6 Best TSX Index ETFs: Passively Invest in Canadian Stocks (2022)

Are you looking to invest in the broad Canadian stock market but have no idea how to start?

Data from S&P Dow Jones Indices outlines that investors have roughly saved US $403 billion in management fees over the past 26 years by investing in index funds.

In Canada, two important Canadian equity indices are the S&P/TSX 60 Index and the S&P/TSX Composite Index.

We will cover the best TSX index ETFs below and outline some of their key features.

The S&P/TSX 60 Index Vs the S&P/TSX Composite Index

The two main Canadian stock market indices are fairly different.

The S&P/TSX 60 Index is an index of the 60 largest Canadian stocks by market capitalization.

The S&P/TSX Composite Index is a much broader index, including about 70% of the companies on the Toronto Stock Exchange (by market capitalization). This results in an index with roughly 250 companies.

These two indices can be thought of as the Canadian equivalents of the S&P 500 Index and the S&P Total Market Index in the US.

Pros and Cons of TSX Index ETFs

TSX index ETFs, or Canadian equity index ETFs, come with their advantages and disadvantages, similar to most investments.

Pros
  • Extremely low management expense ratios (or fees)
  • One-ticket solution allowing you to invest in a diversified basket of Canadian stocks
  • Accessing a higher dividend yield (relative to US broad-market indices)
  • Canadians do not have to worry about changing currency exchange rates
Cons
  • They are concentrated in sectors such as financials, energy, and materials
  • Lack of active management can lead to larger downside risks
  • Investing only in Canadian equities does not diversify you outside of Canada
  • They are concentrated in sectors such as financials, energy, and materials
  • Lack of active management can lead to larger downside risks
  • Investing only in Canadian equities does not diversify you outside of Canada

Overall, TSX index ETFs (Canadian equity index ETFs) are a great way for Canadians to begin investing in the broad Canadian stock market.

Best TSX Index ETFs

We will cover three ETFs that aim to cover the broad Canadian market (tracking or similar to the S&P/TSX Composite Index) as well as three ETFs that cover approximately 60 of the largest Canadian companies by market capitalization (tracking or similar to the S&P/TSX 60 Index)

Canadian Broad-Market Index ETFs (S&P/TSX Composite Index)

1. TD Canadian Equity Index ETF

TD Logo (Fixed)
  • Ticker: TTP.TO
  • Inception Date: March 22, 2016
  • Assets under Management: $970.36 Million
  • Management Expense Ratio: 0.05%
  • Management Style: Passive
  • Risk Rating: Medium
  • Distributions: Quarterly
  • Yield: 3.12%
  • Stock Price: $23.01
  • YTD Return: -0.72%

TD has taken steps to offer extremely low-cost passive ETFs to Canadians over the past several years. The TD Canadian Equity Index ETF is a broad Canadian stock market index ETF that invests in over 300 individual Canadian stocks.

The ETF is passively managed, with approximately 50% of the ETF’s investments falling into one of the following sectors:

  • Financial Services
  • Energy
  • Basic Materials

The ETF has a medium-length performance track record and is large in terms of assets. TTP offers a great dividend yield and pays distributions to investors on a quarterly basis.

TTP is one of the lowest-cost options to consider among Canadian broad-market index ETFs.

2. iShares Core S&P/TSX Capped Composite Index ETF

ishares logo
  • Ticker: XIC.TO
  • Inception Date: February 16, 2001
  • Assets under Management: $8.74 Billion
  • Management Expense Ratio: 0.06%
  • Management Style: Passive
  • Risk Rating: Medium
  • Distributions: Quarterly
  • Yield: 3.41%
  • Stock Price: $31.9
  • YTD Return: -0.63%

iShares is a well-known name in Canada as a provider of low-cost index ETFs. The XIC ETF in particular is absolutely massive in terms of assets and is one of the most commonly-encountered Canadian broad-market index ETFs.

XIC is passively managed and has over 50% of its assets in the financials, energy, and industrials sectors.

The ETF has a long performance track record and ranks among the largest ETFs in Canada by assets. XIC also offers a great yield, with distributions being paid to investors on a quarterly basis.

XIC is an excellent option to consider for investing in the broad Canadian market, although it is marginally more expensive than TTP (in terms of MER).

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

BMO
  • Ticker: ZCN.TO
  • Inception Date: May 29, 2009
  • Assets under Management: $6.92 Billion
  • Management Expense Ratio: 0.06%
  • Management Style: Passive
  • Risk Rating: Medium
  • Distributions: Quarterly
  • Yield: 3.22%
  • Stock Price: $
  • YTD Return: 0%

BMO Global Asset Management is one of the first Canadian bank investment arms to enter the low-cost ETF space over a decade ago. The ZCN ETF is another very popular choice with Canadian investors for targeting the broad Canadian stock market.

ZCN is passively managed and like other broad Canadian equity peers, has over 50% of its assets in the financials, energy, and industrials sectors (with materials coming in as a close 4th sector).

The ETF has a long performance track record and is a massive Canadian ETF in terms of assets under management. ZCN offers a good yield, with distributions also being paid to investors on a quarterly basis.

ZCN is another great option to consider for broad Canadian stock exposure, currently being offered at the same MER as iShares’ XIC ETF.

Canadian Large Capitalization Index ETFs (S&P/TSX 60 Index)

4. Vanguard FTSE Canada Index ETF

Vanguard Logo
  • Ticker: VCE.TO
  • Inception Date: November 30, 2011
  • Assets under Management: $1.2 Billion
  • Management Expense Ratio: 0.06%
  • Management Style: Passive
  • Risk Rating: Medium
  • Distributions: Quarterly
  • Yield: 3.07%
  • Stock Price: $44.11
  • YTD Return: 0.19%

Vanguard is a well-known global asset manager that provides low-cost ETFs. In Canada, Vanguard’s VCE ETF tracks a similar group of stocks as those contained within the S&P/TSX 60 Index. It invests in roughly 50 of the largest Canadian stocks by market capitalization.

VCE is passively managed and is even more concentrated than the broad Canadian market index ETFs that we covered further up. Almost 70% of the ETF’s investments are concentrated in the financials, energy, and basic materials sectors.

The ETF has a long performance track record and is a very large ETF in terms of assets under management. VCE offers a good yield and pays investors a quarterly distribution.

VCE is an excellent, low-cost ETF to consider if you would like to invest in large-capitalization Canadian stocks.

5. Horizons S&P/TSX 60 Index ETF

horizons logo
  • Ticker: HXT.TO
  • Inception Date: September 14, 2010
  • Assets under Management: $3.73 Billion
  • Management Expense Ratio: 0.04%
  • Management Style: Passive
  • Risk Rating: Medium
  • Distributions: None
  • Distribution Yield: 0%
  • Stock Price: $49.28
  • YTD Return: -0.97%

Horizons is a well-known provider of low-cost ETFs here in Canada, focusing specifically on tax efficiency. Some of Horzions’ total return ETFs (including HXT) do not pay distributions to investors, increasing tax efficiency in non-registered accounts.

HXT follows the performance of a basket of the 60 largest Canadian stocks by market capitalization. Financials, energy, and industrial services (as sectors) make up approximately 65% of the ETF.

The ETF is extremely large in terms of assets under management and has a long performance track record. Since the ETF does not pay distributions to investors, HXT will not be appealing to investors that are looking for constant income from dividends.

If you are concerned with tax efficiency and do not require an income from your Canadian equity ETF, HXT is a great fund to consider.

6. iShares S&P/TSX 60 Index ETF

ishares logo
  • Ticker: XIU.TO
  • Inception Date: September 28, 1999
  • Assets under Management: $10.69 Billion
  • Management Expense Ratio: 0.18%
  • Management Style: Passive
  • Risk Rating: Medium
  • Distributions: Quarterly
  • Distribution Yield: 2.98%
  • Stock Price: $30.59
  • YTD Return: -0.79%

iShares also offers an extremely popular large-capitalization Canadian equity index ETF through XIU. The ETF invests in the 60 largest Canadian companies by market capitalization.

XIU is passively managed and is more concentrated than iShares’ XIC ETF. Over 65% of XIU’s investments fall within the financials, energy, or industrials sectors.

Although XIU ranks among the largest Canadian ETFs by market capitalization, it is extremely expensive relative to its peers (likely due to its iShares and S&P index branding). XIU invests in a similar group of stocks as both VCE and HXT but is at least three times more expensive in terms of fees.

The ETF has a very long performance track record, with a track record of over 22 years.

Given XIU’s high relative fees, we do not recommend it over peers such as HXT or VCE.

Are TSX Index ETFs Worth the Fees?

TSX index ETFs also referred to as Canadian equity ETFs, are an excellent addition to most portfolios that typically invest in stocks. The ability to invest in a basket of tens or hundreds of Canadian stocks for several basis points is extremely valuable.

Whether you are looking to invest with more of a large capitalization focus or more broadly, low-cost Canadian equity index ETFs save you a lot of time. The alternative would be to divide your money across the different stocks and individually buy and then sell each.

For most Canadians, Canadian stocks are an important part of an investment portfolio (one that includes equities), and the above ETFs are good options to consider for easily adding this exposure.

How to Buy the Best TSX Index ETFs

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 
Low Fees
Wealthsimple Trade
  • Stock and ETF buys and sells have $0 trading fees
  • Desktop and mobile trading
  • Reputable fintech company
  • Fractional shares available
Well-Rounded
Questrade
  • ETF buys have $0 trading fees
  • Excellent market research tools
  • Most types of registered accounts available

To learn more, check out my full breakdown of the best trading platforms in Canada.

Conclusion

Best TSX Index ETFs

TSX index ETFs are a very cost-efficient way of investing in Canadian stocks through a well-diversified approach.

In a lot of cases, these ETFs are either focused on the broad Canadian market as a whole or solely on some of the largest Canadian companies by market capitalization.

If you are new to trading ETFs, make sure to read our guide, which outlines how to buy ETFs in Canada.

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Author Bio - Christopher Liew is a CFA Charterholder with 11 years of finance experience and the creator of Wealthawesome.com. Read about how he quit his 6-figure salary career to travel the world here.

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