Best U.S. ETFs for 2022

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Overview
Canadian
U.S.
International
Fixed-Income
All-in-One
Desert-Island Picks

It’s certainly been an interesting year for U.S. equities, with most of the markets down by quite a bit year-to-date. That’s not going to stop investors from buying into the biggest markets in the world, and ones that are far more diversified than our own. While you can get a lot more technology or healthcare by owning an S&P 500 ETF or a NASDAQ ETF, investors should take the same approach to ETF-picking as they take to Canadian equity funds: focus on diversified and low-cost options.

That’s what drove our panellists to choose the seven funds on this “Best U.S. ETFs” list, which is three fewer than was picked last year. (The BMO S&P 500 Index ETF, the Vanguard S&P 500 Index ETF and its Canadian hedged version were voted off the list this year.) XUU and VUN (the full ETF names can be found in the chart below) made the list once again, in part because these total-market funds give Canadians exposure to a broader swath of the U.S. market than traditional S&P 500 funds, including mid- and small-cap stocks that aren’t in the S&P 500.

“I like total market or all-caps indexes as opposed to just the S&P 500, because there’s a heck of a lot more than 500 companies in the US and I think it’s wise to hold a slice of them all,” says panellist Robb Engen.

For panellist Mark Yamada, XUU is best for long-term holders because of its low fee of 0.07%. “Goal-based investors, who are targeting specific sums of money at certain future dates, might consider low-volatility products that help control volatility over shorter periods,” he adds. Our list of U.S. ETFs includes a few low-vol products, such as ZLU, XMU and FCUL.

One choice from our panel that investors may be curious about is QQQ, which is a tech-centric ETF that tracks the NASDAQ. It’s done incredibly well over the last five years—up almost 100%—but it fell on hard times in 2022, dropping by nearly 25% as of the time of writing. Still, it made the list with five out of our eight panellists giving it the go-ahead, in part because while tech has struggled lately, thanks to rising interest rates and other inflation-tightening measures, it’s still a strong long-term play that will be worth getting into again at some point.

“I think the stock market growth of the tech sector may be on pause,” says panellist Mark Seed. “The tech sector will continue to grow, and growth sectors are generally hit first when inflation rises.” He also adds: “Once interest rate cycles play out a bit more, this may restore the tech sector exposure in the index throughout the transition period ahead.”