A recent newsletter (On Money) from the Globe and Mail caught my attention. In it, the author (David Berman) made the assertion that ZEB (a BMO ETF that invests solely in the Big 6¹ Canadian banks) was a better way of investing in the Canadian banking segment over holding the stocks individually. Two of the big reasons align very well with my own philosophy, namely:

• The ETF fees include regular rebalancing
• The ETF removes the temptation to time the market

These are the main reasons the majority of my retirement savings are in all-in-one ETFs like AOA and XGRO.

But anyway, what caught my eye about the article were the eye-popping returns of this segment, especially compared to the overall TSX, captured in an ETF like XIC. So I did a quick analysis which I share with you here:

In summary,

• Canadian banks make up about 1/3 of the Canadian stock market (and hence XIC)
• This segment has outperformed the overall Canadian market — by a wide margin — over the past 16 years
• Past performance does not guarantee future results
• This analysis hasn’t changed my perspective; I still prefer diversification over raw performance…no FOMO for me.

1. TD, CIBC, Bank of Nova Scotia, RBC, BMO, National Bank ↩︎