Thanks to the Bank of Canada’s two jumbo 50bps cuts while the U.S. Federal Reserve hasn’t budged, the USD/CAD exchange rate has surged to new highs—or new lows, depending on your perspective.
Right now, $1 USD is worth $1.44 CAD. Great for me since most of my clients are U.S.-based, but terrible for the average Canadian already struggling with the cost of living in Trudeau’s economy. Remember when the budget was supposed to “balance itself”? Surprise—it didn’t. The 2023 deficit hit $61.9 billion.
So, if you’ve had a U.S.-listed ETF on your shopping list, that exchange rate might make you think twice. And let’s not forget the 1.5% spread most brokerages charge on top of it, adding insult to injury.
But here’s the good news: the Canadian ETF market has grown into a diverse and competitive space. While U.S.-listed ETFs often get all the attention, there are plenty of Canadian-listed alternatives offering similar strategies—without the currency headache.
Here’s my buyer’s guide to finding the right Canadian-listed ETF alternatives.
Buy this instead of TSLY
Income-hungry investors in the U.S. have been piling into the YieldMax TSLA Option Income Strategy ETF (NYSE:TSLY).
This fund uses a "synthetic covered call strategy"—buying a long call and selling a short put at the same strike, then selling a short call—to deliver a jaw-dropping 110.57% distribution yield as of December 30.
For Canadian investors, the closest listed alternative is the Purpose Tesla (NASDAQ:TSLA) Yield Shares ETF (YTSL), and honestly, I like it better. Unlike TSLY, YTSL actually holds Tesla stock and isn’t just a derivative onion.
Here’s how it works: the fund borrows up to 25% of NAV to invest in TSLA with 1.25x leverage. Then, it sells covered calls on up to 50% of its holdings to generate income.
While YTSL’s distribution yield of 11.26% might seem modest compared to TSLY, total return is what really matters. Year-to-date, YTSL is up 26.06%, outperforming TSLY’s 20.76%.
Additionally, YTSL is more tax-efficient for Canadian investors, as its distributions are classified as either capital gains or return of capital, rather than the ordinary income you get from TSLY.
Buy this instead of DGRW
I’m a fan of the WisdomTree U.S. Quality Dividend Growth Fund (NASDAQ:DGRW), and I’ve covered it before as one of the best dividend ETFs you can buy.
It’s built around a fundamental index that screens growth stocks based on long-term earnings growth expectations, while also incorporating quality factors like three-year historical averages for return on equity (ROE) and return on assets (ROA).
Another feature I like is its weighting methodology. Instead of weighting stocks by market cap, DGRW weights them based on the size of projected cash dividends.
DGRW also boasts a 5-star Morningstar rating, which means it’s ranked in the top 10% of its category based on past risk-adjusted performance. And historically, it’s outperformed SPY on a risk-adjusted basis, making it a great choice for investors seeking income with lower volatility.
If you’re a Canadian investor looking for a direct alternative to DGRW, check out the CI U.S. Quality Dividend Growth Index ETF (DGR) and the CI U.S. Quality Dividend Growth Index ETF (DGR.B).
While these ETFs have a slightly higher MER of 0.38% (DGR) and 0.37% (DGR.B), as a Canadian investor, you’re probably used to this by now.
Both track the same index as DGRW, offering identical growth and quality factor screens. The only real difference is that they’re traded in CAD and lose 15% of dividends to U.S. withholding tax.
Buy this instead of IBIT
Bitcoin surpassed the $100,000 mark this year, and if you’re feeling FOMO, I’m not here to talk you out of it. Just remember, it’s sitting near all-time highs, and everyone is feeling euphoric and greedy—proceed with caution.
The big winner of this milestone in the U.S. has been the iShares Bitcoin Trust (NASDAQ:IBIT), which now boasts $52 billion in AUM.
So yes, you could convert your CAD to USD, eat the high exchange rate, and buy IBIT—or you could just pick up a Canadian-listed spot Bitcoin ETF, which has been around for years.
I like the Purpose Bitcoin ETF (BTCC). It was the first of its kind and remains a solid option. While its 1.31% MER is pricier than IBIT’s 0.25%, once you factor in the currency conversion costs most brokerages charge, BTCC still comes out ahead for Canadian investors.