Make 2025 the year you invest in ETFs

Investing isn’t complicated. It may look that way from the outside, but the truth is that anyone can invest on their own.

And by using exchange-traded funds, you can get yourself set up quickly and easily. So why not make 2025 the year you get off the investing sidelines?

ETFs have surged in popularity in Canada in recent decades – and for good reason. They are a cheap, easy and effective way to invest in the stock market. When compared with mutual funds, you could pay less in fees and have your money grow faster with ETFs.

Yet despite such benefits, mutual funds are still far more popular: There is about 4.5 times more money sitting in them than ETFs in Canada.

There are a few reasons for this gap. One is that mutual funds are the go-to investments for bank sales people and financial advisers, while ETFs often aren’t available in these channels.

Also, investing in ETFs has a hurdle: Investors need a brokerage account, something that isn’t needed for mutual-fund investors. And investing at a discount brokerage means you get no help choosing your investments. For many people, this can feel like stumbling block.

The fact is that getting set up with an online broker and investing in ETFs is straightforward. Yes, it takes a bit of effort to learn the basics, but fortunately, there’s a lot of good information online about ETFs and passive investing.

You could also pick up a book on investing: Have a look at the Canadian Couch Potato’s recommendations. Once you are set up, there’s very little work required moving forward, and no, you don’t have to read the financial news.

You have a few choices for getting invested in ETFs. There’s the hands-off-do-most-of-it-for-me approach, using a robo-adviser, and the do-it-yourself (DIY) method.

If you want the simplest and most hands-off option, then go with a robo-adviser, a software program that decides how to invest your money. There are a number of them in Canada, some of which are independent firms such as WealthSimple, Justwealth and Questwealth, and others that are affiliated with banks and other financial companies.

Once you’ve chosen one, all you need to do is open an account and answer a set of questions. Based on the answers, you are assigned a risk-rating, and the robo-adviser determines what the appropriate asset allocation is for you – that is, how much you should invest in stocks and bonds.

It then invests your money in a set of ETFs that line up with your asset allocation. And that’s it: You are now an ETF investor, and you don’t need to do anything else.

If you are instead interested in being a DIY investor, you can save a bit of money by avoiding the fee that the robo-adviser charges – usually 0.40 per cent to 0.50 per cent a year. As a DIY investor, it’s up to you to decide on your allocation to stocks and bonds, and how to split up your investments between Canada, the U.S. and international markets.

Making this decision is really not difficult – there’s no “perfect formula.” You can get some guidance by filling out an investment questionnaire such as Vanguard’s and then looking at examples of different portfolios.

Once you’ve made your asset allocation decision, you can take two routes: one is to choose a handful of ETFs that line up with the allocation you’ve picked; or you can use an all-in-one or asset allocation ETF, which does the job of picking the individual ETFs for you. (And by the way, if you want to choose your own ETFs, you can just copy what these all-in-one products are doing.)

All that’s left to do is buy your chosen funds, and that’s also simple. Placing trades online is quite intuitive, and your online broker will have articles and videos to walk you through the process. And remember, there is also a real person you can call if you need help with the mechanics of trading, although not to give you advice on how to invest.

In my experience, people who learn to invest using ETFs find it much easier than they expected, and most wish they had learned sooner. Don’t procrastinate any longer – make 2025 your year to invest.

Anita Bruinsma is a Toronto-based financial coach. You can find her at Clarity Personal Finance.