An Overview of Commission-Free ETFs

By Dan Bortolotti on June 28, 2012
Estimated reading time: 4 minutes

Three discount brokerages in Canada now offer a menu of commission-free ETFs. Scotia iTrade pioneered this feature in Canada last September, then Qtrade Investor announced a similar offering about a month later, followed soon after by Virtual Brokers. While index investors welcomed this development, the lineup of ETFs eligible for commission-free trades at all three brokerages is less than ideal. Narrowly focused funds dominate all three lists, which is fine if you want to invest in copper futures, Indian large caps, or the Australian dollar. But if you’re a long-term Couch Potato investor, you have to look a little harder for appropriate ETFs. To help with that task, I’ve compiled a checklist of commission-free ETFs available from each of the brokerages, limiting the selection to broadly diversified funds that cover core asset classes. Funds that use currency hedging are marked with an asterisk (*).

		Scotia	Qtrade	Virtual
Fixed income		iTrade	Investor	Brokers
iShares 1-5 Year Laddered Gov’t Bond	CLF	x	x	x
iShares 1-5 Year Laddered Corp Bond	CBO	x	x	x
BMO Mid Federal Bond Index	ZFM			x
BMO Long Federal Bond	ZFL			x
BMO Long Corporate Bond	ZLC			x
iShares Advantaged Canadian Bond	CAB	x	x	x
iShares DEX Real Return Bond	XRB		x
BMO Real Return Bond	ZRR			x
iShares Advantaged High Yield Bond *	CHB	x	x	x

Canadian equity
Horizons S&P/TSX 60	HXT	x	x	x
iShares S&P/TSX Completion	XMD	x	x	x
iShares S&P/TSX SmallCap	XCS		x
iShares Dow Jones Canada Select Value	XCV			x
iShares Canadian Fundamental	CRQ	x		x
iShares S&P/TSX Cdn Dividend Aristocrats	CDZ	x		x
iShares S&P/TSX Cdn Preferred Share	CPD	x		x

US equity
Horizons S&P 500 *	HXS	x	x
BMO US Equity *	ZUE			x
iShares US Fundamental Index *	CLU	x		x
iShares US Fundamental Index	CLU.C	x		x
iShares S&P US Dividend Growers *	CUD	x

International and global equity
iShares International Fundamental	CIE	x	x	x
BMO International Equity *	ZDM			x
Vanguard MSCI EAFE *	VEF	x
iShares Global Monthly Adv Dividend	CYH	x		x
iShares Global Real Estate	CGR	x	x	x

Emerging markets equity
iShares MSCI Emerging Markets	XEM		x
iShares Broad Emerging Markets	CWO	x		x
BMO Emerging Markets Equity	ZEM			x

A breakdown of each asset class

Fixed income. If you’re looking for a broad-based ETF that includes both government and corporate bonds of all maturities, there simply isn’t one. (CAB appears to fit this description, but it is a non-traditional fund that is appropriate only for taxable accounts.) All three brokerages offer CLF and CBO, which are excellent short-term bond ladders, but only Virtual Brokers includes ETFs with longer maturities. Two of the three brokerages offer a real-return bond fund. Canadian equity. You’re pretty well covered here. While none of the brokerages include the iShares S&P/TSX Capped Composite (XIC), they all offer HXT and XMD, which work well in combination. HXT includes the 60 largest companies in the S&P/TSX Composite Index, while XMD includes the remaining 190 or so. You can hold about 75% in HXT and 25% in XMD to mimic the Composite index, or split them 50-50 to give yourself a small-cap tilt. US equity. The US equity offerings are limited from all three brokerages. They all have a large-cap option that includes currency hedging, plus Scotia iTrade and Virtual Brokers also offer the iShares US Fundamental Index (CLU.C), which does not use hedging. Note that there are a few US-listed options that I have not included in the table above: Virtual Brokers offers the Vanguard S&P Small Cap 600 ETF (VIOO), while Qtrade has included several Vanguard, iShares and SPDR sector funds. International equity. Some decent choices here. All three brokerages offer the iShares International Fundamental (CIE) which does not use currency hedging and would be a good choice as a core holding. Scotia iTrade and Virtual Brokers include traditional cap-weighted options from Vanguard and BMO, respectively, both of which are hedged to the Canadian dollar. Emerging markets equity. All the brokerages offer good choices in emerging markets: Virtual Brokers even offers two options, one fundamental and the other cap-weighted. All Canadian-listed ETFs in this asset class are quite costly, but there is no good mutual fund alternative, so these are as good as you can get without using US-listed ETFs.