As a self-directed investor, it can be challenging to avoid the constant noise of the latest and greatest moves in the industry. A sample of the kinds of things that have landed in my inbox lately will hopefully illustrate this point:
“Single stock SpaceX ETFs are coming”
“This 11% dividend is a screaming deal”
“This divvie is the ultimate ‘pick and shovel’ play on Elon, Inc”
“Should we have sold in May and walked away?”
The noise is nearly impossible to avoid; there always seems to be one company, one trend, one segment, one market, one product that’s just booming while your portfolio languishes.
What’s the reason this is so? Beyond the need for news sources to produce content, I mean? A peek at Blackrock’s “periodic table“1 of market performance gave me an answer, maybe.
This table illustrates the performance of thirteen segments of the market on an annual basis. What is evident is that the “hot” segment keeps changing. What was hot last year rarely repeats this year. Take for example this year’s darling, Commodities. This index can be found over at https://www.investopedia.com/terms/c/crb.asp and tracks (among other things) the price of oil, gold, copper, wheat…and I’m sure you’ve noticed the recent uptick in ETFs covering this space (or a subspace):
GlobalX has three new silver-focused ETFs (SLVX, SVCC, and SVCL) and three commodity producers ETFs (COMX, CMCC and CMCL)
BMO launched a covered call gold bullion ETF (ZWGD.T) and a hedged broad commodity ETF (ZCOM.F) this year
TD launched TCOM which looks like it’s achieving exposure to broad commodities markets through swaps and derivatives2
My sense is that all of these ETFs were launched in an effort to attract FOMO investors who are trying to ride the commodities wave this year. Commodities as a category aren’t a terrible thing to invest in, as the Annualized column shows — they have actually performed pretty decently over the past decade — but still behind US Equity, Emerging Market Equity, Japan Equity and European Equity indices.
There’s always going to be some segment that’s on fire in a given year. Predicting which segment that might be isn’t consistently possible, so my advice is to ignore the noise and don’t chase the latest shiny object. Over long periods of time, it’s hard to beat investing in boring index equity funds.
After much consideration, I’ve decided that holding USD-denominated assets during retirement is no longer a good idea. I have been struggling with this question for a while now.
There are a few reasons why I’ve reached this conclusion:
I no longer spend USD. I have two credit cards1 that allow me to avoid foreign exchange fees.
Complexity. The USD in my RRIF accounts needs to be converted periodically since withdrawals are in CAD. The USD in my non-registered account might eventually lead me to have to file a T1135, and I hate new tax wrinkles. And of course the USD funds add to the universe of funds I have to manage in all the accounts. Fewer is better!
Choice. Without USD in my portfolio, the universe of DIY brokers opens up2 and the number of accounts I have to have is also reduced34.
The fluctuating CAD/USD FX rate might be another reason, but that hasn’t really bothered me. In the long term, it’s reasonably stable.
So how to go about doing it, and what impacts will this have? Let’s take a look.
General considerations
So of course, the only real way to convert USD into CAD at Questrade is to use Norbert’s Gambit. Performing the Gambit is a multi-day activity:
Day 1: Sell the USD asset and buy DLR.U with the proceeds; make journaling request to convert DLR.U into DLR
Day 2: Wait for settlement of trades made on day 1
Day 3: Wait for journaling to complete
Day 4: Wait for journaling to complete
Day 5: Sell DLR and buy CAD-listed assets to replace what I sold on day 1
Each time I do this exercise, it makes me a little leery since
I have to pay $9.95 plus GST to journal the shares on Questrade (not a huge deal, but as you have read elsewhere on the blog, I am a cheapskate)
I’m out of the market for 3 days. I really hate being out of the market since big moves can happen over short periods of time. Of course, this cuts both ways; I could miss a big rally or a big meltdown as a result5.
I’m making a bet on favourable FX rates. FX rates don’t typically swing much in short periods of time, but since over 50% of my retirement portfolio is in USD I’m not willing to try to find the “right” time to make such a trade.
As a result, I’ve made the decision to
Sell off 1/6th of my USD portfolio every month for the next six months (or thereabouts). This will allow me to smooth out any FX speed bumps and limits how much of my portfolio is idle at any one time.
Take advantage of a free month of Questrade Plus6 and do a few journaling requests during this month and save a few bucks
I’ll try to start moving my portfolio to these new targets as I make this shift, but given the targets are brand new, I’m in no particular time constraints; I’m expecting the portfolio to slowly move from the old targets to the new ones, finally landing at some point later in 2026.
Kicking USD out of my RRIF accounts
Of the 5 RRIF accounts I have in the household (three for me, two for my spouse), only two of them have USD in it, and the USD portion is 100% invested in either AOA (an 80/20 all-in-one global equity fund) or ICSH (an ultra short-term bond fund that stands in for cash)
AOA can be replaced with XGRO but it’s not an exact replacement. AOA has almost no Canadian Equity content and a higher US Equity content than XGRO. This means that a one-to-one switch will cause my Canadian Equity content to increase and my US content to decrease. I’m expecting this will eventually cause me to need to replace some of my AOA with a pure play US Equity asset. I’ve chosen VFV since it mirrors the S&P 500, an index that won’t be adding the mega-IPOs any time soon 🙂
ICSH can be replaced with ZMMK since they are similar in nature, but I’m not going to do that. Why? Because I hold ZMMK in my non-registered account as a VPW cash cushion, I do make trades in ZMMK from time to time. I don’t want to end up in a situation where I’m selling ZMMK in my non registered account and buying it in my RRIF, since this could deprive me of possible (small) capital losses — CRA does not look kindly on trying to “artificially” generate capital losses in this way.
So after mulling it over a bit, I’ve decided to replace ICSH in my RRIF accounts with ZST. It’s a short term bond fund which is a bit riskier than ZMMK7, but I’m counting on it being cash-like for my purposes. Neither has been around all that long, but it appears they are pretty close on the performance front with a slight edge for ZST.
So when all is said and done, my RRIFs should have three holdings: XGRO (mostly), VFV (some), ZST (about 2.5% of overall portfolio),
Kicking USD out of my non-registered accounts
Here there are two holdings
ICSH in my VPW cash cushion account
SCHF, an international equity fund I’ve held for years and years
The ICSH replacement is easy — move it to ZMMK. I’ll do that all at once. It will mean a loss of over a percentage point in gains at the moment, but this is the price of simplicity, I guess.
The SCHF sale is a bit like selling 6 months of RRIF payments all at once, which will attract a capital gain. I’m ok with that, but I’d prefer to avoid more capital gains for the rest of the year (I didn’t budget for that when I tried to work out my likely tax bill for 2026). Since selling SCHF is actually helpful in getting my new asset allocation targets right, I don’t need to replace it with another International Equity fund. My calculations tell me that I’ll probably need to replace it with a Canadian Equity fund. Here I’ve chosen to use VCN since it uses a different index provider8 and would be considered different from my other non-registered Canadian equity funds, namely XIC and HXT9. Buying VCN and selling it in subsequent months to fund my retirement salary should result in minimal capital gains for the remainder of the year.
So when all is said and done, the VPW cash cushion account should be 100% ZMMK and the other non registered account will be 100% CAD-listed ETFs, mostly tied up in Canadian Equity.
This Friday (June 12, 2026) SpaceX (which, as it turns out, doesn’t just make rockets — it also encompasses Starlink and Twitter — er, X) will launch its mega-IPO. It’s expected to immediately become a top 10 company in terms of market capitalization, putting it in the same stratosphere as Nvidia, Apple, and Microsoft.
There’s a lot of chatter over how (and even if) this will impact the boring old index investor. It might help to review what the major US Indices are. The major US indices1 that show up again and again in ETFs are
S&P 500 — this is the index used by ETFs like VFV, XSP, ZSP and HXS
CRSP US Total Market Index — VUN, VUS and VEQT for example
The ETFs that track indices don’t have discretion over when or if to include a stock in their ETF. When the index changes, so does the ETF. It’s totally mechanical. The indices also have published rules on how and when to include stocks, but because SpaceX is anticipated to be so exceptionally large, there was pressure on the index providers to tweak their rules to make sure SpaceX was included. If you’re keeping score, only Nasdaq made changes to accommodate SpaceX. S&P did not.
After much anticipation, here’s the state of play as of June 9, 2026:
Many of the indices use the float-adjusted amounts; this means a lower weighting for SpaceX than its full market-cap, which means a lower weight in any index that uses float. In the coming months, I’ll take a peek at how much SpaceX I hold, and how it’s changing, just for my own education.
So, for me, it looks like I’ll be owning some SpaceX in the not-too-distant future since the vast majority of my US holdings are in XEQT/XGRO/AOA. And, the odds are, it will lose value post IPO. That kinda sucks.
Of course, as BMO correctly points out, nobody will be immune from this kind of market movement — why, you may ask? Given SpaceX is going to be included in the popular Nasdaq 100, funds that mirror this index are going to have to make room for the new arrival, selling off shares of things they already hold, like Nvidia, and Microsoft. This will create downward pressure on the prices of these tech stocks, and hence it will also create downward pressure on any ETF that also holds Nvidia, and Microsoft. The S&P 500 holds many of the Nasdaq 100 companies, so you can expect some price erosion of ETFs mirroring the S&P indices as the Nasdaq ETFs do their rebalancing act.
In the grand scheme of things, I don’t think I really care. I don’t love SpaceX, or any other stock for that matter. The S&P indices have historically rewarded the patient investor, and I see no reason to change my strategy based on one IPO, no matter how splashy. It won’t be the last — both Anthropic and OpenAI are probably close behind with their IPOs.
The small cap Russell 2000 is also popular, but I don’t mention it in the main list since SpaceX is too big to be a small cap ↩︎
This is a CAD ETF and holds things beyond “just” the S&P index. See more here. ↩︎
This is a USD ETF, and holds things beyond just the S&P index. See more here. ↩︎
The most famous Nasdaq 100 ETF trades in USD and is QQQ. This would explain the not-very-original names chosen by the Canadian management companies. ↩︎
I think only TD uses this one, but since I’ve written about TEQT in the past, I figured I’d include it. ↩︎
and likely longer, since there is a profitability screen imposed as well for inclusion in the S&P 500 ↩︎
Over time, the size of the SpaceX float is expected to increase as insiders unload their shares; the timing of this is not known. I’d expect the SpaceX % to increase over the first year of inclusion on the S&P Total index. ↩︎
As an investor, I only care about one thing: how much return are my assets generating? I don’t care what the source of the return is, and there’s really only two:
The price of the asset can increase (price appreciation)
The combination of these two is the total return of your investment, assuming that you reinvest any dividend into more of the same asset.
My focus on total return means that every month I have to sell some shares to generate cash. This does not bother me. Yes, I’m “eating into my capital”, but so far in retirement (nearly 1.5 years in), that hasn’t prevented my net worth from increasing nonetheless:
Covered call ETFs are a product that’s exploded in the past year or two. The idea is to sell call options for stocks/ETFs you own. The benefit is a stream of monthly income. The downside is a loss in overall return. The strategy generates very eye-catching yield results, if that’s the sort of thing you care about. For me, yield is fine, but what about the total return?
I asked Google what the most popular covered call Canadian ETF was, and it turned out to be ZWB, a covered call ETF that focuses on Canadian banks. I took a look at what it held and saw that 20%2 of it was wrapped up in ZEB, a similarly named ETF that is an “equal weight Canadian bank ETF”. Under the hood, they look rather similar. But ZWB has a lovely 6.23% yield which makes ZEB’s yield of 2.5% look downright miserly. But what about the total return3? Oh, my:
The covered call strategy is completely obliterated by the “buy the 6 banks and hold them” strategy. I tried to see if there was any time period where the covered call strategy outperformed the totally passive strategy. Turns out there was one year in the last ten:
The covered call strategy caused you to lose a little less in 2018 than you would have otherwise. Lest you think that the covered call strategy always works in down markets, it didn’t in the other negative return year — 2022:
Given the carnage covered-call ETFs cause, why are they so popular? Per Ben Felix, the preference for some investors have for recurring income over total return can play a big role here. For me, total return is always preferred. I don’t mind selling shares to get access to cash as I need it!
Or the asset can give you back your own money. This is called “return of capital”. ↩︎
I’m not sure why ZWB doesn’t just invest fully in ZEB; the remaining ZWB holdings are roughly equally split among the holdings of ZEB. ↩︎
As readers know, I’m strictly1 an index investor. Boring, yet very effective over time. Buy a basket of stocks that are based on public indices (e.g. S&P 500, TSX 60, MSCI World) and forget about it. Since it’s not possible to buy an index directly, ETFs exist to do that for you — you buy the ETF, the ETF managers buy the underlying stocks, and life is good.
This means a few things:
You don’t actually own the stocks of the index yourself; the ETF manager does
You rely on the ETF manager to do the work of adding/removing stocks from the index when the index does (and this happens all the time2)
You rely on the ETF manager to pay out the dividends the underlying stocks hold; this isn’t on the same schedule as the underlying companies themselves — the ETF manager will pay out dividends annually, semi-annually, quarterly or even monthly.
You are implicitly investing in everything the chosen index invests in. Some folks may have reservations about investing in sectors like defence industries, oil and gas, tobacco and alcohol, gambling or anything involving Elon Musk, etc.
You pay a (hopefully small) premium to have someone else do this work3
Now. the super cheapskates out there will rightly point out that with commission-free trades on many DIY platforms4, why bother with an index fund? Why not just own all the stocks of an index yourself and cut out the intermediary step (and the associated fees)?
Two of Canada’s DIY providers (Wealthsimple and Questrade) are now offering products that may meet that need. Although I am a client of both providers, I don’t use either of these services.
Wealthsimple Direct Indexing
Wealthsimple was the first to introduce a product that allows investors to own the underlying stocks of an index. The full story is here, but it’s not exactly what you might expect:
Good: You can buy either the S&P 5005 or the TSX Composite6 (about 200 companies)
Good: You can exclude stocks from the list if you wish
Bad: You can only use direct indexing in a non-registered account.
Good (?): You don’t actually hold all the stocks in the underlying index; sampling is used to approximate the overall index (this is done in order to facilitate tax loss harvesting)
Good: Trades are done automatically on your behalf to take advantage of tax loss harvesting. The idea being that (for example) an underperforming bank stock is sold and replaced with a different bank stock
Terrible: Although you can hold the S&P 500, you can’t hold it natively in USD. This means lots of FX fees for Wealthsimple 🙁
Neutral: Direct indexing costs 0.15% of holdings
Bad: The service sounds like it will generate a lot of trades, which means a lot of tracking of gains and losses. Wealthsimple helpfully(?) suggests using CRA’s “Autofill my return” feature.
The main value proposition of direct indexing offered by Wealthsimple is the idea of automating tax loss harvesting. For people with large non-registered portfolios, this can be an attractive proposition. Of course, you have to be able to FUND a large non-registered portfolio in the first place. In my case, this would mean liquidating my existing non-registered portfolio and incurring all the capital gains at once. No thanks.
And, I can’t stress this enough: using this service in its current incarnation to buy the S&P 500 is a terrible idea. The FX fees will eat into your returns as sure as the sun will rise tomorrow!
Questrade’s Custom Indexing
This is a brand new product from Questrade. All the details are here.
Good: You can define your own index, either starting totally from scratch or using one of the existing templates7.
Bad: It only works for USD stocks8 at the moment. It goes without saying that you should invest using USD and not CAD if you were to choose this route910.
Good: It can be an RRSP, TFSA, FHSA or non-registered account.
Bad: It doesn’t include RRIF accounts.
Neutral: It has to be a new account dedicated to this strategy
Good/Bad: Rebalancing (with “one click”) is in your hands. Good because you maintain total control, Bad because you can be inclined to try to time the market, which is almost never a good idea.
Neutral: Your custom index is limited to 600 holdings.
Good: There’s no charge!
This is a great looking service on paper. I thought that perhaps it would work for my TFSA accounts since I only hold XIC and XEQT in them but I see some limitations in doing that:
Custom indexing doesn’t (yet) support CAD-listed stocks
XEQT holds international stocks; custom indexing can’t. I suppose I could use ETFs to get around that.
XEQT holds ~8500 individual companies, whereas custom indexing is limited to 600 stocks
I suppose I could decompose my all-in-ones (XGRO/XEQT) into their ETF components and build a custom index based on that. This would replace the all-in-one MER with the MER of the individual components, which as I’ve shown previously, would save you money.
I could do this immediately with AOA (my USD all-in-one), but I only hold that in my RRIF account, and direct indexing doesn’t seem to allow RRIF accounts.
Anyway, it’s an interesting offering, and one that I’ll keep an eye on!
My Take
Wealthsimple’s direct indexing might be attractive to someone in the accumulation phase of their investment journey. For me, all the things I have in my non-registered accounts will eventually be sold off to fund my retirement — I’m not adding to that part of my retirement holdings.
Questrade’s custom indexing might be interesting to me once they add support for Canadian equities. Until then, another button to ignore.
Well, for 80% of my portfolio anyway. The equity part. ↩︎
Expressed as MER (Management Expense Ratio). This is the percentage of your holdings that goes to pay the expenses of the fund manager. For passive index funds, it should be low — 0.25% or lower. If it’s higher, it should lead you to question what, exactly, the fund is doing. ↩︎
Wealthsimple, Questrade, QTrade, National Bank Direct and Moomoo all offer commission-free trading for stocks and ETFs without restrictions. ↩︎
I’m simplifying here. Wealthsimple’s US offering is actually based on the Morningstar US Target Market Exposure Index which is slightly broader in scope than the S&P 500. But for all intents and purposes, close enough. ↩︎
There’s not a lot of templates but they include S&P 500/200/100 and a few sectors. There’s also user-submitted templates, not sure how these are curated by Questrade (they appear to be rather polished, so I’m thinking these are seed ideas, TBD how many of these become visible over time) ↩︎
This is because Questrade only support fractional shares of USD stocks and ETFs. CAD is “coming soon” but has been for about a year now. ↩︎
