're going to be able to issue, you know, a lot of capital gains, which probably boosts that distribution. And then, you know, during drawdowns, I would imagine there's going to be a bit of return of capital there, just to kind of try and maintain the distribution, but it does yield 8%. I'm definitely not somebody who focuses all that much on yield whatsoever, but I think it's an interesting fund. Just utilities have been beat up a bit.

They made this fund after the success of their – it would be their financials one, I think, or they made a banking one. Yeah, I think so. That did very well. H-Cal, it was a Canadian bank one, 25% leverage. That ended up doing very well, so they launched a banking one yeah that did very well hcal uh they it was a canadian bank one 25 leverage that ended up doing very well so they launched this utilities one and uh it's going to be interesting to see to see how uh how it does moving forward yeah that's interesting i was pretty critical of the bank one just because banks are so levered to begin with levering the leveraged

yeah it's it's nice when banks perform well at at least like they did this year. I'm sure the fund crushed it. Oh, yeah, it did. It did very well. Yeah, if they don't, then just be careful. Yeah. Again, know what you own. But I think this is a great episode. I think it's a good spot to wrap it up.

We had a couple more names, but maybe we can do another episode in the new year with some more TFs that people may enjoy. I guess before we let everyone know, happy holidays to everyone. If you had family dinners during the holidays or parties, you know, and you start talking about investing and stuff and people are interested in podcasts, make sure you mention about the Canadian Investor Podcast. And if they're interested in real estate, the Canadian Real Estate Investor, because it does help people find us, word them out, goes up, you know, does some big things for us. It may not seem like it, but, you know, it just takes one that talks a few more people and so on. And if you haven't had the chance to give us a like, review, you know, do it on your favorite podcast player. It definitely helps other people find us as well and helps us to

keep growing this show. So it is much appreciated. Any parting thoughts before we let people go, Dan? No. Happy holidays, everybody. We'll see you in 2025. Well said. Happy holidays, everyone. The Canadian Investor Podcast should not be construed as investment or financial advice. The hosts and guests featured may own securities or assets discussed on this podcast. Always do your own due diligence or consult with a financial professional before making any financial or investment decisions.