The MoneySense ETF All Stars 2021


MoneySense has just published the 9th edition of the ETF All Stars, 2021 edition. As you can read in the  overview, this amounts to the Pandemic Recovery edition. The full package is available online here. Below we summarize the main picks by category: click on the highlighted headline [in red] for each category to go to the full MoneySense commentary as well as the accompanying charts showing ETF names, ticker symbols, fees and general description.

We again had eight panelists: the same as last year, except that regular Hub contributor Mark Seed of My Own Advisor replaced departing Dave Nugent. The format consists of the eight experts “voting” on which funds to retain and which to replace, with five out of eight votes carrying the day. (I get involved only if there is a 4-4 tie.)

Since our philosophy is to retain as many earlier picks as possible — provided they still meet our criteria of broad diversification and low cost — we ended up with 52 picks this year, just two more than in 2020: 44 selections were agreed-upon winners, plus there were 8 Desert Island picks (see below).

However, there were more new additions than that might suggest, since we also dropped a few ETFs from last year, notably in the ESG and Low Volatility categories.

Canadian Equities

All five Canadian equity ETFs return: VCN, XIC, HXT, ZCN and ZLB (see the chart at MoneySense for full ETF names). However, no new funds were added: We considered adding five new names but none attracted the five-vote majority necessary.

Remember that Canadian stocks are also amply represented in the One-Decision Asset Allocation ETFs discussed below.

US equities

The panel opted to retain all seven of our 2020 U.S.-equity ETF picks, while (finally!) adding two technology ETFs and a Vanguard all-cap total market fund (VUN), for a total of ten. That makes for a crowded category but after all the US is the biggest single geographic market in the world and investors have certainly been rewarded for being there in recent years: especially in 2020.

Returning picks are XUU, iShares’ US Total Market ETF; and three low-cost plays on the S&P500 index: VFV and VSP from Vanguard, and BMO’s ZSP. There was also the returning Desert Island pick from PWL’s Cameron Passmore: Avantis US Small Cap Value ETF [AVUV.]

International and Global equities

The panel retained six of the eight international or global ETF All-stars from 2020: two from iShares (XAW and XEF), three from Vanguard (VXC, VEE and VIU) and BMO’s low-volatility pick ZLI. Two other new picks introduced in the 2020 edition didn’t make the cut this time: iShares Edge MSCI Min Vol Global Index ETF (XMW, 0.48%), and CI First Asset MSCI World Low Risk Weighted ETF (Unhedged, ticker: RWW/B).  There was also a new international Desert Island pick from PWL’s Ben Felix: Avantis International Small Cap Index Fund (AVDV).

Fixed Income

While our panel as a whole continues to take a “stay with the program” approach to its fixed-income All-Star picks, we did cut back slightly on the number of Bond ETFs this year.  Only six of the eight previous fixed-income All-star picks returned: ZAG, VAB, VSB, ZDB, XSB and VGAB. One added last year, TLT, did not return, and long-time pick BXF also did not make the cut in 2021.

Speaking personally, panelist Yves Rebetez views Bonds as a “total waste of time when yields rise 35 basis points too far on the 10-year and the market just about has a heart attack. Not to mention negative rates once inflation is factored in.” In the current environment, bond ETFs compound virtually zero return “and we reached return-free risk a while ago.”

As we discuss in the One-Decision Asset Allocation ETF section below, both VAB (Vanguard’s aggregate Canadian bond fund) and VSB (short-term Canadian bonds) are long-time All-stars but investors who worry that interest rates are set to rise by 2023 or so may prefer to have more VSB than VAB.

Expanding our One-Decision Asset Allocation packages

Asset allocation ETFs have become so popular with our panel that they now make up almost half of our All-star picks: 18 of 44. This year, we added the three Asset Allocation ETFs from Horizons: HGRO, HBAL and HCON.

We also retained the five iShares AA ETFs and three BMO ones added in 2020.

And of course, the panel stuck with the suite that started it all: the pioneering Vanguard asset allocation ETFs (VGRO, VBAL, VCNS, VEQT and VCIP) to which we added a sixth: the new Vanguard Retirement Income Fund (VRIF). Similar to VBAL but with a 50/50 stocks/bond mix, VRIF is a bit different than the rest of this category, as it seeks to target (but not guarantee) a 4% annual return for retirees.

Not all panelists were as enthusiastic about the more conservative asset allocation ETFs this year; indeed, the panel was split on adding the two more conservative new Horizons offerings. For example, almost half of Vanguard’s VCIP (almost 47%) is in one of our perennial fixed-income All-Stars: VAB: the Vanguard Canadian Aggregate Bond Index ETF. More than half of the bonds held in VAB mature between five and more than 25 years from now: investors who worry about rising interest rates may prefer to build their own version of VCIP (or its equivalents in the competitor suppliers) and replace some VAB with the other All-Star, the short-term bond VSB, which holds only short-term (maturing in five years or less) Canadian bonds.

Desert Island picks

Returning for the third year is our popular Desert Island picks, in which our panelists can champion a fund that the rest of the panel may have passed on: provided they would feel comfortable recommending this fund to a friend or family member stranded on a desert island and unable to contact their brokerage firm for five years. About half of last year’s Desert Island picks returned, while the other half are new replacement picks. You’ll have to click to the actual feature to discover which!

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