Episode 130: The Millionaire’s Secret to Investing: Why Successful Canadian Investors Use ETFs Over Stock-Picking

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Are you tired of stressing over which individual stocks you should be adding to your Canadian investment portfolio? 

Wondering if there’s a smarter, simpler way to invest without losing sleep over market swings?

In this episode, we explore why Exchange Traded Funds (ETFs) have quickly revolutionized how Canadian investors—from beginners to seasoned pros—build wealth. Whether you’re looking for a hands-off Canadian investment strategy or want to actively trade like a pro, ETFs offer unparalleled flexibility, diversification, and cost-effectiveness. You’ll discover how these powerful investment tools can protect you from the pitfalls of single-stock investing and why they’re a key component of a Canadian millionaire’s long-term success.

What you’ll learn:

• Learn why ETFs are often a smarter, safer alternative to individual stocks.
• Discover how ETFs cater to both passive “set it and forget it” investors and those who love hands-on strategies.
• Get a clear, actionable roadmap for starting your self-directed, ETF investment journey today.

Press play now and learn how to make ETFs a cornerstone of your wealth-building strategy—because smarter investing starts with informed decisions.

Resources:

• Ready to take a deep dive and learn how to generate personal tax free cash flow from your corporation? Enroll in our FREE masterclass here. 
• Book a Discovery Call with Kyle to review your corporate (or personal) wealth strategy to help you overcome your current struggle and take the next step in your Canadian Wealth Building Journey!
• Dig into our Ultimate Investment Book List
• Interested in opening an Interactive Brokers Trading Account? Use our referral link here so you get a welcome bonus.
• Follow/Connect with us on social media for daily posts and conversations about business, finance, and investment on LinkedIn, Instagram, Facebook [Kyle’s Profile, Our Business Page], TikTok and TwitterX.
• Looking for a new mortgage, renewal, refinance, or HELOC? Reach out to Jon to share some options.

Calling All Canadian Incorporated Business Owners & Investors:

Consider reaching out to Kyle if you’ve been…

• …taking a salary with a goal of stuffing RRSPs;
• …investing inside your corporation without a passive income tax minimization strategy;
• …letting a large sum of liquid assets sit in low interest earning savings accounts;
• …investing corporate dollars into GICs, dividend stocks/funds, or other investments attracting cordporate passive income taxes at greater than 50%; or,
• …wondering whether your current corporate wealth management strategy is optimal for your specific situation.

Achieving financial independence retire early (FIRE) requires smart planning, especially when it comes to growing your net worth and generating passive income with a focus on the sequence of returns of your Canadian investment portfolio. In this episode, we focus on why Canadian investors are better diversified and protected using index Exchange Traded Funds (ETFs) instead of trying to pick the next best stock on the TSX, S&P500 or NASDAQ. For business owners, navigating the complexities of corporate structures, tax implications, and investment strategies can feel overwhelming. From understanding capital gains rules to leveraging life insurance for wealth optimization, the right approach can transform your financial future. By aligning your strategy with tax-efficient tools, you can unlock the full potential of your business and investments, ensuring sustainable growth and long-term independence.

Transcript:

Are you tired of the stress of picking individual stocks? Maybe you’re intrigued by our recent episodes introducing the set it and forget it covered call options strategy, or maybe you’re just seeking out a smarter, easier way to grow your wealth. Well, in this episode, we’re diving into exchange traded funds or ETFs, the index investing tool that’s changed the game for everyone from beginners to seasoned

investors and even traders. You’ll learn why ETFs might be the smarter choice over individual stock picking, how they fit seamlessly into both passive and active investing strategies, and how you can get started today regardless of the type of investment account or broker you might be using. Stick with us because by the end of this episode you’ll have a clear roadmap for making index funds and ETFs

a part of your portfolio and your investing process. You’ll be saving time, money and stress in the process. So let’s dig in. All right there, Canadian wealth secret seekers. It’s Kyle here for another Friday secret sauce episode. And I thought it would just take you down the path of exchange traded funds.

Recently, we’ve had a lot of folks commenting out there on YouTube on different social platforms, as well as reaching out to us, asking us about some of these different strategies we’ve been talking about in the market. As you know, early in our journey, we talked a lot about our experience in real estate investing and by all means, we are still heavily

invested in the real estate market and we actually will be doing some episodes on what we’ve got going on south of the border actually in the US. But right now we’re going to talk a little bit about what you might be able to do or adjust in your investment process. Now, just keep in mind, for those who are listening, by all means, everything we talked about in this episode, we are not giving advice here, we are not telling you what you should do.

We just want to make sure that you are aware of some of these ideas and strategies out there. And we’re going to share some of our thinking about the market. As you may know, earlier in this journey, early in the, you know, we’ll call it in the teen episodes or so, back when this was the Invested Teacher podcast, we talked a little bit about some of our concerns about the stock market, right? It seems almost like, you know, too abstract, right? The number goes up one day, it goes down the other day.

Sometimes a company can have great earnings, for example, and then the stock goes down the next day, right? These are things that can be really, really tough to try to deal with and grapple with. Now, for those of you who are in set it and forget it portfolios already, we’re not suggesting that you have to do anything here. However, being exposed to some of the ideas that are out there might change your tune a little bit, or at least get you thinking a little bit differently about what you have going on.

First and foremost, I wanna share why we are big fans of ETFs. Now we’re not suggesting that we’ll never buy an individual stock or an individual company, nor are we suggesting that you shouldn’t do the same. But the one thing that really pops into my mind every time I think about those people out there that are picking individual stocks of individual companies is that oftentimes those companies either do well,

or they don’t do well. And the part that’s really upsetting is the fact that every decade or two, you’ll see companies coming in and out of the S &P 500 or the NASDAQ or some of these other index funds or indexes, I should say, and markets. And basically what ends up happening is that company might actually go to zero. So if you pick a company and you put all your money or all your eggs in that basket, you might go to the moon.

Right? Maybe if it was Amazon or maybe it was Tesla or whatever it is that you did, or it could go the other way as well. Right? Some of these companies actually don’t last and they may never come back. And that can be definitely scary. So that’s why a lot of people talk about diversification, right? So if you have diversification, you can do this in a couple of different ways. One way is you can buy, you know, all kinds of different companies. You can buy all kinds of different stocks and you know, you’re diversifying in that regard.

Or what you can do is you can actually lean on ETFs to help you. These are exchange traded funds. And there are a bunch of them. They are very, popular nowadays, especially in the last couple of decades. They become very, very popular. And that means they have like trillions of dollars invested into these ETFs. Now, some have very low MERS, right? So that’s the actual management fee. Some of them have a little bit higher MER.

depending on your investment style. If you’re gonna be a buy and hold, then really paying attention to those MERs is gonna be really important. Now, if you wanna be a covered call trader, like we do, some of our strategies, it’s not the only option strategy we utilize, but when we do covered calls, we need to make sure it’s on ETFs that are optionable, meaning they have options and they trade options, and we also need to make sure that there’s enough, we’ll call it enough volume.

in the market so that you can successfully trade those options, right? If it’s an ETF that has very little volume or very little action or very little invested in that ETF, then you’re not gonna see the stock price moving around or you’re not gonna have the opportunity to take advantage of some of these more complex strategies. So figuring out who you are and what it is that you’re after is gonna be really, really important. Now,

There was a study done, and I’m just going to cite this, and we’re going to do an episode on this coming up as well, where they interviewed 10,000 millionaires. OK, there was 10,000 millionaires. And basically, the question was asked to them is, like, how did you become a millionaire? And out of those 10,000 millionaires, none of them said it was by picking a specific stock, right? It was about, and none of them actually talked about it being inherited either. So that was a really important point here, too.

So it’s not about them just, you know, sorta, you know, receiving money or being, you know, eating from the silver spoon or anything like that. They had actually made it on their own. And one of the things that they cited was by investing consistently in the markets. And they weren’t specifically just talking about the stock market. They were talking about assets in general, but it wasn’t a specific asset that got them there. So what that means to me and how I interpret this is that an ETF

actually helps you with some of this diversification kind of keeps you out of trouble because here’s something really interesting. Let’s pretend that you invest in the S and P 500. Let’s pretend you put a significant amount of money in today and tomorrow the S and P 500 goes down by 30%. While you’re not going to feel good about that, the one thing that you’re not going to in your mind think of is is the market never going to come back.

right? Whereas if that money is in with a specific company, that company may go under that company may go out of business. And with an index, what ends up happening is some of these companies do go under some of these companies do fall out of the top 500 companies, and they’re replaced by a different company. So that is kind of automatically giving you diversification across at least whatever market or index that you’re working with.

So some of you set and forgetters, you might be thinking to yourself, well, like maybe I’ll just do the S &P 500. Others have emailed me and said they do like a total market or a total international market ETF. That’s an option as well. You’re basically like betting on the world to do well over time, right? That’s a pretty safe option. I’m going to show you a couple examples here that doesn’t suggest that it doesn’t mean you’ll never have a drawdown.

but at least you know that, like some country is gonna come out alive here, right? I tend to think that the US still has a lot of positive economic growth. So I feel really good about that. Some of you feel really great about Canada. So I’m not gonna speak to that. I’m not gonna tell you where or where you shouldn’t be buying your ETFs or what markets you should be buying those ETFs in. I just want you thinking about how can I do this? And can I do it?

like passively, but also I want to speak to some of those more active investors. Those of you that perked up when you heard about the covered call strategy, you can also use ETFs and still be active. How can you do that? Well, there’s a couple of ways you can do that. You can buy on red days and you can sell a little on on green days, right? Like that sounds like a logical thing to do, right? But a lot of us don’t do it, right?

like it’s very hard to be routine. It’s very hard to be disciplined. Now, for some of you, might go, you know what, I only want to log into my account once a year. And if that’s you, great, fine. You probably want to do a dollar cost averaging of different ETFs or maybe pick an ETF or multiple ETFs that you feel are worth having in your portfolio. A lot of people would argue that not just sticking to one ETF is the way to go. Like, you know, I would argue that

trying to spread out across different markets is probably going to be very helpful. And the more educated you are, the better you can decide when it might make sense to fund some of these ETFs. And for some of you, you might not want to go down that path at all. So probably just DCA into a S and P 500 or maybe half in the S and P 500 half in the NASDAQ, which is very tech heavy. Uh, you get to decide what this looks like and sounds like for some of you.

Although it’s not me, some of you might just pick a dividend ETF, where it’s like a bunch of dividend companies go in, and it’s got a dividend every year. The dividend’s not going to be like massive. It’ll probably be a few percent. But if that’s your style, hey, rock and roll. Work with it. Do whatever you need to do. The reality is, though, is that over the long run, just collecting dividend from dividend stocks is not going to get you as far as, picking equities.

or even equity ETFs. So these are things to think about for our incorporated business owners buying ETFs that have dividends is probably not going to be a great move either for you because if you’re buying it inside of your corporate structure, you’re going to have potentially high passive income taxes. You’re going to have to pay 50 % in passive income tax ish. I’ll say our friends in Alberta, they get a discount. They get around 46 % as of this recording, but

For those of us in other provinces like Ontario, it’s actually over 50 % of interest or dividends are going to be taxed at, you know, at this high rate, which is not fun at all. So there is some thinking to be done here, but the one thing that I will say is that even without thinking, one thing I can tell you is you’re going to be better off if you’re investing into something than not investing. So if you hear this and you go, I got to, you

maybe you’re like me a fact finder where it’s like, you know, you need to learn everything before you pull the trigger. Probably not the best move. You can always adjust as you go. So get in there even if it’s passive or even call up the big bank that you work with and say, listen, I need to get myself on a dollar cost averaging routine.

even if you find out later, hey, maybe the MERS are high, get started. And once the portfolio gets large enough where these MERS fees become problematic for you, that’s when you might say, okay, now it’s time for me to shift away. So let’s talk a little bit about some ETFs. I’m going to share my screen here. So those on YouTube, you get a little bit of a, you know, a little bit of extra here on this particular episode, but I’m just going to share a couple ETFs that you might consider.

Exploring so the one that I’ve got on the screen here, by the way, I use trading view as my my actual stock market sort of tracker. And, you know, I’m watching, you know, here I’m using candlestick pattern. So you can see green days are up days, red days are down days, and you can even see wicks on there. So it kind of just lets you know where the price moved in a specific time period. Right now we’re looking at a daily chart.

you don’t have to go down this path, you don’t have to get trading view, you don’t have to study charts. But I just want to give you a sense as to like, where you know, you can use a little bit of insight to help you here. Like I’m looking at this is the spy SPY. This is the the the SMP 500 ETF. It’s one of the most heavily traded ETFs out there. And it does move quite a bit. And you’ll see here that it’s done very well.

over this past year. Like I spoke on on a call the other day and someone said, you know, I just took over my portfolio and you know, I did pretty well like he’d been having someone else manage his portfolio getting okay returns. He takes over the portfolio and he’s like, man, I did like 30%. And I was like, okay, he did recognize though he’s like, well, you know, I know I’m not a hero, the market did well. And as you can see here, if I start back in, you know, December 2023,

here and I go all the way up to where we are, which is January, 2025. you can actually see it’s gone up, you know, the market went up 30%. So when he says, you know, I did pretty well, he could have just bought the S and P 500 ETF and it would have went up 30%. Right now it would have went up and then down, right? So it would have went up a 12 % here until March. And then it would have went down a little bit, would have went up again and then down a bit. But you see the general trend is up here.

So that’s a great thing. It’s not always gonna do that as consistently. So what you’re gonna see on my screen is, first off, if today you were like, you know what, I wanna get into ETFs and I’m gonna do it now. I’m gonna put money in the market now. And you just log into your brokerage and you type in SPY, that’s the ticker. And you’re like, I’m gonna put some money into the market. One thing that is worth noting here, if we kind of zoom into what’s going on right now,

is you’ll see that like we are floating right at about an all time high right here, you know, and it’s probably worth me like throwing in a line here, I’m gonna draw a horizontal line. So the spies trading today at 607 $607. Okay, you can buy it, you can buy one share for $607, you can buy 100 shares for $60,000. And then you can sell options on it if you wanted to, you can do all kinds of different things. But the thing that I want to keep you keep in mind is you see,

for today, the day before, the day prior to that, you’ll see we’ve actually had three updates in a row getting us right up to this all time high. Now what could happen, so you could just take off from here, like you could keep going. But what I’m gonna say is that, you know, it might be best to wait for one of these red days, even if that red day like isn’t gonna pull back too much, that might be a better move than say just like going all in here at the all time high. So,

Why I’m sharing this with you is that there are ways that we can be strategic. And there’s also ways that we can sort of eyeball whether a market is trending upwards, whether it’s sideways or whether, you know, it’s down. Now, when I say sideways, maybe it’s like up and down, it’s kind of not deciding. Here, you can see we have moving averages up on the screen. I have a 200 day moving average in red here. And I’ve got a 50 day moving average.

in yellow. And what you can see here is that we are trading above both of those lines and both of those trends are trending upwards. So it’s suggesting to me that you know what we are in like a pretty good bear market here and we’ve been in a pretty good bear market for quite some time. Now if we explore back a little you’ll see those lines kind of curve. And when was that like when was it that we were actually like sort of trending down? Look at that.

the yellow line started trending down January 2022. The red line started trending down shortly thereafter, which is the 200 day moving average around May 2022. And it just kept going down, kept going down. And then eventually it started coming back again. So what you can do is you can actually like use a little bit of these indicators to kind of give you a sense as to like how bullish

or maybe how bearish you might be on a certain market or a certain index fund. Now, for those who are just set and forget, if you just do this like every week or every month or whenever it is that you’re buying into these assets, you’re going to over time just be what they call dollar cost averaging. You’re just gonna like slowly move money in. You’re not gonna worry if it’s up or down. Some days it’s gonna be down and you’re gonna get a good buy.

Other days is going to be up. You’re not going to get a great buy, but over time you’re generally going to move up and it’s going to be absolutely fine for you. However, some people want to be a little more hands on and that’s who I’m speaking to here today. Let’s look at the cues really fast. Cues are doing a very similar. You know, they’re they’re performing very similarly to the spy right now. They’re at the top near the all time high, which is up here. It’s at 532 today. The all time high is at about 538.

And you’ll notice I got a little box here on the screen. You can see this box is sort of in my world, a bit of like a trading range. So it’s like, if I’m up near the top of this box, I might not buy on, you know, those days. I might sell a little bit up here and near the bottom of this box, I can actually do some buying and you know what, guess what? Some days you’re going to win and some days you’re going to lose. But one thing I can tell you is that over time, it’s going to be a

Okay, and that’s one thing that I love about ETFs is that really what I’m trying to do is I’m trying to give myself a little bit of an advantage here. So that you know why buy at the top end of this range. Now if it breaks out of this box, then it’s like now I have to sort of like start thinking to myself, okay, you know, is this thing going to just start ripping away but we what you’ll notice is that it tends to come back to you know, kind of play near this yellow line this 50 day moving average right now we’re way above it.

And it will eventually come back down to that line. Now it might move higher in the meantime, but what I’m trying to do or what I’m trying to avoid is going all in at sort of we’ll call it the top, right? Now, again, even if I did, and even if it did pull back 20%, this is an ETF. And I know that over time it is going to come back. But if we look at maybe an ETF like the IWM here, you’ll see here it’s in a general bull trend.

But what you’ll notice is that only recently did it get back to its all time high from November, 2021. November, 2021, it hit 244 and it only got back to 244 around November, 2024. So about two years later, it took two years. You’ll see here that like way up here, if you bought way up here, it was way above the 50 day moving average. And you’ll notice the 50 day moving average was sort of like flattening out.

And so is the 200 day moving average. And then all of a sudden it just started ripping down and somewhere around there would be a good place to sort of, you know, maybe sit on the sidelines until you can see the price action sort of, you know, get to a logical levels again. So over here, what we’re trying to do is just to kind of give you a heads up here that

Once again, these people that held the the IWM, which is the Russell 2000 ETF, these are small cap companies in the US 2000 small cap companies. Guess what? You know, you you can, it will come back right now. We just got back to that all time high and you know you you could have been Nostradamus and sold out. But even if you held on, you’re still near an all time high and it looks like it’s going to continue trending higher based on

these moving averages and how things are working. But the one thing I do want to let you know is, you’ll notice here that, you know, the yellow lines flatten out again, and the red line sort of flattened out. And we’re hanging out between the 50 day moving average and the 200 day moving average. So when I look at that, go, you know, I can play in this land. But you know what, it’s like, I’m probably not gonna, you know, I’m just gonna like, wait and see what happens.

So it doesn’t mean like sell it all if you have it, but I’m not going to buy more of the Russell 2000 right now because we’re sort of in this like in the middle of the 200 day average and the 50 day moving average and the yellow line has flattened out. So why, why even why go there? Like why not just play in another place where you see it’s a little bit more bullish.

So these are just some ideas here for you to sort of play around with. I wanna give you an example of a place that I don’t wanna be right now. Here’s TLT. These are the 20 plus year treasury bonds ETF in the US. And basically what you can see is the yellow line is trending down. The red line is trending down just barely, but you’ll notice, you know, since about September,

it’s just been sort of like in a bit of a freefall, like little bumps up, they call this a dead cat bounce and then all the way back down. So ultimately here, what I’m trying to give you is just some ideas that, you know, if you are going to be a little bit more hands on that there’s some things you might want to look at just to kind of give yourself a slight advantage. So one thing that we don’t need to worry about though, is that like making a quote unquote mistake, investing is not a mistake, especially if we’re doing it into ETFs.

And especially if we’re diversified, imagine a world where each ETF that you’re invested in is diversified amongst an asset class. So for example, the S and P 500, the 500 top companies in the US, you have a little bit of all these companies. Now you have more of the bigger companies like Apple and you know, Tesla and some of those, those are bigger companies. So it is going to be more heavily affected. But you’ve got, you know,

some exposure to all of these different companies. The same can be true with all of these different ETFs. So imagine a world where if your ETFs are diversified as well, where it’s not all SMP, but maybe there’s, you know, there’s some, uh, QQQ, which some of those QQQ companies are in the S and P 500 as well. Or maybe you pick an global or an international ETF, um, that is taking advantage of the entire market.

These are all just ideas for you to consider here as you start thinking about, you know, the type of investor that you want to be. There is no right or wrong to this. But one thing I will say for certain is if you’re picking individual stocks, it’s hard to do and it’s hard to do well. You might get lucky, but you might also strike out.

right? And you know, if you’re picking individual stocks, there’s a lot to it. There’s fundamental analysis, but there’s also the technical analysis and the macro behaviors. So where we kind of hang out is mostly an ETFs. There are ETFs for Bitcoin and Ethereum. And now there’s even one for Solana. There’s Bitcoin, you know, there’s ETFs for different asset classes like gold. So

you can play in this land and still try to keep what we call more of a passive or a conservative portfolio so that you’re not going to lose your shirt if you make a wrong stock pick. So a couple of things that I want to leave you with here today. Step one, educate yourself.

understand these basics. Hopefully this episode’s help you with that. Okay. Listen more to our podcast. Check out our Canada or a Canadian wealth secrets.com forward slash books list. So that is at Canadian wealth secrets.com forward slash books. We’ve got some great, great resources there for you as well. And really start to, you know, the second step is like assessing your portfolio and who you are as an investor. Are you going to be a set and forget?

Are you going to be completely hands on looking at your portfolio every day or are you going to be somewhere in between? All right. Think of which ETFs you think is a good start for you, but start somewhere. Okay. Maybe you’re going to pick a broad market ETF like the spy or VTI is one worth checking out. Or maybe you want to look at a global ETF like VX US. that’s a great one that you can check out as well. Now,

Keep an eye on the MER fees, but don’t overwork or overstress about them, especially if your portfolio isn’t significant, right? If you’re not dealing with say a million dollars or whatever portfolio, the MER is not something that you need to overly concern yourself with at this point. You can always shift around and find those lower MER fee funds if you wanna be more passive, all right?

Step four is gonna be opening the right account. Make sure that you’ve got the right accounts opened up to take advantage of your long-term goals. If you’re looking at just passive investing in equities or in dividends, make sure that tax-free savings account is funded. Make sure you’ve got that RRSP if you’ve got a large enough T4 income where it makes sense to be funding that and getting your tax back on that fund.

Open up that unregistered account. If you’re looking to do something like the Smith maneuver or leverage against an insurance policy so that you could take advantage of the market and really have your money working in two places at once. And then step five, which is the last one, it is just take action, start small, pick one ETF to begin and slowly scale in as you gain confidence.

staying passive does not make you a bad investor and getting active does not make you a good investor. Just keep that in mind. All right. So hopefully this has been helpful for you in this particular episode. Remember, if there’s anything we can do to assist you in your journey, reach out to us over at Canadian wealth secret.com forward slash discovery. Once again, that’s Canadian wealth secrets.com forward slash discovery.

and specifically to our incorporated business owners who have retained earnings or maybe they’re taking out a large salary or dividend each year for their lifestyle. You are going to want to get signed up for our business owner masterclass on unlocking your retained earnings. Head on over to Canadian wealth secrets.com forward slash masterclass in order to get enrolled today. It’s completely free and will open your mind to

new worlds so that you can keep more of those tax dollars in your pocket. Head on over to Canadian wealth secrets.com forward slash master class and we will see you soon. Just as a reminder, this content is for informational purposes only. You should not construe any such information or other material as legal tax investment, financial or other advice. And as a reminder, Kyle Pierce, that’s me.

Kyle Pearce is a licensed life and accident and sickness insurance agent and VP of corporate wealth management with the PanCorp team that includes Corporate Advisors and Pan Financial.

Canadian Wealth Secrets is an informative podcast that digs into the intricacies of building a robust portfolio, maximizing dividend returns, the nuances of real estate investment, and the complexities of business finance, while offering expert advice on wealth management, navigating capital gains tax, and understanding the role of financial institutions in personal finance.

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