The Best ETFs in Canada for Building Wealth

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New investors (or even established investors) may want to consider investing in broad market Exchange Traded Funds (ETFs) to build wealth. Thanks to some reader requests, we’ve updated this post for 2023 to highlight the best ETFs in Canada for building wealth.

In fact, we’ve reviewed dozens upon dozens of low-cost ETFs so you don’t have to!

Listed in the sections below, we’ve assembled what we consider some of the best ETFs to invest in covering our Canadian market, U.S. market and international markets. Better, still, we’ll also share why these are the best ETFs to own and why you might want to consider ignoring hundreds of other ETFs in the process.

Let’s dig in!

The Best ETFs in Canada for Building Wealth

So many personal finance blogs and investing sites will tout the merits of ETFs for a few reasons, many of which we agree with:

  • ETFs can be easily purchased via a discount brokerage or a Robo-advisor. (Further Reading: What is a Robo-Advisor? Is a Robo-Advisor right for you?)
  • Some ETFs often have very low, or no, minimums for investment with discount brokerages.
  • Some ETFs have very low money management fees, allowing you to keep more of your hard-earned money working for you via the power of compounding.

You might recall from our previous posts, including our primer on index investing, that an ETF is really just a basket of securities combined into one fund – a fund traded on a stock exchange. (Hence the name: Exchange Traded Fund.)

ETFs can hold more than just a basket of stocks.

ETFs can hold bonds, commodities, precious metals, currencies, and other assets too.

For the purpose of today’s post, we’ll highlight previous articles on our site that include some of our “best of” ETFs to consider for your portfolio and offer a few other considerations as well so you have everything in this consolidated article.

How to choose the “best ETF” for you

In order to figure out which ETF is best for you, we’ve offered up a few questions for you to answer below:

  1. How long do you plan to remain invested in the fund?
  2. What is your personal risk tolerance for fund losses?
  3. What long-term returns are you hoping to achieve?

As we go through each ETF selection below, consider your answers to each question above!

1. Best All-in-One ETFs in Canada

At Cashflows & Portfolios, even though we don’t own any all-in-one ETFs yet, we believe these are excellent funds for many beginner or intermediate investors.

Here’s why:

  1. All-in-one ETFs eliminate the need for manual rebalancing. Simply buy and hold, and buy and hold some more over time!
  2. These ETFs have your personal investing risk tolerance already designed in.
  3. Such ETFs are already globally diversified, including a small portion of Canadian content.

There are many all-in-one fund providers (Vanguard Canada, iShares Canada, and Bank of Montreal tend to lead the pack of offerings) but there are other fund providers as well.

In our opinion, here are the best ones to own and why:

All-in-one fundTickerRationale to Own
Vanguard All-Equity ETF PortfolioVEQTLong-term investing with 100% equity growth
Vanguard Growth ETF PortfolioVGROA bias to growth over fixed income
Vanguard Balanced ETF PortfolioVBALBalanced for growth and fixed income
iShares Core Equity ETF PortfolioXEQTLong-term investing with 100% equity growth
iShares Core Growth ETF PortfolioXGROA bias to growth over fixed income
iShares Core Balanced ETF PortfolioXBALBalanced for growth and fixed income
BMO Growth ETFZGROA bias to growth over fixed income
BMO Balanced ETFZBALBalanced for growth and fixed income
Horizons All-Equity Asset Allocation ETFHEQTLong-term investing with 100% equity growth

If we had to pick just one ETF, from this list, we’d likely go with HEQT.

Why?

  • HEQT has a low total management expense ratio of about 0.20%.
  • HEQT includes a NASDAQ-100 ETF ~ 10%; for a slight tech-tilt for potentially higher growth.
  • HEQT is more tax-efficient (than other ETFs above) in a non-registered account.

Beyond HEQT, for most investors, we have a bias to ETFs with tickers such as XGRO, VGRO and ZGRO – which are 80% equities and 20% fixed income. While the traditional 60/40 balanced fund is far from dead, we prefer to own more growth oriented assets in our asset accumulation years. The bonds at 20% weighting will help you stomach market volatility. Besides, owning more bonds than that (i.e., using a balanced fund with 40% bonds) could put a small dent in your asset accumulation total returns.

2. Best Canadian Equity ETFs

At Cashflows & Portfolios, even though we don’t own any individual, Canadian ETFs (we’ve decided to own many Canadian stocks in our personal portfolios directly – see why here if dividend investing might be right for you!), we believe our list below are excellent funds for any investors to gain the market-like returns from our Canadian stock market indices less minor money management fees.

In our opinion, here are the best ones to own and why:

Canadian EquitiesTickerRationale to Own
Vanguard FTSE Canada All Cap Index ETFVCNExposure to small-, medium- and large-cap companies
BMO S&P/TSX Capped Composite Index ETFZCNFee as low as VCN and XIC; more assets than VCN
iShares Core S&P/TSX Capped Composite Index ETFXICTracks one of Canada’s best-known indices
iShares S&P/TSX 60 Index ETFXIUTracks the top 60 blue-chips stocks in Canada
Horizons S&P/TSX 60 ETFHXTTax-efficient; tracking the TSX 60

Personally, if we had to pick just one ETF, to rule them all for Canadian content, we’d go with XIU.

Why?

  • XIU is low-cost, very comparable to the returns of other ETFs above (if not better)!
  • By design, it includes the top-60 companies in Canada, companies that make lots of money and higher cashflow collectively year-after-year. You can ride those earnings and higher growth by owning the ETF and avoid individual stock selection.
  • XIU is also tax-efficient in a non-registered account (since you can take advantage of the Canadian Dividend Tax Credit – see TaxTips.ca for more information) and over many investing years, XIU either meets or beats the returns of those other ETFs above!

Should you wish to invest in some of Canada’s Best Dividend ETFs, look no further than this post for income and growth:

These are the Best Canadian Dividend ETFs to own.

3. Best U.S. Equity ETFs

In our personal accounts, we also want to disclose we have a bias toward owning U.S.-listed ETFs (in U.S. dollars) in our RRSP accounts specifically to hold U.S. stocks or international stocks. We do that mainly to avoid U.S. withholding taxes – a primer on that for those below:

  • U.S. dividends may or may not have withholding tax. Meaning, that if you own U.S. stocks directly in your RRSP, there will be no withholding tax. In other accounts, withholding tax is likely to apply.
  • If you own U.S. stocks through a U.S. ETF, you will not have withholding tax, either.
  • If you own U.S. stocks indirectly through a mutual fund and/or an ETF listed on a Canadian stock exchange, that mutual fund or ETF will be subject to U.S. withholding tax on any dividends before it receives them, even though you will not notice any withholding tax on the dividends or distributions you personally receive from the fund. So, a Canadian mutual fund or ETF is itself considered a non-resident of the U.S., subject to a 15% withholding tax.

In our opinion, here are the top-3 Canadian ETFs to own, and why, and should you wish to own a U.S.-listed ETF that one is QQQ:

U.S. EquitiesTickerRationale to Own
iShares Core S&P US Total Market Index ETFXUUHolds total U.S. stock market = thousands of U.S. stocks
Vanguard U.S. Total Market Index ETFVUNThis is a market-weighted fund, like VTI in the U.S.
Vanguard S&P 500 Index ETFVFVTracks the S&P 500; largest U.S. stocks
Invesco QQQ ETF*QQQ*We like this ETF for a tech-focus; U.S.-listed ETF to deliver potentially higher growth than the S&P 500 over time.

If you are seeking more of an income-play for retirement or semi-retirement, look to some of the Best U.S. Dividend ETFs to own below:

These are the Best U.S. Dividend ETFs to own.

4. Best International Equity ETFs

At Cashflows & Portfolios, with a bias to dividend investing in Canada and the U.S. coupled with low-cost ETFs. In fact, we own ex-Canada ETFs to purposely ride the returns of global markets for a very small money management fee.

These are our favourites:

International EquitiesTickerRationale to Own
iShares Core MSCI All Country World ex Canada Index ETFXAWAn ideal global equity fund beyond Canadian stocks
Vanguard FTSE Global All Cap ex Canada Index ETFVXCOne-stop shopping beyond Canadian stocks
iShares Core MSCI EAFE IMI Index ETFXEFGreat, broad coverage of European, Japan and Australian stocks
Vanguard FTSE Developed All Cap ex North America Index ETFVIUA diversified fund beyond North American stocks

In fact, each of us happens to own large quantities of XAW to ride those global market returns.

Why?

  • Both of us own many individual Canadian stocks already – so owning XAW is a great way to avoid too much home bias over time; we can invest easily beyond Canadian borders in a low-cost way without any individual stock selection.
  • While XAW has some withholding taxes applied, we still feel it makes great sense to own this ETF in a registered account (e.g., RRSPs/RRIFs, TFSAs, LIRAs/LIFs).

You can read more about XAW including any withholding taxes that may apply, as part of this very comprehensive post:

How to build wealth using our diversified ETF model portfolios.

5. Best Bond ETFs – do you list any?

Nope!

To be honest, while bonds have some place in some diversified investor portfolios, we simply don’t own any personally at Cashflows & Portfolios. That’s why our list above focused on mostly equity ETFs as part of our “best of” list.

Again, some reminders on bonds and interest rates:

  • Most bonds pay a fixed interest rate that becomes more attractive if interest rates fall, driving up demand and the price of the bond.
  • Conversely, if interest rates rise, investors will no longer prefer the lower fixed interest rate paid by a bond, resulting in a decline in its price.

For sure, fixed income is helpful at times (i.e., helping investors navigate or stomach stock market ups and downs) but we far prefer having a cash wedge of sorts to navigate any market volatility.

My Own Advisor has a very comprehensive post on the cash wedge concept here.

If you are going to own some bond ETFs, we believe you should keep your bond durations/terms short – since bond prices fall as interest rates rise. Holding anything but Canadian fixed income, while potentially good, can be a challenge for some investors. For example, Vanguard’s Global Aggregate Bond Index ETF (VGAB) has a modest management expense ratio but it also has foreign withholding tax costs based on its structure, which depending on the account type the fund is held in, can add in more significant costs.

If you are intending to own any Canadian bond ETFs, consider XSB, VSB or ZAG as leading candidates – keeping  your bond term shorter vs. longer.

The Best ETFs in Canada for Building Wealth Summary

At last count, there are over 1,000 ETFs listed on Canadian exchanges. So, if you didn’t read this post, that could make choosing the best ETF for your portfolio a HUGE challenge!

That said, you came to the right place today to narrow a seemingly impossible list of choices down to the very best ETFs in Canada to build wealth with.

Any ETF choice will likely be a balancing act amongst answers to these questions:

  1. How long do you plan to remain invested in the fund?
  2. What is your personal risk tolerance for fund losses?
  3. What long-term returns are you hoping to achieve?

Ultimately, any ETF selection is up to you but we’re happy to answer any questions about our “best of” list above or anything else you want to throw our way for that matter – just leave us a comment and let us know!

Need any help with understanding your cashflow or retirement income needs?

Developing and managing a well-diversified, investment portfolio, if executed well, is very likely to meet your retirement planning and/or your retirement income needs.

Should you ever need any assistance with those drawdown needs like the ones below, don’t hesitate to reach out!

We answer client questions like:

  • What registered accounts do I draw down first?
  • How much income will my investments generate?
  • Can I afford a large purchase like a new car or new house during retirement?
  • Do I have any idea how long this income might last?
  • What amount of taxes will my RRSP withdrawals incur?
  • When should I take my workplace pension?
  • Is it more beneficial to draw down non-registered money before RRSPs and TFSAs?
  • And much, much more…

Knowing how to demystify the retirement income puzzle is not trivial work but it’s absolutely something we can help with – we continue to help clients every month!

If you need some help solving your retirement decumulation puzzle (i.e., how to efficiently withdraw from your retirement accounts), or figuring out if you have enough saved from any portfolio you’ve constructed we’re here to help answer those questions and more!

If you are interested in obtaining some low-cost personal projections for your financial scenario, please contact us here to get started.

We also have a new low-cost DIY solution to consider as well!

So, we have two (2) low-cost solutions beyond our free content to consider leveraging whenever you want:

  • Done-For-You – we do the work and data entry, and provide your reports OR
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Try finding that anywhere else!?  🙂 

Beyond any low-cost services, our content is always free here, and if you have a financial question or comment, just send it our way. We read everything and try to reply to everything.

Thanks for your ongoing readership.

Mark and Joe.

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6 thoughts on “The Best ETFs in Canada for Building Wealth”

  1. Terrific post as usual, Mark and Joe! Question: The section on best Canadian ETFs refers to a post listing the best Canadian dividend ETFs to own: HAL, XEI, XDV, ZDV, CDX, VDY, XIU. That post is from September 2021 so I wondered whether in your view that list is still the “Magnificent Seven”? Any deletions or additions in the past 2 years? Many thanks!

    Reply
    • Thanks, Barbara. You triggered us to get this updated!

      We need to update that post since published, we’ll get on that for early 2024.

      We would say from this list, XIU is #1 and maybe XEI is a close #2 for us. We like all of them but more favourites than others.

      We backtested XIU vs. XEI vs. VDY and since 2015 guess which one wins? 🙂 XIU. The reality is, the top-60 comapnies in Canada make our economy and market go round.

      Not advice, but hope that helps a bit!?

      Happy Investing and Happy Holidays to you.
      CAP

      Reply
  2. Thank you for keeping this up-to-date. It’s a great reference to keep me on track and help me lean more toward passive ETF investing! 🙂

    Reply

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