Are you looking to invest your money through ETFs but have no idea where to begin?
There is a huge variety when it comes to selecting ETFs in Canada and abroad. Within Canada alone, there were 1,177 Canadian-listed ETFs by the end of 2021.
Canadian ETFs come in all shapes and sizes, and it’s important to pick the best funds from the large sea of options.
We will outline the best ETFs in Canada below and discuss some of their features.
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1) Best All-In-One ETFs
2) Best Canadian Equity ETFs
3) Best US Equity ETFs
4) Best Global and International Equity ETFs
5) Best Canadian Dividend ETFs
6) Best Fixed Income ETFs
7) Best REIT ETFs
8) Best Gold ETFs
9) Best Technology ETFs
10) Best ESG ETFs
11) Best Covered ETFs
Table of Contents show
Understanding ETFs
An ETF is a fund that pools several investments together into a one-ticket solution listed on a stock exchange. It’s important to understand that an ETF is traded in the same way you would trade any ordinary stock, unlike mutual funds.
ETFs are typically broken down into three categories:
- Passive ETFs – designed to passively track an index (or a grouping of investments).
- Multi-factor ETFs – rule-based ETFs that typically focus on specific investment characteristics (such as value stocks) with minimal human interaction. Algorithms are sometimes used with multi-factor ETFs.
- Active ETFs – a portfolio management team actively manages these ETFs.
While the most inexpensive, passive ETFs do not try to outperform their benchmark (or the market they are targeting). They simply try to offer investors the returns of the benchmark or market that they track.
Multi-factor ETFs and active ETFs are typically trying to outperform their benchmarks and are typically more expensive in terms of fees. These funds have significantly more human involvement than passive ETFs.
Pros and Cons of Investing in ETFs
Investing through ETFs has advantages and disadvantages. Here are some of the pros and cons:
Pros
- The ability to buy and sell the fund throughout the day, during market hours
- Transparency into the fund’s underlying holdings
- Diversifying across many investments through each ETF
- Lower relative fees than mutual funds (usually)
- ETFs are typically more tax efficient than mutual funds
Cons
- Having to trade the fund through a bid-ask spread
- ETFs fluctuate in value throughout the day, especially during volatile markets
- Some ETFs may come with high fees, especially when niche strategies are involved
How to Choose the Right ETF: A Step-by-Step Guide
- Determine Your Purpose: ETFs cater to diverse investment goals, from broad market exposure to niche sectors. Identify the specific attributes that align with your financial ambitions.
- Evaluate the Costs: Understand the management expense ratios (MER) as they impact your returns. Some renowned ETFs might justify their higher MER with better performance or other benefits.
- Assess Popularity and Trust: An ETF with large assets under management (AUM) suggests that it has earned investor trust. However, don’t make decisions based solely on popularity.
- Scrutinize the Track Record: Reviewing an ETF’s performance history offers insights into its consistency and how it reacts to market fluctuations. But remember, past performance doesn’t guarantee future results.
- Diversification is Key: Diversification is paramount in investments. Look for ETFs that invest across a wide range of companies or sectors.
- Consider Ease of Trade: Liquidity is essential in the world of ETFs. Opt for an ETF that allows for efficient trading without significant price discrepancies.
- Understand Payouts: Examine the yield of the ETF. Some ETFs provide regular dividends, which might be attractive for certain investors.
Best ETFs in Canada
Best All-In-One ETFs (Set it and Forget it)
All-in-one ETFs are designed to be an adequate solution for an entire portfolio. These funds are usually fund-of-funds, meaning that each all-in-one ETF actually holds several underlying ETFs.
The key considerations behind this category are to find solutions with low fees and ones that match your particular circ*mstances in terms of risks and objectives.
1. BMO Conservative ETF
- Ticker: ZCON.TO
- Inception Date: February 15, 2019
- Assets under Management: $40.63 Million
- Management Expense Ratio: 0.15%
- Management Style: Passive
- Risk Rating: Low
- Distributions: Quarterly
- Distribution Yield: 2.71%
- Stock Price: $32.32
- YTD Return: -0.08%
An excellent option for a conservative all-in-one ETF is BMO’s ZCON.
The ETF targets a 60% fixed income and 40% equity allocation using low-cost index ETFs as its underlying investments. Since it uses multiple ETFs, it is very well diversified.
ZCON is labelled as a low-risk fund and comes with a very low MER. It pays a good yield on a quarterly basis to investors.
The fund is very small in terms of assets under management and has a very short performance track record.
- Ticker: XBAL.TO
- Inception Date: June 21, 2007
- Assets under Management: $1.12 Billion
- Management Expense Ratio: 0.20%
- Management Style: Passive
- Risk Rating: Low-to-Medium
- Distributions: Quarterly
- Distribution Yield: 2.44%
- Stock Price: $26.84
- YTD Return: 0.41%
The next step up on the risk spectrum is a balanced all-in-one ETF from iShares, XBAL.
This ETF targets a 60% equity and 40% fixed-income allocation, again using underlying low-cost index ETFs. It is a very well-diversified solution.
XBAL is a low-to-medium-risk fund and comes with a very low MER. It also pays a good yield on a quarterly basis to investors.
The fund is very large in terms of assets under management and has a very long performance track record.
- Ticker: XGRO.TO
- Inception Date: June 21, 2007
- Assets under Management: $1.83 Billion
- Management Expense Ratio: 0.20%
- Management Style: Passive
- Risk Rating: Low-to-Medium
- Distributions: Quarterly
- Distribution Yield: 2.27%
- Stock Price: $26.22
- YTD Return: 0.86%
Even higher on the risk spectrum is iShares’ growth ETF, XGRO.
XGRO targets an 80% equity and 20% fixed income allocation by using underlying low-cost index ETFs. It is a well-diversified strategy.
iShares advertises the fund as being low-to-medium risk, but the fund is likely closer to medium risk. XGRO pays a good yield to investors on a quarterly basis.
The fund is extremely large in terms of assets under management and has a very long performance track record.
Related Reading: The best all-in-one ETFs in Canada.
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Best Canadian Equity ETFs
Canadian equity ETFs invest almost entirely (if not entirely) in stocks of Canadian companies. These ETFs are great to consider if you have at least a medium risk tolerance and want to avoid the impact of foreign currency fluctuations.
Keep in mind that Canadian equity funds tend to be concentrated in sectors such as financials and materials.
4. Horizons S&P/TSX 60 Index ETF
- Ticker: HXT.TO
- Inception Date: September 14, 2010
- Assets under Management: $3.73 Billion
- Management Expense Ratio: 0.07%
- Management Style: Passive
- Risk Rating: Medium
- Distributions: None
- Distribution Yield: 0%
- Stock Price: $52.56
- YTD Return: 0.52%
Horizons offers the most inexpensive S&P/TSX 60 index ETF in Canada (Canadian stock fund). The ETF is structured with swaps in order to be as tax efficient as possible, which is very valuable for investors looking to buy it in a non-registered account.
HXT is a 100% Canadian equity mandate that is passively managed.
The ETF is built in such a way that it does not pay distributions to investors.
It is a massive fund in terms of assets and has a very long performance track record.
5. TD Canadian Equity Index ETF
- Ticker: TTP.TO
- Inception Date: March 22, 2016
- Assets under Management: $1.5 Billion
- Management Expense Ratio: 0.05%
- Management Style: Passive
- Risk Rating: Medium
- Distributions: Quarterly
- Distribution Yield: 2.91%
- Stock Price: $23.51
- YTD Return: 0.56%
TD also offers a very inexpensive ETF for investing in the broad Canadian stock market.
TTP is also a 100% Canadian equity mandate that is passively managed and tracks a Canadian market index.
The ETF pays a good yield on a quarterly basis to investors.
TTP is a large fund in terms of assets under management and has a medium-length performance track record.
6. FTSE Canada All Cap Index ETF
- Ticker: VCN.TO
- Inception Date: August 2, 2013
- Assets under Management: $6.03 Billion
- Management Expense Ratio: 0.05%
- Management Style: Passive
- Risk Rating: Medium
- Distributions: Quarterly
- Distribution Yield: 3.01%
- Stock Price: $41.945
- YTD Return: 0.54%
Another excellent ETF to consider for Canadian equity exposure is VCN from Vanguard.
VCN offers 100% exposure to Canadian stocks and is one of the biggest funds in the Canadian equity space.
The ETF pays a good yield on a quarterly basis to investors.
TTP is massive in terms of assets under management and has a long performance track record.
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Best US Equity ETFs
US equity ETFs invest almost entirely (if not entirely) in stocks of US companies. These ETFs also typically come with a medium risk rating and in hedged or unhedged versions (for currency exposure).
The US stock market, especially as you look towards larger companies, tends to be concentrated heavily on technology.
7. TD US Equity Index ETF
- Ticker: TPU.TO
- Inception Date: March 22, 2016
- Assets under Management: $1.3 Billion
- Management Expense Ratio: 0.08%
- Management Style: Passive
- Risk Rating: Medium
- Distributions: Quarterly
- Distribution Yield: 1.22%
- Stock Price: $38
- YTD Return: 3.19%
One of the most inexpensive ways to invest in the US stock market is through TD’s TPU ETF.
TPU has a 100% allocation to large-cap US equities and is passively managed against an index. It is also offered in a currency-hedged series.
The ETF pays a low yield to investors on a quarterly basis. It is a massive fund with a medium-length performance track record.
8. BMO S&P 500 Index ETF
- Ticker: ZSP.TO
- Inception Date: November 14, 2012
- Assets under Management: $1.3 Billion
- Management Expense Ratio: 0.09%
- Management Style: Passive
- Risk Rating: Medium
- Distributions: Quarterly
- Distribution Yield: 1.33%
- Stock Price: $73.54
- YTD Return: 3.17%
BMO also offers a low-cost way to invest in US stocks through its ZSP ETF, which aims to track the S&P 500 index.
ZSP is passively managed and focuses on large-cap US equities. BMO also offers a currency hedged S&P 500 ETF if you are looking to avoid currency exposure.
The ETF pays a low yield to investors on a quarterly basis and is a massive fund with a long performance track record.
9. Vanguard S&P 500 Index ETF Portfolio
- Ticker: VFV.TO
- Inception Date: November 2, 2012
- Assets under Management: $10.18 Billion
- Management Expense Ratio: 0.08%
- Management Style: Passive
- Risk Rating: Medium
- Distributions: Quarterly
- Distribution Yield: 1.20%
- Stock Price: $119.29
- YTD Return: 3.09%
A well-known manager in the low-cost ETF space, Vanguard’s VFV is an excellent choice for investing in US stocks.
VFV is passively managed and again focuses on large-cap US equities. Vanguard also offers a currency-hedged S&P 500 ETF for investors looking to avoid fluctuations between the US dollar and the Canadian dollar.
The ETF pays a low yield to investors on a quarterly basis and is among one of the largest ETFs in Canada by assets. VFV comes with a long performance track record.
Related Reading: The top U.S. equity funds in Canada
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Best Global and International Equity ETFs
Staying globally diversified is an important part of building a well-diversified portfolio.
Global equity ETFs invest in stocks all over the world, including those in North America. International equity ETFs invest in stocks exclusively located outside of North America.
- Ticker: XEF.TO
- Inception Date: April 10, 2013
- Assets under Management: $6.85 Billion
- Management Expense Ratio: 0.22%
- Management Style: Passive
- Risk Rating: Medium
- Distributions: Semi-Annually
- Distribution Yield: 3.03%
- Stock Price: $34.94
- YTD Return: 1.58%
iShares’ XEF ETF invests internationally, specifically in roughly 1,500 stocks across Europe, Asia, and Australia.
The fund is passively managed and is also available in a currency-hedged version.
XEF pays a great distribution yield to investors on a semi-annual basis. It is massive in terms of assets and has a long performance track record.
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11. Vanguard FTSE Global All Cap ex Canada Index ETF
- Ticker: VXC.TO
- Inception Date: June 30, 2014
- Assets under Management: $1.59 Billion
- Management Expense Ratio: 0.21%
- Management Style: Passive
- Risk Rating: Medium
- Distributions: Quarterly
- Distribution Yield: 1.69%
- Stock Price: $53.89
- YTD Return: 1.62%
Vanguard’s VXC ETF invests in global stocks of all sizes and specifically excludes Canadian equities.
Since the ETF is not currency-hedged, your investment will be impacted by fluctuations between the Canadian dollar and various currencies.
VXC pays a good yield to investors on a quarterly basis and is a very large ETF in Canada by assets under management. The fund comes with a medium-length performance track record.
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Best Canadian Dividend ETFs
Dividends are usually an important part of the total return received from an investment.
Some great dividend-paying stocks exist in Canada that you can access through ETFs.
12. Manulife Smart Dividend ETF
- Ticker: CDIV.TO
- Inception Date: November 25, 2020
- Assets under Management: $502.25 Million
- Management Expense Ratio: 0.28%
- Management Style: Active
- Risk Rating: Medium
- Distributions: Quarterly
- Distribution Yield: 3.46%
- Stock Price: $12.67
- YTD Return: -0.13%
Manulife’s CDIV ETF is a rare ETF on our list that is both priced extremely well and actively managed by a portfolio management team.
CDIV invests exclusively in Canadian dividend-paying companies.
The ETF pays a great yield to investors on a quarterly basis. It has a very short performance track record due to its recent inception but has managed to attract a considerable amount of assets in this short period of time.
13. Fidelity Canadian High Dividend Index ETF
- Ticker: FCCD.TO
- Inception Date: September 13, 2018
- Assets under Management: $164.15 Million
- Management Expense Ratio: 0.35%
- Management Style: Passive
- Risk Rating: Medium
- Distributions: Monthly
- Distribution Yield: 4.65%
- Stock Price: $25.71
- YTD Return: 0.02%
Fidelity’s FCCD ETF focuses on high-quality and tax-proffered Canadian dividend-paying companies.
FCCD is a passive ETF that follows a Fidelity-created Canadian high dividend index.
The ETF pays a good yield to investors on a monthly basis. It has a fairly short performance track record but is a large ETF in terms of assets under management.
Related Reading: A full list of the best Canadian dividend ETFs
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Best Fixed Income ETFs
Fixed income or bond ETFs are a staple in most portfolios, especially those of more risk-averse investors.
For a large portion of investors, a combination of fixed-income ETFs and other ETFs will make the most sense.
14. BMO Mid Corporate Bond Index ETF
- Ticker: ZCM.TO
- Inception Date: January 19, 2010
- Assets under Management: $479.45 Million
- Management Expense Ratio: 0.34%
- Management Style: Passive
- Risk Rating: Low
- Distributions: Monthly
- Distribution Yield: 3.94%
- Stock Price: $14.68
- YTD Return: -0.58%
BMO’s ZCM ETF focuses on medium-maturity corporate bonds within Canada. These bonds are issued by corporations, which typically come with a higher yield and risk than government bonds.
ZCM is a passive ETF that tracks a corporate bond index. It has a long performance track record and is a large ETF in terms of assets.
The ETF pays a good yield to investors on a monthly basis.
15. Vanguard Canadian Short-Term Bond Index ETF
- Ticker: VSB.TO
- Inception Date: November 30, 2011
- Assets under Management: $1.03 Billion
- Management Expense Ratio: 0.11%
- Management Style: Passive
- Risk Rating: Low
- Distributions: Monthly
- Distribution Yield: 2.66%
- Stock Price: $22.49
- YTD Return: -0.16%
Vanguard’s VSB ETF invests in short-term bonds issued by corporations and the government. Short-term bonds are valuable because they are less sensitive to movements in interest rates.
VSB is passively managed against an index.
The ETF pays a decent yield to investors monthly and has a long performance track record. It is a massive ETF in terms of assets under management.
- Ticker: XHY.TO
- Inception Date: January 21, 2010
- Assets under Management: $445.7 Million
- Management Expense Ratio: 0.67%
- Management Style: Passive
- Risk Rating: Low-to-Medium
- Distributions: Monthly
- Distribution Yield: 5.55%
- Stock Price: $16.27
- YTD Return: -0.3%
High yield is a fixed-income category that focuses on the riskiest and highest-yielding bonds. iShares’ XHY ETF focuses on high-yield bonds in the US and hedges any currency fluctuations between the US and Canadian dollars.
XHY is passively managed and tracks the performance of an index.
The ETF pays an excellent yield to investors on a monthly basis. It has a long performance track record and is a large ETF in terms of assets under management.
17. BMO Government Bond Index ETF
- Ticker: ZGB.TO
- Inception Date: March 2, 2018
- Assets under Management: $1.09 Billion
- Management Expense Ratio: 0.17%
- Management Style: Passive
- Risk Rating: Low
- Distributions: Quarterly
- Distribution Yield: 2.71%
- Stock Price: $44.15
- YTD Return: -1.63%
BMO’s ZGB ETF invests your money in Canadian government bonds, which are some of the safest fixed-income instruments available. These bonds will, however, yield less than riskier alternatives.
ZGB is also a passive ETF that tracks an underlying index.
The ETF pays a decent yield to investors every quarter. Its performance track record is short, but it has gathered a large number of assets under management.
Related Reading: A complete list of the best bond ETFs in Canada.
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Best REIT ETFs
A real estate investment trust (REIT) ETF allows investors to invest in real estate without physically buying properties.
REITs pool money from investors and use it to build a portfolio of properties, which they then manage.
18. Vanguard FTSE Canadian Capped REIT Index ETF
- Ticker: VRE.TO
- Inception Date: November 2, 2012
- Assets under Management: $284.1 Million
- Management Expense Ratio: 0.38%
- Management Style: Passive
- Risk Rating: Medium
- Distributions: Monthly
- Distribution Yield: 2.66%
- Stock Price: $30.04
- YTD Return: 0.13%
Vanguard’s VRE ETF invests in stocks involved in the Canadian real estate sector. The ETF invests in stocks of all sizes (from small to large cap).
VRE is passively managed against a Canadian real estate index.
The ETF offers investors a good yield, paid on a monthly basis. It comes with a long performance track record and is a large fund in terms of assets under management.
19. Horizons Equal Weight Canada REIT Index ETF
- Ticker: HCRE.TO
- Inception Date: January 22, 2019
- Assets under Management: $47.88 Million
- Management Expense Ratio: 0.30%
- Management Style: Passive
- Risk Rating: Medium
- Distributions: None
- Distribution Yield: 0%
- Stock Price: $24.29
- YTD Return: -0.05%
Horizons offers a great solution within the Canadian REIT space through its HCRE ETF. HCRE invests in Canadian real estate securities.
HCRE is part of Horizons total return ETFs – it uses a swap strategy to make the fund more tax efficient. This eliminates any planned distributions from the fund.
The ETF is passively managed against an index. It comes with a short performance track record and is a small fund in terms of assets.
20. Invesco S&P/TSX REIT Income Index ETF
- Ticker: REIT.TO
- Inception Date: August 25, 2017
- Assets under Management: $10.1 Million
- Management Expense Ratio: 0.51%
- Management Style: Passive
- Risk Rating: Medium
- Distributions: Monthly
- Distribution Yield: 4.30%
- Stock Price: $20.31
- YTD Return: 6.23%
REIT.TO from Invesco is another REIT ETF that invests in Canadian-listed REITs. It is well diversified across different REIT sectors within Canada.
The ETF passively tracks an underlying Canadian REIT index.
REIT.TO pays a good yield to investors on a monthly basis. It comes with a medium-length performance track record and is a very small ETF in terms of assets.
Related Reading: Be sure to take a look at a full list of the best REIT ETFs in Canada.
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Best Gold ETFs
Gold ETFs invest in the stocks of companies whose operations are somehow involved with gold.
Although gold ETFs exist that simply track the price of the commodity, our focus here is on ETFs that contain gold stocks.
21. BMO Equal Weight Global Gold Index ETF
- Ticker: ZGD.TO
- Inception Date: November 14, 2012
- Assets under Management: $52.22 Million
- Management Expense Ratio: 0.61%
- Management Style: Passive
- Risk Rating: High
- Distributions: Annually
- Distribution Yield: 0.76%
- Stock Price: $62.44
- YTD Return: -8.45%
The ZGD ETF from BMO invests in stocks of global gold mining companies. Foreign currency exposure is not hedged away.
ZGD passively tracks a global gold index.
The ETF pays a very low yield to investors on an annual basis. It comes with a long performance track record and is a very small ETF in terms of assets.
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- Ticker: XGD.TO
- Inception Date: March 23, 2001
- Assets under Management: $1.08 Billion
- Management Expense Ratio: 0.61%
- Management Style: Passive
- Risk Rating: High
- Distributions: Semi-Annually
- Distribution Yield: 1.49%
- Stock Price: $15.27
- YTD Return: -8.05%
iShares also offers a global gold equity ETF under the ticker XGD. Despite its global mandate, the fund has an allocation of over 50% to Canadian stocks.
XGD passively tracks a global gold index.
The ETF pays a good yield to investors on a semi-annual basis. It comes with a long performance track record and is a very large ETF in terms of assets.
Related Reading: The best gold ETFs in Canada.
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Best Technology ETFs
Technology as a sector has rewarded long-term investors with exceptional returns over most periods of time.
A technology ETF is a poor substitute for a well-constructed portfolio but is a crucial building block.
- Ticker: XIT.TO
- Inception Date: March 19, 2001
- Assets under Management: $650.38 Million
- Management Expense Ratio: 0.61%
- Management Style: Passive
- Risk Rating: Medium-to-High
- Distributions: Semi-Annually
- Distribution Yield: 0.00%
- Stock Price: $53.37
- YTD Return: 6.27%
iShares offers a technology-focused ETF under the ticker XIT here in Canada. The ETF focuses specifically on Canadian technology stocks and will not give you significant exposure to some of the large tech giants south of the border.
XIT passively tracks a Canadian technology index.
The ETF does not currently pay a distribution, but going forward, it may on a semi-annual basis. XIT has a long performance track record and is a large ETF in terms of assets.
24. TD Global Technology Leaders Index ETF
- Ticker: TEC.TO
- Inception Date: May 7, 2019
- Assets under Management: $1.2 Billion
- Management Expense Ratio: 0.39%
- Management Style: Passive
- Risk Rating: Medium
- Distributions: Quarterly
- Distribution Yield: 0.21%
- Stock Price: $34.48
- YTD Return: 4.11%
TD offers a global technology equity ETF through its TEC fund. While still focusing on tech as a sector, TEC diversifies your investment on a global basis.
XGD passively tracks a global technology sector index.
The ETF pays a low yield to investors on a quarterly basis. TEC has a very short performance track record but has managed to attract a very high amount of assets in a short period of time.
25. Invesco NASDAQ 100 Index ETF
- Ticker: QQC.TO
- Inception Date: May 10, 2021
- Assets under Management: $713.61 Million
- Management Expense Ratio: 0.20%
- Management Style: Passive
- Risk Rating: Medium
- Distributions: Quarterly
- Distribution Yield: 0.54%
- Stock Price: $28.43
- YTD Return: 33.58%
Invesco offers Canadians a NASDAQ 100 ETF through QQC. While it does not exclusively invest only in technology stocks, it has a very high allocation to tech due to the nature of the NASDAQ 100 index.
QQC tracks the NASDAQ 100 index on a currency unhedged basis, but Invesco also offers a hedged alternative.
The ETF pays a low yield to investors on a quarterly basis. It comes with a very short performance track record and is a small ETF in terms of assets.
Related Reading: The best technology ETFs in Canada.
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Best ESG ETFs
If you are looking to invest responsibly, ESG ETFs exist, which focus on three main criteria when investing:
- Environment
- Social
- Governance
An ESG ETF can be constructed across any sector or geography.
- Ticker: XCSR.TO
- Inception Date: April 15, 2020
- Assets under Management: $172.76 Million
- Management Expense Ratio: 0.17%
- Management Style: Passive
- Risk Rating: Medium
- Distributions: Quarterly
- Distribution Yield: 2.61%
- Stock Price: $60.47
- YTD Return: 0.26%
iShares’ XCSR ETF invests in Canadian stocks of all sizes that meet a minimum standard in terms of ESG characteristics. The fund reduces investor exposure to the production of fossil fuels.
XCSR passively tracks an ESG index created by MSCI.
The fund pays a good yield to investors on a quarterly basis. It comes with a very short performance track record and is a large ETF in terms of assets.
27. BMO MSCI EAFE ESG Leaders Index ETF
- Ticker: ESGE.TO
- Inception Date: January 16, 2020
- Assets under Management: $72.95 Million
- Management Expense Ratio: 0.28%
- Management Style: Passive
- Risk Rating: Medium
- Distributions: Quarterly
- Distribution Yield: 2.90%
- Stock Price: $32.03
- YTD Return: 1.4%
BMO also offers a great ESG ETF that invests internationally. ESGE includes the stocks of companies that score favourably across ESG criteria and that are not in Canada or the US.
ESGE also passively tracks an ESG index from MSCI.
The ETF pays a good yield to investors on a quarterly basis. It comes with a very short performance track record and is a small ETF in terms of assets.
Other excellent ESG ETF alternatives exist as well – make sure to look at a full list of the best ESG ETFs in Canada.
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Best Covered ETFs
Covered call ETFs allow investors to invest in funds that typically pay extremely high yields. When you compare a covered call ETF to an identical fund (without covered calls), the addition of the strategy tends to reduce volatility.
28. BMO Canadian High Dividend Covered Call ETF
- Ticker: ZWC.TO
- Inception Date: February 9, 2017
- Assets under Management: $1.64 Billion
- Management Expense Ratio: 0.65%
- Management Style: Active
- Risk Rating: Medium
- Distributions: Monthly
- Distribution Yield: 7.63%
- Stock Price: $16.54
- YTD Return: -0.29%
BMO is a key investment manager in the covered call ETF space in Canada. The ZWC ETF invests in Canadian companies that already pay a high dividend yield while also using a covered call strategy. This produces a very high yield for investors.
The fund is actively managed and also uses a rules-based approach.
The ETF pays a very high yield to investors on a monthly basis. It comes with a medium-length performance track record and is a massive ETF in terms of assets.
29. CI Tech Giants Covered Call ETF
- Ticker: TXF.TO
- Inception Date: October 24, 2011
- Assets under Management: $563.34 Million
- Management Expense Ratio: 0.71%
- Management Style: Passive
- Risk Rating: Medium
- Distributions: Quarterly
- Distribution Yield: 7.48%
- Stock Price: $20.58
- YTD Return: 3.56%
CI offers Canadians a technology-focused covered call ETF. TXF invests in US technology companies that don’t usually pay a high dividend, but the ETF is able to generate an extremely high yield through covered calls.
TXF is an actively managed strategy.
Since the ETF currently pays such an extraordinarily high yield, the covered call strategy will likely restrict long-term growth. TXF comes with a long performance track record and is a very large ETF in terms of assets.
30. Horizons Canadian Large Cap Equity Covered Call ETF
- Ticker: CNCC.TO
- Inception Date: March 16, 2011
- Assets under Management: $27.5 Million
- Management Expense Ratio: 0.85%
- Management Style: Active
- Risk Rating: Low-to-Medium
- Distributions: Monthly
- Distribution Yield: 9.08%
- Stock Price: $11.71
Horizons is another investment manager with a lot of traction in the covered call space in Canada. CNCC is an ETF that invests in large Canadian stocks while also using a covered call strategy.
CNCC’s underlying investment is in HXT (which is a passive ETF). The covered call part of the ETF is actively managed.
The ETF pays a very high yield to investors on a monthly basis. It comes with a long performance track record and is a small ETF in terms of assets.
Make sure to look at our full list of the best covered call ETFs in Canada.
Summary of the Best ETFs in Canada
Should you Invest in ETFs?
For the vast majority of investors, ETFs are likely the best approach to building a high-quality portfolio. This is because ETFs:
- Typically charge low fees
- Are usually well-diversified
- Can easily be combined to create a well-rounded portfolio
If you are looking to invest small amounts of money, using ETFs is critical to properly diversify your investments.
For seasoned investors with larger portfolios, ETFs are still an excellent option to consider. You have the flexibility to choose between passively managed ETFs and actively managed ones depending on your portfolio involvement. You also have a high level of control over your portfolio.
Lastly, investing in ETFs allows you to adjust your portfolio over time much more easily than with a direct stock and bond portfolio. ETFs can be bought or sold to reflect changes in circ*mstances or risk tolerance in a short period of time.
What is the Most Successful ETF?
The most successful ETF (in terms of attracting the most investor capital) is currently the SPY ETF listed in the US. The ETF tracks the S&P 500 index and has assets under management of roughly US $350 billion.
Are ETFs Good for Beginners?
ETFs are an excellent way for beginners to start investing. They help properly diversify each asset class within your portfolio, which is difficult to do if you pick stocks and bonds individually.
Make sure to follow our 20 crucial investment tips for beginners.
How Many ETFs Should I Own?
The number of ETFs you should own depends on the nature of the ETF you want to buy.
An all-in-one ETF would be appropriately diversified to make up a full portfolio. A sector-specific ETF or a commodity ETF would likely need to be a part of a bigger portfolio.
Our investing guide can help with making starting investment decisions.
When Should I Sell an ETF?
An ETF should typically be sold under four main conditions:
- If you are in need of cash and need to liquidate investments
- If your personal circ*mstances have changed, along with your investment preferences
- Once you have achieved your long-term goals
- You want to use tax-loss harvesting
How Long can you Hold an ETF?
There is no set period of time restricting how long an investor can hold on to an ETF. As long as an ETF continues to operate, investors can choose to participate.
Be mindful that small ETFs are sometimes closed down early if they are unable to attract sufficient capital to be profitable.
How to Buy the Best ETFs in Canada
The cheapest way to buy ETFs is from discount brokers. My top choices in Canada are:
Readers Choice
Qtrade
- 105 commission-free ETFs to buy and sell
- Excellent customer service
- Top-notch market research tools
- Easy-to-use and stable platform
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Low Fees
Wealthsimple Trade
- Stock and ETF buys and sells have $0 trading fees
- Desktop and mobile trading
- Reputable fintech company
- Fractional shares available
Get $25 Signup Bonus
Well-Rounded
Questrade
- ETF buys have $0 trading fees
- Excellent market research tools
- Most types of registered accounts available
Get $50 Free Trades
To learn more, check out my full breakdown of thebest trading platforms in Canada.
Final Thoughts on the Best ETFs in Canada
Deciding to invest through carefully-selected ETFs is an excellent first step to building a world-class investment portfolio.
Keep in mind that ETFs come in all shapes and sizes – they can differ in terms of management style (active, multifactor, or passive) and investment coverage (sector-specific, country-specific, etc.).
Unless you are using an all-in-one ETF, try and include several ETFs within your portfolio to properly diversify your investments.
Once you have decided to invest in ETFs, make sure to check out our guide on the different ways to buy an ETF in Canada.
