The Best ETFs in Canada 2022 For Young Investors

According to Investor Economics via the CEFTA July 2022 Report (PDF), there are 1,008 ETFs available today in Canada worth a combined $329 billion.

But you might be wondering what an ETF is. If you are completely new to ETFs, go check out this in-depth ETF guide and then come back and read this article. 

If you want to know about the best (most popular) ETFS in Canada….pull up a chair, brew some of your favourite coffee, pop some of your favourite….um, corn and keep reading!

Table Of Contents
  1. What is an ETF?  Definition
  2. Why Should I Invest in ETFs?
  3. Types of ETFs
  4. Categories for ETFs
  5. The Best Canadian Equity ETFs
  6. The Best American ETFs
  7. The Best International ETFs
  8. The Best Bond ETFs
  9. The Best All-in-One ETFs
  10. Pros vs Cons of ETFs
  11. ETFs vs Mutual Funds
  12. Where to Buy ETFs
  13. Conclusion
  14. The Best ETFs in Canada FAQs

What is an ETF?  Definition

Exchange traded funds (ETFs) are baskets of assets  that are traded on a stock exchange.  ETFs allow an investor to construct a diversified portfolio with just a few clicks of a computer.

What could be better that that?

A side benefit is that you pay much lower fees with ETFs when compared to mutual funds.

If you are a passive investor with a busy life and no financial interest, then an ETF that tracks an index might be the best solution for you.  ETFs allow your investments to earn market returns minus any small fees you pay to the ETF provider.

The best ETFs for the average person will track a broad market index like the S&P 500 or TSX/60.  Over the long run (twenty years plus) consistently investing in index ETFs should provide you with a sizeable retirement nest egg. 

Why Should I Invest in ETFs?

According to SPIVA, over the past five years 74% of U.S. equity funds that used the S&P 500 as a benchmark actually underperformed it.  That number rises to 83% over a decade long timeframe.

In other words, buying an ETF that tracks the S&P 500 index would be a really good bet over longer timeframes. You would beat 83% of all active comparable funds in the stock market.   In the short-run anything can happen. The long run is where the real money is made though. 

Bringing it back to the homeland of Canada, over the past 5 years SPIVA is reporting that 94% of equity funds underperformed the S&P/TSX Composite Index that tracks the large cap companies in Canada.  In other words, if you bought an ETF that tracked the S&P/TSX Composite Index you would be in the top 5.5% of performers on the stock market. 

Pretty eye-opening stuff, right? 

Types of ETFs

There are many different asset classes, and if there’s an asset class then there is likely an ETF for it.  The main ETF asset classes are stocks, bonds and real estate investment trusts (REITs).  

ETF can hold the following:

  • Stocks
  • Bonds
  • Currencies
  • Real estate investment trusts (REITs)
  • Cryptocurrencies
  • Commodities (gold, silver)

Categories for ETFs

The best ETFs in Canada are grouped by category.  There are five main categories.  There is a category for:

  • Canadian equities
  • American equities
  • International equities
  • Bonds
  • All-in-One funds

The Best Canadian Equity ETFs

Home is where the heart is. For Canadian investors, home is where the dollars are. 

Like most countries, Canadians tend to invest a lot of their money into the Canadian markets. Canadian investors receive favourable tax treatment from the government for the dividends that are paid out by domestic companies.

Canadians like you also choose to invest in large cap Canadian companies due to familiarity. This provides a huge psychological benefit because you are investing in companies you know. 

If you were given the option to invest in Royal Bank, Enbridge and Metro or Taiwan Semiconductor, Tencent and Novartis which would you likely pick? 

Exactly.

Another benefit of investing in Canadian companies through ETFs is that it is always good to have your money in funds that are in your own home currency so you don’t have to worry about conversion costs or foreign exchange costs. 

It should be noted that the Canadian market makes up less than 5% of the world market and it is highly concentrated into the financial and energy sectors. Any index ETF that you buy that follows the S&P/ TSX 60 will have a huge tilt towards those sectors. Although you do gain a degree of diversification you may feel you need more.

Nevertheless Canadian equities are popular here in Canada, and here are some of the best ETFs that track the Canadian markets.

The information below is based on July 31, 2022 data and sourced from Vanguard, BlackRock and BMO. Please check the information on the ETF provider’s website for the most current and accurate data.

1.Vanguard FTSE Canada All Cap Index ETF (VCN)

This is a total market Canadian ETF holding small, mid and large cap companies. That’s a fancy way of saying small, medium and large companies. The top index in Canada is the S&P/TSX 60 but this fund holds three times more companies which means you get more diversification for your dollars. 

  • TSX Ticker: VCN
  • Inception Year: 2013
  • Management Expense Ratio (MER): 0.05%
  • Dividend Yield: 2.85%
  • Holdings: 185
  • Assets Under Management: $4.88 billion
  • Composition: 100% stocks  
  • 1/3/5 year average annual returns (%): -0.20/9.38/8.34
  • Equity = North America 100%
  • Top 5 Sectors: Financials 32.5%, Energy 18.2%, Industrials 10.6%, Basic Materials 10.5%, Utilities 6.4%
  • Top 10 holdings: 38.1% – Includes Royal Bank, TD Bank, Enbridge, Bank of Nova Scotia, Canadian National Railway, Brookfield Asset Management Inc.

2. BlackRock iShares Core S&P/TSX Capped Composite Index ETF (XIC)

TSX Ticker: XIC

Inception Year: 2001

Management Expense Ratio (MER): 0.06

Dividend Yield: 3.03%

Holdings: 238

Assets Under Management: $9.12 billion

Composition: 100% stocks

1/3/5/10 year average annual returns (%): -0.23/9.51/8.63/8.53

Top 5 Sectors: Financials 31.2%, Energy 18.5%, Industrials 12.7%, Materials 11.0%, Information Technology 5.64%


Top 10 holdings: 36.9% includes Royal Bank, TD Bank, Enbridge, Canadian National Railway and Canadian Pacific Railway.

Summary: This index holds 238 of the biggest companies in Canada, and tracks the S&P/TSX Capped Composite Index.

3. BMO S&P/TSX Capped Composite Index ETF (ZCN)

TSX Ticker: ZCN

Inception Year: 2009

Management Expense Ratio (MER): 0.06

Dividend Yield: 3.10%

Holdings: 239

Assets Under Management: $7.3 billion

Composition: 100% stocks  

1/3/5 year average annual returns (%): -0.23/9.52/8.61/8.54

Region: Equity = Canada 100%

Top 5 Sectors: Financials 33.62%, Energy 14.94%, Industrials 11.80%, Materials 11.21%, Information Technology 8.13%,

Top 10 holdings: 37.15% includes Royal Bank, TD Bank, Enbridge, Canadian Pacific Railway, Brookfield Asset Management.

Summary: Follows the performance of the S&P/TSX Capped Composite Index. This index caps any stock at a maximum of 10% of the portfolio. This is a total market Canadian equity fund that holds almost four times the companies that an index that tracks the S&P/TSX 60, holds.

4. BlackRock iShares Core S&P/TSX 60 Index ETF (XIU)

TSX Ticker: XIU

Inception Year: 1999

Management Expense Ratio (MER): 0.18%

Dividend Yield: 2.94%

Holdings: 60

Assets Under Management: $10.4 billion

Composition: 100% stocks 

1/3/5/10 year average annual returns (%): 0.41/9.93/9.15/9.10

Top 5 Sectors: Financials 36.03%, Energy 17.89%, Industrials 11.95%, Materials 9.57% and Communication 5.94%

Top 10 holdings: 46.25% includes Royal Bank, TD Bank, Enbridge, Canadian National Railway and Bank of Nova Scotia.

Summary: This index is the most popular Canadian equity ETF. It tracks the performance of the S&P/TSX 60 which is filled with the largest 60 Canadian blue-chip companies. 

The Best American ETFs

As mentioned before the Canadian equity market makes up less than 5% of the world market and lacks large sector representation in areas like health care and consumer staples. 

Our neighbours to the South house the largest companies in the world and you should consider gaining exposure to them by investing in a ETF that tracks a American stock market index such as the S&P 500. The S&P 500 holds approximately 500 of the largest American companies. A lot of these firms have international operations as well – so you are further geographically diversifying your portfolio with these selections.

5. Vanguard S&P 500 Index ETF (VUN)

TSX Ticker: VUN

Inception Year: 2013

Management Expense Ratio (MER): 0.15

Dividend Yield: 1.10%

Holdings: 4,076

Assets Under Management: $5.5 billion

Composition: 100% stocks

1/3/5 year average annual returns (%): -5.6/10.85/12.28

Region: United States 99.9%. Other 0.1%

Top 5 Sectors: Technology 26.3%, Consumer Discretionary 14.7%, Health Care 13.6%, Industrials 12.9%, Financials 11.0%

Top 10 holdings: 23.6% includes Microsoft, Apple, Amazon, Tesla, Google and Berkshire Hathaway

Summary: This is a total market index that tracks the CRSP US Total Market Index – the largest companies in the most powerful economy in the world.  This fund holds around 70% in large-cap stocks, including all your favourites like Microsoft, Amazon, Netflix, Disney and Google.

6. U.S. Total Market Index ETF (VFV)

TSX Ticker: VFV

Inception Year: 2012

Management Expense Ratio (MER): 0.09

Dividend Yield: 1.20%

Holdings: 503

Assets Under Management: $7.0 billion

Composition: 100% stocks 

1/3/5 year average annual returns (%): -2.36/11.82/13.04

Region: United States 100%

Top 5 Sectors: Information Technology 27.9%, Health Care 14.3%,Consumer Disc 11.5%,  Financials 10.6%, Communication Services 8.4%

Top 10 holdings: 28.0% includes Microsoft, Apple, Amazon, Alphabet (Google), Johnson & Johnson.

Summary: This index tracks the S&P 500 – the largest companies in the most powerful economy in the world. There are no small or mid-cap companies in this fund.

7. BlackRock iShares Core S&P U.S. Total Market Index ETF (XUU)

TSX Ticker: XUU

Inception Year: 2015

Management Expense Ratio (MER): 0.07%

Dividend Yield: 0.96%

Holdings: 100 (Underlying holdings = 3,629)

Assets Under Management: $2.1 billion

Composition: 100% stocks

1/3/5/10 year average annual returns: -4.13/11.39/12.32

Underlying ETF breakdown (all US domiciled):  IVV 49.64%, ITOT 43.52%, IJH 3.11%, IJR 1.35%

Top 5 Sectors (equity)Information Technology 26.77%, Health Care 13.97%, Consumer Discretionary 11.42%, Financial 11.25% and Industrials 8.71%

Top 10 underlying holdings: 24.36% includes Apple, Microsoft, Amazon, Tesla and Alphabet (Google)

Summary: Invests in the entire US market – from micro to large cap companies. XUU holds American domiciled ETFs within it’s own fund [IVV (S&P 500), ITOT (total US market), IJH (US mid-cap stocks) and IJR( US small cap stocks]. 

8. BMO S&P 500 Index ETF (ZSP)

TSX Ticker: ZSP

Inception Year: 2012

Management Expense Ratio (MER): 0.09%

Dividend Yield: 1.33%

Holdings: 504

Assets Under Management: $9.8 billion

Composition: 100% stocks. 

1/3/5/10 year average annual returns (%): -2.39/11.88/13.03

Region: United States 100%

Top 5 Sectors: Information Technology 28.49%, Health Care 13.25%, Consumer Discretionary 11.70%, Financials 11.40%, Communication Services 10.03%   

Top 10 holdings : 28.19% includes Apple, Microsoft, Amazon, Alphabet (Google), Tesla.

Summary: Very large fund that tracks the S&P 500 index which holds all the biggest American companies.

The Best International ETFs

Investing in North America, especially the biggest the companies in the index gives you international exposure. Companies like Johnson & Johnson, Procter and Gamble, Apple, Facebook have operations all over the world in many different countries. 

Still that doesn’t leave you with true global coverage.  There are many great companies in other countries that have big industries. 

If you want exposure to emerging markets like China and India with huge populations and growing economies you may want to look at investing in an international ETF.  Or you may want to have exposure to great companies situated in Europe; if so, a good international ETF will have all of the above. 

This first three ETFs are Ex-North America, meaning that there are no companies from Canada or the US within the funds. 

9. Vanguard FTSE Developed All Cap ex North America Index ETF (VIU)

TSX Ticker: VIU

Inception Year: 2015

Management Expense Ratio (MER): 0.20

Dividend Yield: 2.97%

Holdings: 3,913

Assets Under Management: $2.81 billion

Composition: 100% stocks 

1/3/5/ year average annual returns (%): -13.45/2.46/2.99

Region: Europe 58.0%, Pacific 40.9%, Middle East 0.8%, Other 0.3%

Market (Top 5): Japan 23.0%, UK 15.2%, France 9.0%, Switzerland 8.9%, Australia 8.0%

Top 5 Sectors: Industrial 17.2%, Financials 16.3, Consumer Discretionary 14.1%, Health Care 12.5% and Technology 9.2%

Top 10 holdings: 12.0% includes Nestle, Samsung, Toyota, Shell, Novartis and Louis Vuitton Moet Hennessy.

Summary: Follows the performance of the FTSE Developed All Cap ex North American Index.  Has 3,913 holdings and no exposure to the North-American markets.

10. BlackRock iShares Core MSCI EAFE IMI Index ETF (XEF)

TSX Ticker: XEF

Inception Year: 2013

Management Expense Ratio (MER): 0.22

Dividend Yield: 3.75 %

Holdings: 2,613

Assets Under Management: $5.2 billion

Composition: 100% stocks 

1/3/5 year average annual returns (%): -13.04/2.34/3.04

Region: Japan 23.44%, United Kingdom 15.82, France 10.12%, Switzerland 9.56%, Australia 8.30% 

Top 5 Sectors: Industrials 16.42, Financials 16.19, Health Care 12.45, Consumer Discretionary 11.61%, Consumer Staples 10.16%

Top 10 underlying holdings: 12.31% includes Nestle, Roche, ASML, Astrazeneca, Shell and Toyota

Summary: Follows the performance of the MSCI EAFE Investable Market Index. 

11. Vanguard FTSE Emerging Markets All Cap Index ETF (VEE)

TSX Ticker: VEE

Inception Year: 2011

Management Expense Ratio (MER): 0.23

Dividend Yield: 2.70 %

Holdings: 5,412

Assets Under Management: $1.54 billion

Composition: 100% stocks

1/3/5/10 year average annual returns (%): -15.0/0.88/1.93/5.08

Region: Emerging Market 99.7%, Europe 0.3%

Market: China 34.1%, Taiwan 17.5%, India 17.1%, Brazil 6.1% and Saudi Arabia 5.0%

Top 5 Sectors: Technology 21.6%, Financials 20.9%, Consumer Discretionary 13.4%, Industrials 8.3%, Basic Materials 7.9%

Top 10 holdings: 18.2% includes Tencent, Alibaba, Taiwan Semiconductor and Infosys.

Summary: Follows the FTSE Emerging Markets  All Cap Ex Canada China A Inclusion Index. This is an all emerging market ETF that is a substitute for XEF.

The next two ETFs are combined US and International ETFs, so you do get a little North American flavor mixed in with the rest of the globe. 

12. Vanguard FTSE Global All Cap ex Canada Index ETF (VXC)

TSX Ticker: VXC

Inception Year: 2014

Management Expense Ratio (MER): 0.20

Dividend Yield: 1.87 %

Holdings: 11,335

Assets Under Management: $1.32 billion

Composition: 100% stocks 

1/3/5 year average annual returns (%): -8.78/7.3/8.03

Region: North America 62.4%, Europe 15.8%, Pacific 11.1%, Emerging Markets 10.4%

Top 5 Sectors: Technology 21.5%, Consumer Discretionary 14.4%, Industrials 13.6%, Financials 13.4%, Health Care 12.3%

Top 10 holdings: 14.9% includes Apple, Microsoft, Amazon, Tesla, Alphabet (Google)

Summary: Follows the FTSE Global All Cap Ex Canada China A Inclusion Index. This fund contains small, mid and large cap companies across developed and emerging international markets. This is a substitute option for XAW.

13. BlackRock iShares Core MSCI All Country World ex Canada Index ETF (XAW)

TSX Ticker: XAW

Inception Year: 2015

Management Expense Ratio (MER): 0.22

Dividend Yield: 1.79 %

Holdings: 6 ETFs (9,396 underlying holdings)

Assets Under Management: $1.7 billion

Composition: 100% stocks 

1/3/5 year average annual returns (%): -7.31/7.66/8.16

Region: Unites States 62.46%, Japan 6.11%, United Kingdom 4.13%, China 3.24%, and France 2.64%

Underlying ETF breakdown (all US domiciled):  IVV 54.22%, XEF 25.34%, IEMG 11.11%, IJH 3.86%, ITOT 2.98%, IJR 2.40%

Top 5 Sectors: Information Technology 20.84%, Financials 13.43%, Health Care 12.49%, Consumer Discretionary 11.83% and Industrials 10.60%

Top 10 underlying holdings: 15.44% includes Apple, Microsoft, Alphabet (Google), Berkshire Hathaway, Johnson & Johnson

This ETF tracks the performance of the MSCI ACWI ex Canada IMI Index. It contains small, mid and large cap companies across both the developed and emerging countries outside of Canada. 

This ETF holds 6 other ETFs IVV (S&P 500), XEF (International), IEMG (Emerging markets), IJH (US mid-cap), ITOT (US total market), IJR (US small cap).

This ETF is also a substitute for VXC.

Canadian investors face withholding taxes on any foreign dividends, which can add on another 0.30% to the MER costs.  On a $100,000 this could cost you an extra $300 per year. For diversification purposes this is a small price to pay in order to have diversification in your portfolio.

The Best Bond ETFs

Bond ETFs generally contain government (federal, provincial, municipal) and corporate bonds. Bonds are rather mundane and boring, but having them in your portfolio will help you sleep well at night. 

This is because bonds are less volatile than stocks, and can cushion the blow of a market crash. 

When I was learning the ropes in the investing game, a common rule of thumb was to hold the same percentage of your portfolio in bonds as “your age – 10”. 

Using that rule, if you are 40 years old, you should hold 30% in bonds. If you are 30 years old, you should hold 20% in bonds.

As you get older, your focus starts to shift from accumulation of capital to protecting it.  That’s why you usually hear that it’s a good idea to increase the fixed income portion of your portfolio as you age.  Rather than buying individual bonds, it is much easier to purchase a bond ETF. 

14. Vanguard Canadian Aggregate Bond Index ETF (VAB)

TSX Ticker: VAB

Inception Year: 2011

Management Expense Ratio (MER): 0.08

Dividend Yield: 2.71 %

Holdings: 1,130

Assets Under Management: $3.33 billion

Composition: 100% fixed-income

1/3/5/10 year average annual returns (%): -9.12/-1.27/1.16/1.82

Region: Canada 95.6%, United States 2.5%

Top Sectors: Provincial/Municipal bonds 39.7%, Treasury/Federal 24.9%, Financial Institutions 11.7%, Agencies 10.7%,

Top 10 holdings: 13.5% almost exclusively made up of Canada Government Bonds

Summary: Holds bonds, over 79% which are AA rated or higher. Tracks the Bloomberg Barclays Global Aggregate Canadian Float Adjusted Bond Index. 

15. BMO Aggregate Bond Index ETF IndexETF (ZAG)

TSX Ticker: ZAG

Inception Year: 2010

Management Expense Ratio (MER): 0.09%

Dividend Yield: 3.13% (weighted average)

Holdings: 1,432

Assets Under Management: $6.07 billion

Composition: 100% bonds

1/3/5/10 year average annual returns (%): -9.02/-1.21/1.21/1.85

Region: Canada 100%

Top 10 holdings : 12.41% Mostly Canadian (federal) bonds and Province of Ontario bonds

This fund contains federal (36.33%), provincial (3.536%),corporate bonds (26.09%) and municipal (2.21%) bonds. This fund is relatively safe, approximately 73% of the bonds have credit ratings of AA or higher.  All bonds are investment grade (BBB) at minimum. 

The bond durations are broken out as follows: short-term (43%), medium term (26%) and long term (31%).  This ETF tracks the FTSE Canada UniverseXM Bond Index.

The Best All-in-One ETFs

You may have looked at the previous categories and wondered, “Isn’t there something a little more easy?”

Well there is. You can purchase one “All-in-One” ETF and be done. That’s it. Simplicity in all its glory. 

These ETFs are globally diversified, so they present far less risk than having a five stock portfolio.

These funds are basically one ETF wrapper that contains multiple underlying ETFs. You can pick a fund based on your risk tolerance

If you are conservative you may have a higher bond weighting in your portfolio. If you are aggressive then you can go with 100% equities. The best all-in-one providers are Vanguard, BlackRock (iShares) and BMO. 

All-in-One ETfs have a major benefit where the fund rebalances your portfolio automatically, so you don’t have to do it yourself. Simple, right?

First up is the suite of All-in-One ETFs from Blackrock. 

16. BlackRock iShares Core Income Balanced Portfolio (XINC)

TSX Ticker: XINC

Inception Year: 2019

Management Expense Ratio (MER): 0.20%

Dividend Yield: 2.75%

Holdings: 8 ETFS (19,485 underlying holdings)

Assets Under Management: $0.035 billion

Composition: 20% stocks and 80% bonds

1 year average annual returns (%): -8.28 (0.91 since inception)

Holds 8 underlying ETFs featuring stocks and bonds from around the globe: XBB 50.89%, XSH 12.71%, ITOT 9.48%, GOVT 8.10%, USIG 7.92%, XIC 5.11%, XEF 4.74%, IEMG 0.92%

XBB and XSH = Canadian Fixed Income

GOVT and USIG = Non-Canadian Fixed Income

XIC = Canadian equities

ITOT = US equities

XEF = International equities

IEMG = Emerging markets equities

Top 10 underlying holdings: 5.90% include Canada Bonds (Federal Government), Microsoft and Apple

Summary: This fund is for ultra-conservative investors who mainly want to preserve their capital.

17. BlackRock iShares Core Conservative Balanced ETF (XCNS)

TSX Ticker: XCNS

Inception Year: 2019

Management Expense Ratio (MER): 0.20%

Dividend Yield: 2.80 %

Holdings: 8 ETFS (20,602 underlying holdings)

Assets Under Management: $0.087 billion

Composition: 40% stocks, 60% bonds.  

1 year average annual return (%): -7.10% (3.05% since inception)

Holds 8 underlying ETFs featuring stocks and bonds from around the globe: XBB 37.68%, ITOT 19.06%, XIC 10.27%, XSH 9.73%, XEF 9.44%, GOVT 6.04%, USIG 5.84%, IEMG 1.84%

Top 10 underlying holdings: 6.58% include Apple, Microsoft, Royal Bank, Canadian Federal Bonds, Amazon

Summary: This fund is for fairly conservative investors, as only 40% of the portfolio holds equities.

18. BlackRock iShares Core Balanced ETF Portfolio (XBAL)

TSX Ticker: XBAL

Inception Year: 2007

Management Expense Ratio (MER): 0.20%

Dividend Yield: 2.93 %

Holdings: 8 ETFs (20,602 underlying holdings)

Assets Under Management: $0.872 billion

Composition: 60% stocks, 40% bonds

1/3/5/10 year average annual returns (%): -7.38/4.79/5.11/5.32

Holds 8 underlying ETFs featuring stocks and bonds from around the globe: ITOT 28.59%, XBB 24.84%, XIC 15.41%, XEF 14.14%, XSH 6.32%, GOVT 4.00%, USIG 3.86%, IEMG 2.73%

Top 10 underlying holdings: 8.52% includes Apple, Microsoft, Royal Bank, TD Bank and Amazon.

Summary: This fund is a more popular balanced portfolio consisting of 60% equities and 40% fixed-income.

19. BlackRock iShares Core Growth ETF Portfolio (XGRO)

TSX Ticker: XGRO

Inception Year: 2018 (listed also as 2007)

Management Expense Ratio (MER): 0.20%

Dividend Yield: 3.02 %

Holdings: 8 ETFs (20,602 underlying holdings)

Assets Under Management: $1.42 billion

Composition: 80% stocks, 20% bonds 

1/3/5/10 year average annual returns: -7.06/6.48/6.17/7.52

Holds 8 underlying ETFs featuring stocks and bonds from around the globe: ITOT 37.75%, XIC 20.52%, XEF 18.62%,XBB 12.29%, IEMG 3.62% XSH 3.20%,  GOVT 1.99%, USIG 1.92%

Top 10 underlying holdings: 11.04% includes Apple, Microsoft, Royal Bank, TD Bank, Enbridge and Amazon.

Summary: This fund is for investors that have an aggressive risk appetite. It is worth noting that this fund has almost double the assets under management that the balance ETF above. Are investors really in tune with their true risk tolerance?

20. BlackRock iShares Core Equity ETF Portfolio (XEQT)

TSX Ticker: XEQT

Inception Year: 2019

Management Expense Ratio (MER): 0.20%

Dividend Yield: 3.14 %

Holdings: 4 ETFs (9,631 underlying holdings)

Assets Under Management: $1.25 billion

Composition: 100% stocks and 0% bonds

1/3/5/10 year average annual returns (%): -6.65% (8.70% since inception)

Holds 4 underlying ETFs featuring stocks from around the globe: , ITOT 46.85%, XIC 25.36%, XEF 23.07%, IEMG 4.49%

Regions: US 46.06%, Canada 24.68%, Japan 5.47%, United Kingdom 3.53%, Switzerland 2.36%

Top 10 underlying holdings: 13.78% includes Apple, Microsoft, Royal Bank, Tesla, Canadian National Railway.

Summary: This fund is for investors that are very aggressive and don’t mind seeing their portfolios go down 50%.

Vanguard has their own suite of All-in-One ETFs too and here they are. 

21. Vanguard Conservative Income ETF Portfolio (VCIP)

TSX Ticker: VCIP

Inception Year: 2019

Management Expense Ratio (MER): 0.22%

Dividend Yield: 2.48%

Holdings: 13,586 stocks, 17,352 bonds

Assets Under Management: $0.21 billion

Composition: 19.68% stocks and 80.23% bonds

1/3 year average annual returns (%): -8.56/0.56

Holds 80.23% Bonds, 19.68% Stocks. Holds 7 underlying ETFs featuring stocks and bonds from around the globe

Region: Equities = United States 44.3%, Canada 29.5%, Japan 4.4%, United Kingdom 2.9%, China 2.4%.

Top 5 Sectors: Financials 19.0%, Tech 16.6%, Industrials 12.7%, Consumer Discretionary 11.9%, Health Care 8.8%

Top 10 underlying holdings: 2.41% includes Apple, Microsoft, Royal Bank, TD Bank and Amazon.

Summary: This is a low-risk, low-reward fund. Only 20% of the portfolio is exposed to equities.

22. Vanguard Conservative Income ETF Portfolio (VCNS)

TSX Ticker: VCNS

Inception Year: 2018

Management Expense Ratio (MER): 0.22%

Dividend Yield: 2.37 %

Holdings: 13,586 stocks, 17,352 bonds

Assets Under Management: $0.52 billion

Composition: 40% stocks and 60% bonds

1/3 year average annual returns (%): -7.96/2.48

Holds 59.85% Bonds, 40.07% Stocks. Holds 7 underlying ETFs featuring stocks and bonds from around the globe

Region: Equity = United States 44.5%, Canada 29.8%, Japan 4.3%, United Kingdom 2.9%, China 2.3%.

Top 5 Sectors (equity): Financials 19.1%, Technology 16.6%, Industrials 12.7%, Consumer Discretionary 11.9%, Health Care 8.7%

Top 10 underlying holdings: 5.18% includes Apple, Microsoft, Royal Bank, Amazon and Canadian National Railway

Summary: This is a low-risk, low-reward fund. Only 40% of the portfolio is exposed to equities. The higher fixed income component will help you weather stock market crashes or corrections much more comfortably than a fund with higher equity allocations.  If you feel that you need to protect your portfolio because you will need the money shortly, but you still want to gain some upside this may be a good fit for you.

23. Vanguard Balanced ETF Portfolio (VBAL)

TSX Ticker: VBAL

Inception Year: 2018

Management Expense Ratio (MER): 0.22%

Dividend Yield: 2.23 %

Holdings: 13,586 stocks, 17,352 bonds

Assets Under Management: $2.2 billion

Composition: 60.08% stocks and 39.86% bonds, medium risk, medium return

1/3 year average annual returns (%): -7.32/4.36

Holds 7 underlying ETFs featuring stocks and bonds from around the globe

Region: Equity = US 44.3%, Canada 29.7%, Japan 4.4%, United Kingdom 2.9%, China 2.4%.

Top 5 Sectors (equity): Financials 19.1%, Technology 16.6%, Industrials 12.7%, Consumer Discretionary 11.9%, Health Care 8.7%

Top 10 underlying holdings: 8.11% includes Royal Bank, TD Bank, Apple, Microsoft and Amazon.

Summary: This fund has a moderate risk, moderate reward profile. The higher fixed income component will help you weather stock market crashes or corrections more comfortably than a fund with higher equity allocations. 

24. Vanguard Growth ETF Portfolio (VGRO)

TSX Ticker: VGRO

Inception Year: 2018

Management Expense Ratio (MER): 0.24%

Dividend Yield: 2.10 %

Holdings: 13,586 stocks, 17,352 bonds

Assets Under Management: $3.6 billion

Composition: 79.89% stocks and 20.06% bonds, need to have nerves of steel. If you have a longer investing timeframe this may be a good fit for you.

1/3/5/10 year average annual returns (%): -6.81/6.19

Holds 7 underlying ETFs featuring stocks and bonds from around the globe

Region (equity holding %): United States 44.2%, Canada 29.8%, Japan 4.4%, United Kingdom 2.9%, China 2.4%.

Top 5 Sectors (equity): Financials 19.1%, Technology 16.6%, Industrials 12.7%, Consumer Discretionary 11.9%, Health Care 8.7%

Top 10 underlying holdings: 11.32% includes Apple, Microsoft, Alphabet (Google), Tesla and Amazon.

Summary: This fund is for investors that have an aggressive risk appetite.

25. Vanguard Growth ETF Portfolio (VEQT)

TSX Ticker: VEQT

Inception Year: 2019

Management Expense Ratio (MER): 0.24%

Dividend Yield: 1.58 %

Holdings: 13,586 stocks

Assets Under Management: $2.1 billion

Composition: 100% stocks

Region: US 43.9%, Canada 30.0%, Japan 4.4%, United Kingdom 2.9%, China 2.4%.

Top 5 Sectors: Financials 19.1%, Technology 16.5%, Industrials 12.7%, Consumer Discretionary 11.9%, Health Care 8.7%

Top 10 underlying holdings: 15.2% includes RY, SHOP, MSFT, APPL, TD, AMZN.

1/3 year average annual returns (%): -6.29/7.89

Summary: This is a fund for those who don’t mind risk and like throwing some caution to the wind. In an effort to make large sums, this type of investor may have to handle falls of 30, 40 or 50% without feeling the fear and selling out.

Pros vs Cons of ETFs

Pros to Purchasing ETFs

Here are some advantages to ETF investing. 

  1. Diversification:  An ETF that tracks an index lets you hold tens, hundreds or even thousands of stocks or bonds. Your money is spread across many investments leaving you with considerably less risk than having a concentrated portfolio with only a few stocks in it.    
  2. Liquidity: ETFs trade on the stock market where you can buy or sell them just like a stock on weekdays from 9:30am – 4pm Eastern Standard Time. Mutual funds on the other hand, are purchased and sold at the end of the day.
  3. Lower Fees: The fees for the popular index ETFs range from 0.06 to 0.25% while the average mutual fund fee in Canada sits in the 1.5 to 2.0% range. 
  4. Passive: If you own an ETF tracking an index you just have to be able to invest consistently and hold your investments through the inevitable ups and downs over the years.  Doing nothing can lead to vast amounts of wealth. 

    To be clear any investment could go to zero.  You could lose all your money.  However, owning an index ETF investing in Canadian and American equities has proven to be profitable over a 20+ year timeframe, throughout the last century.
  5. Invest in asset classes that are hard to invest in individually:  You can purchase a bond, cryptocurrency or even a real-estate investment trust (REIT). Investing in these asset classes individually can be cumbersome. 

    REITs invest in commercial, residential, industrial or office spaces. Owning actual real estate properties can be a hassle.  You need to spend a lot of time and deal with landlord issues and purchasing Canadian property requires a significant amount of capital. Buying a REIT is much easier and you still get paid. 

    Similarly purchasing actual Bitcoin can be an involved process that requires you to set up accounts and acquire storage for your Bitcoin to keep it safe and off the grid. Buying a bitcoin ETF saves you a lot of hassle. 

Cons to ETF Purchases

Not everything is great when it comes to ETFs.  Here are the disadvantages to ETF investing.

  1. Transaction fees: If you do not use discount brokerages like Wealthsimple, National Bank and Questrade where ETFs can be purchased for free, then you may rack up a lot of money in fees. This can be a huge hinderance if you are dollar-cost averaging strategy.
  2. Lack of customization: When you purchase an ETF you have to hold everything that the ETF holds even if you don’t like it.  For instance you may find that a Canadian index ETF like XIU holds 35% of its fund in financial companies within Canada.  You might not feel comfortable with that.

    In another ETF you may not like 3 companies in the top 10 holdings.  With an ETF you have to take what the ETF offers, there is no ability to customize the fund to suit your preferences. 

ETFs vs Mutual Funds

The big difference is cost. The average mutual fund in Canada has a cost of 1.75% and the (high) average of a bundle of popular ETFs is 0.25%. Many ETFs that track North American markets have fees under 0.10%. Therefore the average mutual fund can cost 7 to 15 times more than an ETF.  That is huge. 

If something costs seven times more, you would expect seven times the performance.  So if the average Canadian based index ETF that tracks the TSX 60 returned 6% in a year, you would naturally expect that a similar mutual fund that tracked the TSX 60 index to return 42%.  Of course that is nowhere close to reality. 

In fact, higher costs just bring down the performance of a fund.  If the TSX 60 has averaged a return of 6% over the last 10 years then you would expect that an ETF with an MER of 0.25% would return 5.75% over that same timeframe.  You would also expect the average mutual fund to return 4.25% over the last decade because of the 1.75% cost. 

If you have a similar index being tracked then a smart investor would be wise to keep the costs low.  This is because: investor returns = index returns less MER costs. 

Where to Buy ETFs

You can purchase ETFs at any bank brokerage, but the best places to buy ETFs for free are Questrade or Wealthsimple. Out of all the brokerages in Canada, Questrade and Wealthsimple are the two online brokerages that allow you to purchase ETFs for free. National Bank has just joined the party as the first no commission fee big bank. 

Questrade: Clients of Questrade enjoy free ETF purchases and commission fees of anywhere from $4.95 to $9.95 when you buy or sell stocks.

They offer all the registered account types like TFSA, RESP, RRSP, RRIF, LIF, cash, and margin accounts.  You do need $1,000 minimum in order to open up each account type. 

Questrade will cover your registered account transfer fees.

Wealthsimple: WealthSimple is Canada’s online brokerage that offers commission free stock or ETF trades. 

However you have to pay the brokerage’s conversion rate if you want to purchase individual stocks on any American stock market exchange. 

Conclusion

There are a wide array of ETFs to choose from in Canada.  The options are varied and hopefully this guide has been able to help you narrow down your choices when creating your own ETF portfolio.  The easiest way to gain exposure to ETFs is to go with an “All-in-One” ETF. 

Sometimes the easiest option is the best option, but it does depend on your risk tolerance and asset allocation choices. 

If you invest in a broad market based index ETF like one that tracks the S&P TSX60 (Canadian large-cap market) and the S&P 500 (American large-cap companies) then you are likely to do better than most investors.  Index ETFs track a market and offer the benefits of broad diversification and low costs. 

Consult an investment or financial advisor if you’re still unsure about investing in ETFs. 

The Best ETFs in Canada FAQs

Is there an ETF that follows the TSX?

The two most popular ETFs that track the S&P TSX 60 are XIU and ZCN. These ETFs hold the top 60 companies in Canada, giving you instant portfolio diversification at a low cost. There are two other ETFs that include companies from the TSX 60 along with small and mid-cap Canadian companies and they are XIC and VCN.

Do ETFs pay dividends in Canada?

Some ETFs in Canada pay dividends, which can be found under the funds’ distributions. It depends on the asset class and purpose of the ETF. Some ETFs do not pay any dividends.

How many ETFs should I own?

You should aim to own between 1-4 index ETFs that track major index exchanges. However it depends on your financial goals and asset allocation. You can gain global diversification with an “all-in-one” ETF such as VGRO or XGRO.

Or if you want to fine-tune your investments you can purchase four individual ETFs – one to track each of the following equities markets: Canadian, US, International, and a global (or Canadian) fixed-income market.

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