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Vanguard FTSE Developed All Cap ex North America Index ETF (VIU)
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Vanguard FTSE Emerging Markets All Cap Index ETF (VEE)
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Horizons Intl Developed Markets Equity Index ETF (HXDM)
I Would like to expand my question posted earlier. Here is the original, and your reply:
Q: Hi Peter,
I am helping my kids who are in the mid-twenties to invest. The funds will be in RRSP & in TFSA for long term. Would you please recommend a list of ETFs and/or Stocks to invest in for growth. I would like to have the portfolio diversified globally and invested into various sectors.
Thank you,
Asked by Roger on November 08, 2023
5I RESEARCH ANSWER:
We can suggest: CSU, BN, WSP, TFII, ATD, SLF for a conservative mix of stocks from differing sectors. XIC could be a general Canadian ETF, and VFV a US market ETF. We prefer international exposure to be done through an ETF. VIU is an easy solution in our view (it is ex North America).
I have a tax efficiency question. If I am holding VIU in either RRSP or TFSA, would the dividends, even distributed through DRIPs, be subject to an international withholding tax of 15%? If that is the case, do you have another suggestion for investing in an international EFT where dividends are minimized, and the value of the EFT is in growth?
Do you have a suggestion for investing in the emerging market? Again, an EFT with the similar focus on tax efficiency.
Thank you again,
VIU will have withholding taxes in a non-reg account and a TFSA account. The amount will vary as different countries have different rates. Based on indicated yield, the tax will be a drag on performance of about 0.29% annually. Considering one year return is 14.16%, we would be OK with this. There is no avoiding this tax if the fund distributes any income at all, unless one uses a 'total return' fund. Internationally, Horizons offers HXDM, with NO distributions. This is the only one we are aware of internationally. Its one-year is 14.04%, so may be a good solution. It represents 21 countries, ex Canada and the US, and has assets of $451M. In emerging markets, one could buy a highly sector specific ETF that pays very little income, but this would not add the diversity we would prefer. For emerging markets, we really would prefer to stay diversified, even with a small tax drag. VEE would be one of our favourites.