Investing on TD Easytrade? Buy These TD ETFs for a Diversified Portfolio

I've had great experiences using platforms like Wealthsimple and Interactive Brokers for my Canadian and U.S. ETF investments, respectively. However, it's worth highlighting when one of the big banks steps up their game, particularly with offerings tailored for entry-level investors.

TD's EasyTrade app is a prime example, boasting a user-friendly interface and up to 50 commission-free trades per year. But what makes it even more appealing for those loyal to banking with TD is the unlimited commission-free trades on TD's own ETFs.

Yes, TD isn't just a big bank; they've also got a competitive lineup of low-cost, passively managed index ETFs that are surprisingly good. If you're aiming to build a globally diversified 100% equity portfolio, here are three TD ETFs worth considering.

TD U.S. Equity Index ETF (TPU)

For those looking to allocate a significant portion of their portfolio to U.S. equities, TPU is an excellent choice, especially if aiming for about 60%, mirroring the market-cap weight in a global portfolio.

This ETF tracks the Solactive US Large Cap CAD Index, a straightforward and transparent index that, unlike the S&P 500, operates without an earnings screen or committee involvement, simply tracking the largest 500 stocks.

Compositionally, TPU is similar to the S&P 500, with a substantial weighting in technology and top holdings that include the well-known 'Magnificent Seven' tech giants.

One standout feature of TPU is its exceptionally low expense ratio. At just 0.07%, it undercuts even the cheapest S&P 500 ETFs in Canada, which typically charge around 0.09%. This makes TPU not only a strategic but also a cost-effective choice, with annual fees of just $7 on a $10,000 investment.

TD International Equity Index ETF (TPE)

Next, let's allocate 30% of our portfolio to international equities through TPE, which tracks the Solactive GBS Developed Markets ex North America Large & Mid Cap CAD Index.

This index functions similarly to the more commonly known MSCI EAFE Index, representing European, Asian, and Far Eastern regions, focusing on developed market stocks outside of North America.

TPE's composition closely mirrors that of the MSCI EAFE Index, with significant weightings in financials and consumer staples and a strong presence in European and Japanese markets. Top holdings include global giants like Toyota, Shell, LVMH, and Nestlé.

A major advantage of TPE is its direct holding of stocks rather than relying on a wrapped U.S.-listed ETF, which often incurs additional layers of foreign withholding taxes.

While holding international equities incurs higher costs, TPE maintains a competitive edge with a 0.19% management expense ratio (MER). This is still quite favorable compared to alternatives from iShares and Vanguard, which often use more expensive FTSE and MSCI indexes and charge around 0.22%.

TD Canadian Equity Index ETF (TTP)

Finally, we'll round out our portfolio by incorporating a bit of home country bias with TTP, which tracks the Solactive Canada Broad Market Index, making up 10% of our portfolio. This allocation is still three times what Canada's actual weight in the MSCI World Index is

TTP’s benchmark is akin to no-name versions of more widely recognized indexes like the FTSE Canada All-Cap or the S&P/TSX Capped Composite used by Vanguard and iShares. Again, it doesn’t matter because functionally, they perform virtually identically.

Currently, TTP has 282 holdings characteristic of the Canadian market. It is notably overweight in sectors such as financials and energy, with top holdings including major banks, pipeline companies, and railways.

What stands out about TTP is its exceptionally low management expense ratio (MER) of just 0.05%, coupled with a robust dividend yield of 2.81%. This is predominantly composed of eligible dividends, which are more tax-efficient, though it's not 100% due to the inclusion of some REITs in the ETF.

Putting it together

From January 2, 2019, to November 1, 2024, a portfolio with 60% in TPU, 30% in TPE, and 10% in TTP, rebalanced quarterly, would have yielded a compound annual growth rate (CAGR) of 14.37%.

This performance is quite impressive, but it's important to keep expectations realistic. Part of this strong performance can be attributed to the rising US dollar relative to the Canadian dollar, which provided a significant boost to the non-currency hedged TPU.

However, it's worth noting that this ETF portfolio lacks exposure to small and mid-cap stocks and emerging markets, meaning it's not maximally diversified. If you're looking for comprehensive global coverage, including these areas, you might need to look beyond TD's ETF offerings for now.