4 Best Index ETFs in Canada for Passive Investing (June 2026)
The best index ETFs in Canada include VFV.TO (~0.06% MER) and ZSP.TO (~0.09%) for S&P 500 exposure, plus XIC.TO (~0.05%) and VCN.TO (~0.06%) for Canadian equities. These low-cost ETFs track major indices, making them ideal for TFSA or RRSP investors seeking passive, long-term market returns.
Index ETFs are one of the most popular ways for Canadians to invest because they track major market indices at very low cost. ETFs like VFV.TO and ZSP.TO follow the S&P 500, while XIC.TO and VCN.TO provide broad exposure to the Canadian stock market — all with MERs typically below 0.10%.
However, not all index ETFs provide the same diversification. VFV.TO and ZSP.TO are heavily concentrated in U.S. large-cap stocks, while XIC.TO and VCN.TO focus on Canadian equities, which are more weighted toward financials and energy. The key decision is whether to prioritize global diversification or target a specific market.
In this guide, we break down the best index ETFs in Canada, comparing fees, holdings, and risk so you can choose the right ETF for your TFSA, RRSP, or long-term passive investing strategy.
At a Glance: Quick Comparison
Side-by-side snapshot of fees, yield, and returns. Data updates daily.
| ETF | MER | AUM | Yield | YTD | 1Y |
|---|---|---|---|---|---|
Top VFV.TO Vanguard S&P 500 Index ETF | — | $33.1B | 0.84% | +12.50% | +27.55% |
ZSP.TO BMO S&P 500 | — | $23.9B | 0.75% | +12.54% | +27.62% |
XIC.TO iShares Core S&P/TSX Capped Composite | — | $30.3B | 2.02% | +10.28% | +34.42% |
VCN.TO Vanguard FTSE Canada All Cap | — | $16.2B | 2.01% | +9.48% | +33.38% |
What Is an ETF?
An index ETF in Canada is an exchange-traded fund that tracks a specific market index, such as the S&P 500 or the S&P/TSX Composite Index. Instead of trying to outperform the market, these ETFs aim to replicate the performance of the index they follow, making them a core tool for passive investing.
For example, VFV.TO and ZSP.TO track the S&P 500 with very low fees (~0.06%–0.09% MER), providing exposure to leading U.S. companies. XIC.TO and VCN.TO track the Canadian stock market, covering hundreds of domestic companies with MERs around ~0.05%–0.06%.
Index ETFs are widely used in TFSAs and RRSPs because of their low cost and simplicity. Many U.S.-focused index ETFs are unhedged to CAD, meaning returns are influenced by currency movements, while Canadian index ETFs provide more domestic exposure but less global diversification.
The 4 Best ETFs: Ranked & Reviewed
Detailed breakdown of each pick with live data.
Vanguard S&P 500 Index ETF
$187.97
+12.50% YTD
Vanguard S&P 500 Index ETF seeks to track, to the extent reasonably possible and before fees and expenses, the performance of a broad U.S. equity index that measures the investment return of large-capitalization U.S. stocks. Currently, this Vanguard ETF seeks to track the S&P 500 Index (or any successor thereto). It invests directly or indirectly primarily in stocks of U.S. companies.
Returns
YTD
+12.50%
1Y
+27.55%
3Y
+22.75%
5Y
+16.32%
BMO S&P 500
$116.02
+12.54% YTD
Returns
YTD
+12.54%
1Y
+27.62%
3Y
+22.77%
5Y
+16.33%
iShares Core S&P/TSX Capped Composite
$56.09
+10.28% YTD
Returns
YTD
+10.28%
1Y
+34.42%
3Y
+24.00%
5Y
+14.88%
Vanguard FTSE Canada All Cap
$71.01
+9.48% YTD
Vanguard FTSE Canada All Cap Index ETF seeks to track, to the extent reasonably possible and before fees and expenses, the performance of a broad Canadian equity index that measures the investment return of large-, mid- and small-capitalization, publicly traded securities in the Canadian market. Currently, this Vanguard ETF seeks to track the FTSE Canada All Cap Domestic Index (or any successor thereto). It invests primarily in large-, mid- and small-capitalization Canadian stocks.
Returns
YTD
+9.48%
1Y
+33.38%
3Y
+24.00%
5Y
+14.96%
Pros & Cons
Pros
- Extremely low fees (VFV.TO ~0.06%, XIC.TO ~0.05%)
- Broad market exposure through a single ETF
- Transparent and rules-based strategy with no active management
- Ideal for long-term passive investing and portfolio building
Cons
- Limited upside compared to active strategies in certain market conditions
- U.S.-focused ETFs like VFV.TO and ZSP.TO are concentrated in large-cap stocks
- Canadian index ETFs (XIC.TO, VCN.TO) are heavily weighted toward financials and energy
- Currency fluctuations can impact returns for unhedged U.S. ETFs
Compare These ETFs Head-to-Head
Drill into a side-by-side breakdown of performance, AUM, and yield.
Best next ETF step
Keep comparing ETFs
These are good next reads if you want a broader shortlist, Canadian index exposure, or a faster way to compare funds.
ETF category
See more guides in this cluster
Stay inside the same ETF category and compare more funds with similar investor intent.
Popular guide
30 Best ETFs in Canada
A broad starting point if you want a shortlist across the main ETF categories.
Core ETF guide
Best TSX Index ETFs
A simple place to start if you want Canadian equity exposure through index funds.
Sector ETF guide
Best Canadian Oil ETFs
A useful next read if you want energy exposure without picking individual oil stocks.
Frequently Asked Questions
What is the best index ETF in Canada for passive investing?
For passive investing, VFV.TO (~0.06% MER) and ZSP.TO (~0.09%) are popular choices because they track the S&P 500 at very low cost. Investors seeking Canadian exposure may prefer XIC.TO or VCN.TO (~0.05%–0.06% MER). These ETFs are widely used in TFSAs and RRSPs for long-term, low-maintenance investing.
What’s the difference between VFV.TO and XIC.TO?
VFV.TO tracks the S&P 500, providing exposure to large U.S. companies, while XIC.TO tracks the Canadian stock market. VFV.TO offers stronger historical growth due to U.S. tech exposure, while XIC.TO provides domestic diversification but is more concentrated in financials and energy.
Are index ETFs good for a TFSA?
Yes, index ETFs like VFV.TO, ZSP.TO, and XIC.TO are ideal for a TFSA because they offer low-cost, long-term growth with tax-free capital gains. However, U.S.-listed holdings within ETFs like VFV.TO are typically unhedged to CAD and may be subject to foreign withholding tax on dividends.