Too often, humans have a way of turning simple things into something far more complicated than they need to be.
Such is the case with ETFs. I’ve seen investors debate very minor differences in similar products to the point of exhaustion, forgetting the fact these differences don’t really matter that much.
For people with only a few thousand invested, the difference between one ETF versus another can even result in less than a few dollars per year.
People will happily analyze two ETFs for hours only to save enough for a coffee. It’s madness, especially considering the whole appeal of ETFs is supposed to be simplicity.
Fortunately, for investors who want a simple solution, there’s an easy answer. Buy Canada’s largest ETF, the iShares S&P/TSX 60 Index Fund (TSX:XIU).
XIU has more than $12 billion in assets in Canada’s top 60 stocks. It has a management fee of just 0.18% and it pays investors a dividend of approximately 2.8%. It offers a good cross-section of solid blue-chip Canadian companies, most of which have a history of increasing dividends.
Is there an argument for investing in other ETFs? Sure. XIU doesn’t offer an ideal amount of diversification to small Canadian companies. It doesn’t have much exposure to markets outside of Canada, either.
But investors have to start somewhere, and at home is as good of place as any. Besides, it sure beats analysis paralysis. Simplicity isn’t so bad, especially for folks just starting out.
