My Top Retirement ETFs

One of my frugal inspirations of life and loved politician is Mr. Jose Mujica. He is the ex-president of Uruguay and known as the poorest president in the world. He donated 90% of his salary to local charities and drove his old Volkswagen Beetle while being a president. Want to know more about him? Check out this YouTube interview (or watch all the Human movie, 100% recommended). 

Mr. Mujica said once that you don’t pay the things you buy with money, instead, you pay them with the time of your life that take you to earn that money. What a powerful message, so true! We turn into slaves of our things and waste our lives working to buy things that don’t make us happy or don’t really need. Do the math, how long do you have to work, in days or months, to pay off your brand new car? 

Yes, we all are going to die. Yes, we all have to live now. Living now has to be realistic and responsible. Look around, what are those financially successful people doing that you are not doing? Why is that? 

As employees in our day to day work, most of us have very little gains of the profits of the company. Having a yearly raise and career development is part of a successful plan for companies to retain their employees. What I am talking about, is that in the majority of the public traded companies, employees and managers work very hard every single day, weekend and overtime to keep the company’s shareholders happy. Boom, there, I said it!  We have to learn to shift our focus of working for someone else to have someone working for us, and how do we do that? Becoming a shareholder.

At some point in your life, when you become a senior citizen, you won’t have the energy to work anymore. We all need to become responsible and take care of our future, the same way we take care of our children’s education and many other things in life. Investing in your retirement found is the way to achieve a peaceful time after saying so long to all those years of hard work.

If you live in Canada, take a look at the following ETFs. Vanguard is known to have the lowest Management Expense Ratio (MER). MER is basically the fee a company charges you to keep your investments going through all those years until you retire and start to make withdrawals instead of contributions. I use Questrade as my broker to buy all my ETFs with my RRSP (Registered Retirement Savings Plan). Every trade, or transaction, for each ETF I buy each month, is usually less than $0.03 commission!

As of April 24th, 2020:

  • VFV.TO

Vanguard S&P 500 Index ETF

MER: 0.09%

Return since inception: 15.56%

Still going strong while the US economy is in crisis.

  • VUN.TO

Vanguard US Total Market Index ETF

MER: 0.16%

Return since inception: 12.41%

Note: Less return but more diversification.

  • VCE.TO

Vanguard FTSE Canada Index ETF

MER: 0.06%

Return since inception: 4.69%

  • VEH.TO

Vanguard FTSE Developed Europe All Cap Index ETF

MER: 0.25%

Return since inception: 1.28%

  • VRE.TO

Vanguard FTSE CDN Capped REIT Index ETF

MER: 0.39%

Return since inception: 3.17%

Note: Monthly dividends! By law, they need to distribute almost all their income after expenses! 

  • XIT.TO

Ishares S&P/TSX Capped Information Technology Index ETF

MER: 0.61%

Return since inception: 4.86%

  • XUT.TO

Ishares S&P/TSX Capped Utilities Index ETF

MER: 0.62%

Return since inception: 6.60%

When you compare $0.06 MER to $0.62, you may or may not think that is too much, but it is 10 times the fee from one ETF to another. Why would anyone do that? My answer is diversification, to an extent. You can’t put all the eggs in one basket, right? And you can’t compare apples to oranges (one ETF to another).

More things to review while deciding what ETF is the right one for you: 

  • Google the ETF name, for example, VUN.TO. You can get a summary of the fund super-fast without the need to access into each website.  Review the fund timeline since inception (max) and see the trend over the years. 
  • Does it pay dividends?
  • Dividend frequency
  • Dividend amount
  • Top holdings
  • Is it capped?
  • Rebalance frequency

Make your money count! Budget your monthly automated RRSP contribution and buy your shares every single month, no matter what. Stick with the plan but review it every year at least. 

You can do it, I know you can!