Do you want a $1 million pension? 2 simple index funds to buy and hold for decades

Retiring comfortably nowadays requires much more than before. With rent averaging more than $2,000 for a single person and food prices continuing to rise, many Canadians are reconsidering what constitutes an adequate amount for retirement. Financial advisors used to say that about $600,000 was enough. Today, most Canadians think it’s closer to $1 million, including both real estate and liquid savings. If you’re planning to retire in Toronto, you’ll almost certainly need seven figures to retire comfortably.

The question is: how do you get $1 million in retirement savings? If you have a very high-paying job it shouldn’t be too difficult, but if you are paid modestly, you need to be very diligent about investing consistently and be careful about what you invest in. With that in mind, here are two Canadian exchange-traded funds (ETFs) that can help you fund your $1 million retirement.

iShares S&P/TSX Capped Composite Index Fund

Vanguard S&P/TSX Capped Composite Index Fund (TSX:XIC) is one of Canada’s largest and most liquid (i.e. heavily traded) index ETFs. Brought to you by BlackRockone of the most important asset managers in the world, is a staple in the portfolios of many Canadian investors.

The iShares S&P/TSX Capped Composite index fund is known for its broad diversification. It is based on the S&P TSX Composite, an index consisting of 240 market-cap weighted stocks. XIC actually owns about 220 of the 240. So the fund is broadly diversified and represents the underlying index well.

What else does iShares S&P/TSX Composite Fund have to offer?

A lot of. It has a management expense ratio (MER) of 0.05%, making it one of the cheapest of all Canadian funds. It has a very low bid-ask spread, which limits hidden trading costs (i.e. fees charged not by the fund managers but by market makers). And finally, the fund is managed by a renowned asset manager – the largest index fund manager in the world – who can ensure that all day-to-day fund operations run smoothly.

Vanguard Emerging Markets All Cap ETF

Vanguard Emerging Markets All Cap ETF (TSX:VEE) is a Canadian emerging markets fund. It mainly holds shares in companies based in China, India and other Asian countries. It also has some exposure to Latin America.

VEE is doing very well this year and is significantly outperforming the market. It’s no surprise this is happening: Chinese stocks are far outperforming US stocks and other global stocks this year, and they’re a big part of VEE. His top company, Taiwanese semiconductor manufacturingreally crushed it too.

Like XIC, VEE has some very desirable technical features. It contains 6,038 stocks, which is phenomenal diversification. The underlying portfolio has a low price-earnings ratio (16) and high earnings growth (16%). And finally, the fund is cheap, with an MER of 0.25%. At a time when many of the world’s smartest investors are prioritizing investments in emerging markets, VEE seems like a solid buy.