Two Popular Model Portfolios Used by Canadians

November 16th, 2018

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If you’re just getting started with self-directed investing, figuring out where to allocate your hard-earned money can often feel like a stumbling block you can’t move past. There are so many options available that it’s easy to find yourself stuck in analysis paralysis, unable to hit the Buy button.

If you’re unsure where to start or what to invest in, here’s a look at two model portfolios that are followed by many Canadians and often talked about in online investing communities.

Before we get to the portfolios, a quick primer on ETFs – feel free to skip the next section if you’re already familiar with them!


What are ETFs? They are exchange-traded funds, specifically investment funds that are traded on the stock exchange. These funds hold a basket of assets, which may include stocks, bonds and/or other asset classes.

ETFs are popular because they let investors diversify the companies and industries they hold in their portfolio just by buying a single ETF. For example, you can buy an ETF that tracks the entire S&P 500 – this way, if one company were to go bankrupt, it’d have barely any effect on your portfolio.

ETFs are also popular with savvy investors because they have extremely low management fees (often under 0.5%) that are typically a fraction of the fees associated with typical mutual funds (often 2-2.5%).

While those percentages all seem small, over your investing lifetime they can add a shocking amount of “drag” to the potential growth of your portfolio. If you want to play around with specific numbers, this is a great calculator.

ETF lesson - check! On to the portfolios below.

Model portfolio #1: Canadian Couch Potato

The Canadian Couch Potato (CCP) is a popular blog and method of investing. The CCP blog is run by Dan Bortolotti, who lists three main options for investors, the last of which we’ll be talking about here: buying individual ETFs through a brokerage yourself. The CCP highlights a simple three-fund portfolio that includes:

  • Vanguard FTSE Canada All Cap Index ETF (VCN)
  • iShares Core MSCI All Country World ex Canada Index ETF (XAW)
  • BMO Aggregate Bond Index ETF (ZAG)

The Vanguard fund gives Canadians domestic exposure – it’s always a good idea to invest in companies that are based in the country where you’ll be living (and spending money!) in the future. This particular fund includes over 200 companies, giving your portfolio diversity across industries including banking, oil and gas, telecoms, and real estate.

The iShares fund gives your portfolio international exposure and excludes Canadian companies since they’re already covered by the first fund.

The final fund, BMO Aggregate Bond Index, tracks Canadian bonds. While bonds may have lower rates of return than stocks long-term, their relative stability counteracts the volatility of stocks in your portfolio. Depending on your risk tolerance and how long you plan to invest for, you may choose to hold a higher or lower percentage of stocks versus bonds.

Model portfolio #2: Canadian Portfolio Manager

The second model portfolio can be found on the Canadian Portfolio Manager blog. Rather than sticking to 3 funds, they highlight a 5-fund portfolio:

  • Vanguard FTSE Canada All Cap Index ETF (VCN)
  • iShares Core S&P U.S. Total Market Index ETF (XUU)
  • iShares Core MSCI EAFE IMI Index ETF (XEF)
  • iShares Core MSCI Emerging Markets IMI Index ETF (XEC)
  • BMO Aggregate Bond Index ETF (ZAG)

This portfolio has the same Canadian stock index fund (VCN) and Canadian bond index (ZAG) as the Canadian Couch Potato portfolio. Unlike the CCP, rather than using the iShares “World Excluding Canada” fund, it uses three separate funds to achieve a similar diversification: US (XUU), emerging markets (XEC), and Europe, Australasia and the Far East (acronym ‘EAFE’ - XEF).

Both portfolios are popular with modern DIY investors because they offer low fees, global diversification, and stability through bonds. Aside from that, it’s much easier to rebalance among 3-5 funds than dozens of individual stocks. That being said, these are just two model ETF portfolios and if you’re interested in finding other ETFs that meet your investing needs, ETF Database is a great place to start.

Before you can buy ETFs, you need to open a trading account at a brokerage. If you haven’t set one up yet, we recommend considering Questrade because they offer commission-free purchasing of ETFs, though selling attracts a fee.

Once your investments are set up, you can pair your Questrade account with Passiv to make managing your own portfolio simple and easy. Read this article if you want to learn more about putting your ETF portfolio on autopilot.

Happy investing!

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