Best Canadian ETFs
Exchange-Traded Funds (ETFs) have been gaining popularity since their introduction to the Canadian landscape over 30 years ago. Offering a lower risk level compared to stocks and holding lists with hundreds to thousands of securities, it’s no wonder why Canadians are choosing ETFs to build their financial future. Currently, there are over 1,000 ETFs for Canadians to purchase with assets hovering around $200 billion. Since ETFs have multiple underlying assets (unlike stocks that only have one), they can be structured to track the price of an individual commodity, a large group of securities, or even specific investment strategies.
Table of Contents
There are many kinds of ETFs including:
Stock ETFs – access major market index stocks
Bond ETFs – track a bond index or product
International ETFs – invest in foreign-based securities
Industry ETFs – own stocks and securities in a specific industry or sector
Foreign Currency ETFs – trade foreign currencies without complex transactions
Equity EFTs – track an index of equities or shares
Dividend ETFs – own stocks in companies that pay dividends
All-in-One ETFs – bundle ETFs with automatic rebalancing
ETFs have simplified the investing process and made it easier than ever to DIY your dream portfolio without the panic of leaving significant returns on the table.
The Best ETFs in Canada
Whether you’re just kicking the tires on investing, or you drink stocks for breakfast, ETFs are a great way to harness the power of your hard-earned income. To help get your money growing in the right direction, we’ve compiled a list of the best Canadian ETFs.
Best All-in-One ETFs
Vanguard ALL-Equity ETF Portfolio
Dividend Yield: 1.27%
Net Assets: $1.6 B
Vanguard Growth ETF Portfolio
Dividend Yield: 1.81%
Net Assets: $3.2 B
iShares Core Equity ETF Portfolio
Dividend Yield: 1.64%
Net Assets: $813.62 B
Best Canadian Dividend ETFs
iShares S&P TSX Composite High Dividend Index ETF
Dividend Yield: 3.60%
Net Assets: $1.4 B
BMO Canadian Dividend ETF
Dividend Yield: 3.86%
Net Assets: $757.32 M
S&P/TSX Canadian Dividend A
Dividend Yield: 3.13%
Net Assets: $969 M
Best Canadian Equity ETFs
Vanguard FTSE All Cap Index ETF
Dividend Yield: 2.51%
Net Assets: $4.5 B
BMO S&P/TSX Capped Composite Index ETF
Dividend Yield: 2.76%
Net Assets: $7.10 B
Best US Stocks ETFs
Vanguard S&P 500 Index ETF
Dividend Yield: 1.06%
Net Assets: $6.23 B
BMO S&P 500 Index ETF
Dividend Yield: 1.22%
Net Assets: $10.6 B
Best International ETFs
Vanguard FTSE Global All Cap ex Canada Index ETF
Dividend Yield: 1.49%
Net Assets: $1.3 B
iShares Core MSCI All Country World ex Canada Index ETF
Dividend Yield: 1.77%%
Net Assets: $1.9 B
Vanguard FTSE Emerging Markets All Cap Index ETF
Dividend Yield: 2.17%
Net Assets: $1.60 B
Best Bond ETFs
iShares Core Canadian Short-Term Bond Index ETF
Dividend Yield: 2.06%
Net Assets: $3.2 B
iShares IBoxx $ High Yield Corporate Bond ETF
Dividend Yield: 4.06%
Net Assets: $21.39 B
*All figures as of January 2022
What is an ETF?An exchange-traded fund, ETF for short, is an investment fund that lets you buy a basket of securities for one price. ETFs can hold assets like stocks, futures contracts, and bonds, without having to select them individually. Think of ETFs like a burrito. The beans, rice, lettuce, and cheese are the securities, and the tortilla is the ETF holding everything together.
ETF Pros & Cons
Like everything else in life, there are pros and cons to ETFs. It's essential to do your due diligence before deciding if ETFs are the right choice to add to your investment portfolio.
Pros: The Good Stuff
Diversification: ETFs give you access to thousands of assets, making it easy to diversify your portfolio with one or a few ETFs than if you were buying stock individually.
Lower Fees: Because ETFs are passively managed, their fees are lower than mutual funds, which are actively managed.
Transparency: Unlike mutual funds, which only need to report their holdings a few times a year, ETFs allow investors to see their holdings at any time.
Cons: The Not So Good Stuff
Holdings: ETFs are a pre-selected basket of assets; therefore, investors can’t choose the individual holdings.
Fees: Trading ETFs on a regular basis comes with transaction fees and management fees (MERs).
Liquidity: When buying and selling ETFs, there may be limited liquidity as you can only sell if someone wants to purchase that ETF.
How To Buy ETFs in Canada
Purchasing ETFs in Canada can be done through any major bank or Canadian brokerage. We recommend using a discounted broker, like Questrade and Wealthsimple, because their apps are user-friendly and they tend to have lower fees which puts more money in your pocket to invest. If you decide to use one of these apps, purchasing the ETFs is as simple as creating your account, funding your account, and buying the ETF.
Questrade is a fan favorite among Canadians just breaking into the investment market. With key features like Market Data and Watchlists, users can easily track ETFs with real-time market data and quotes to get a feel for patterns and volatility. Questrade is also one of the most competitive brokers for pricing, offering free ETF purchases. You only pay a commission when selling, which fall around $9.95 for each trade and $1 per contract.
Another popular financial service making ETFs more approachable is Wealthsimple. Users can leave the heavy lifting to the online brokerage that will assess your risk tolerance preference to build a portfolio of ETFs, or investors that want to get in on the action can make self-directed ETF trades on major exchange markets in the US and Canada. Users won’t be charged trade commissions and ETFs can be purchased and sold at no cost.
The Bottom Line
With the growing number of ETF options in Canada, it won’t be hard to find one to fulfill your financial goals. And now that you have the best Canadian ETFs at your fingertips, there’s nothing holding you back from making some serious money moves.
Frequently Asked Questions
ETFs and mutual funds are similar as they both offer pooled fund investing. However, there are a few key differences. Fees are the most significant difference between the two. ETFs have lower management expense ratios (MER) because they are passively managed. Whereas mutual funds are actively managed, which comes with a price tag for the time and expertise of a fund manager. ETFs also actively trade throughout the day. Mutual funds are priced only once and close at the end of the trading day.
In a rare but not impossible situation, the broker you trusted with your trades could go belly-up. Typically, brokers provide protection for this type of situation. Securities Investor Protection Corporation or SIPC ensures that customers are not out of luck if a brokerage goes bust and assets are owed to customers. The broker will notify investors so they can either sell their shares or wait until they’re liquidated. This is a much better outcome than the traditional stock market, where investors own equity in a company—if the company goes bust, the investor can lose the value of their entire investment.
MER stands for management expense ratio, which is an annual fee that covers the fund's operating expenses. The MER is comprised of several expenses like legal fees, taxes, management fees, and administrative costs. The cost of the MER does not have any impact on how the fund will perform, meaning a low MER doesn't guarantee great returns, whereas a high MER doesn't mean worse performance. MER fees matter more over the long term and should only be one thing that is analyzed when you are deciding which ETFs the best addition to your portfolio.