S&P 500 for Companies Using Loonies

May 12, 2008 5:55 PM

Can someone point me in towards something considered to be the Canadian equivalent to the S&P 500?

While I'm not an investing genius or anything, I know little bits here and there. I have a friend who's coming into a little money soon, and is wanting to invest for his retirement. He's asking for advice on what he should do.

Normally, I tell people in his position to sock the thing in some form of low-fee S&P 500 Fund, as the returns on it usually beat any other fund or single stock in any given year. (I know, I know, it loses sometimes as well.) While the investment isn't fool-proof, it's probably the best option I know of for a "set-it-and-forget-it" style investor, which is exactly what this guy would be.

The kink in the whole thing is that he's Canadian - and he's wanting to use an RRSP. I am not 100% sure on what the limits are, but from what I understand, a majority of your RRSP has to be in Canadian companies, not foreign ones. So, he can only have a small amount of his investment in a true S&P 500 fund, as I figure.

Which brings the question: does anyone know of anything in Canadian funds that has such a tried and true, low-effort return? I'm not wanting to set the roof on fire with the returns, but anything between 7%-10%/yr on average would be about right. A quick Google on "Canadian Equivalent S&P 500" gives me the TSX 60, but that's not being very helpful.

posted by plaidrabbit to work & money (8 comments total)

Since January 1, 2005, you are allowed for foreign property in RRSPs or RRIFs with no limit. This allows more international diversification opportunities for retirement investments.

Go ahead and invest in the S&P 500.
posted by heatherann at 6:14 PM on May 12

Also, Money Sense magazine is a good reference for Canadian mutual funds: Honor Roll 2008: Canada's best mutual funds. (Good magazine, terrible website.)
posted by heatherann at 6:17 PM on May 12

If you're looking specifically to capture a total market index of Canadian equities, you can try the iShares MSCI Canada Index.
posted by mhum at 6:43 PM on May 12

I don't like mutual funds because the management fees are through the roof in most cases. If you're looking for a nice, safe index-tracking purchase, an ETF would be a good bet. The TSX provides a handy list of all ETFs traded on their exchange.
posted by lowlife at 6:59 PM on May 12

As heatherann noted, the foreign content limits on RRSPs are a thing of the past - you can invest as much (or as little) of your RRSP money in foreign (non-Canadian, that is) investments.

Moneysense has some good recommendations that give good diversification, which they call their "couch potato" portfolios. They are pretty close to "set it and forget it" - you just need to reallocate money periodically to aim for the target allocation (essentially, you buy high and sell low to get to the starting ratios).

If you're coming into a wad of cash all at once, it probably makes sense to buy ETFs that track the markets instead of index funds. The MERs will be less, meaning more of your money works for you and less gets paid to the company selling the investment. If you're investing a bit every month, though, you're probably better to go for low-cost index funds, like the E-series of funds offered by TD.
posted by gwenzel at 7:17 PM on May 12

XIU traded on the canadian exchange. It's an Exchange Traded Fund. Buy and sell like a stock Follows the TSX 60. The biggest 60 traded companies. No geting hosed on currencies.

These companies are about the size of S&P 500.
posted by thenormshow at 7:18 PM on May 12

XSP follows the S&P 500, but hedges for currency. (You get the benefit of owning canadian dollars, but the appreciation of the S&P 500.
posted by thenormshow at 7:20 PM on May 12

Wow. Thanks for the heads up on the RRSP thing - the last time I knew anything about them was when my wife owned one pre-2005, when the content limits were still in place.

I absolutely love this place; I wouldn't have found this information in an entire week of searches. :)
posted by plaidrabbit at 9:14 PM on May 12