How Canadians can invest in the S&P 500, Nasdaq 100 and Dow Jones with ETFs

So you want to invest in US stocks? That’s probably a good idea. The US stock market represents roughly 60% of the global stock market. To ignore this completely is to ignore a large part of global growth.

But how you invest in US stocks matters. You could try to select individual companies. However, for beginners, it usually makes more sense to use an index exchange-traded fund (ETF). This gives you immediate diversification and keeps costs low.

Let’s take a look at three popular ways Canadians can gain exposure to U.S. stocks using ETFs that track the S&P 500, the Nasdaq 100 and the Dow Jones Industrial Average.

The S&P 500 option

If you want broad exposure to the US economy, BMO S&P 500 hedged to CAD Index ETF (TSX:ZUE) is an easy choice.

This ETF tracks the S&P 500, which includes 500 major U.S. companies selected for their size, liquidity and consistent earnings. Think of it as a snapshot of corporate America. You will gain exposure to technology, healthcare, consumer companies, industrial companies and more.

ZUE is affordable, with an expense ratio of 0.09%. That means you pay $9 per year for every $10,000 invested.

It is also currency hedged. This means that the ETF aims to remove the impact of movements between the US dollar and the Canadian dollar. If the US dollar weakens, your returns won’t go down. The trade-off is that hedging is not free and can reduce performance somewhat in the long run.

Additionally, like most Canadian-listed ETFs that hold U.S. stocks, dividends are subject to a 15% U.S. withholding tax. This creates a small resistance over time. But if you want simple, diversified US exposure, ZUE can get the job done.

The Nasdaq 100 option

If you want to lean harder on innovation and growth, BMO Nasdaq 100 shares hedged to CAD Index ETF (TSX:ZQQ) may appeal.

Unlike the S&P 500, the Nasdaq 100 contains only 100 companies. It completely excludes financial stocks and is heavily focused on technology and growth companies. Just ten stocks can make up more than half of the portfolio.

This means greater exposure to topics such as artificial intelligence, cloud computing, semiconductors and digital advertising. If these areas flourish, ZQQ could outperform broader indexes.

But there are tradeoffs. Returns are lower because many of these companies reinvest profits instead of paying dividends. The fund is also more expensive, with an expense ratio of 0.39%. And because it is more concentrated, it can be more volatile.

The Dow Jones Option

If you prefer something more old fashioned, consider BMO Dow Jones Industrial Average hedged to CAD Index ETF (TSX:ZDJ).

The Dow is one of the oldest stock indices in the world. It includes just 30 large, prominent U.S. companies chosen by a committee. It is price-weighted, meaning more expensive stocks have more influence.

Because it includes established companies from multiple sectors, the Dow often has a slightly more value-oriented look compared to the tech-heavy Nasdaq 100. Its yield is higher than both, reflecting a preference for dividend-paying companies.

ZDJ has an expense ratio of 0.26%, which puts it between ZUE and ZQQ in terms of costs. If you want to get acquainted with iconic American blue chips without going all-in on technology, this is a reasonable middle ground.