Many investors end up putting their portfolios in ETFs because of the simplicity of it all. Only a few ETFs can be enough to get exposure to the whole world’s economy.
That’s not quite simple enough for some investors, however.
Here’s how they can make life even less complicated by only owning two ETFs.
The first ETF takes care of the equity part of an investor’s portfolio. The Vanguard FTSE All-World Ex Canada Index ETF (TSX:VXC) has exposure to investments all over the world. It gives investors ownership of more than 8,000 different companies from just about every country.
The only place excluded is Canada, which is a very small contributor to world GDP.
There’s a very easy rationalization to excluding Canada. The average Canadian investor will already be overly exposed to Canada’s economy. When times are hard, the average Canadian will feel it. And when times improve the average person will see their life get better. There’s no reason to add any additional exposure.
Now we just have to worry about fixed income, an important part of any portfolio. Vanguard offers two bond ETFs that investors should check out.
The first is the Vanguard U.S. Aggregate Bond Index ETF (TSX:VBU) or the Vanguard Global ex-U.S. Aggregate Bond Index ETF (TSX:VBG). Both offer diverse portfolios of fixed income that are Canadian Dollar hedged. Either would be a fine choice.
An ETF portfolio consisting of just these two funds would be enough diversification for most investors, for a low price of less than 25 basis points annually.
