Best ETFs in Canada for Long-Term Investors

The best ETFs Canada for long-term investors combine low fees, broad diversification and tax-efficient placement. This guide explains what ETFs are, how to choose them, recommended ETFs by category (Canadian, U.S., international, bonds), sample long-term ETF portfolios, tax and account planning (RRSP/TFSA/non‑registered), and practical steps to get started.

Why ETFs for long-term investing?

Low cost: Many ETFs have lower management expense ratios (MERs) than mutual funds, which matters over decades.
Diversification: One ETF can give exposure to hundreds or thousands of stocks or bonds.
Liquidity and transparency: ETFs trade on exchanges (TSX) like stocks; holdings and fees are public.
Tax flexibility: Use RRSPs, TFSAs, RESPs and non‑registered accounts with strategies to reduce taxes.

Note: ETF investing Canada has grown fast; major providers include Vanguard Canada, iShares (BlackRock), BMO and Horizons. See provider pages for fund specifics: Vanguard Canada, iShares Canada, BMO ETFs.

What is an ETF? (quick primer)

Definition: An exchange‑traded fund (ETF) is a pooled investment that tracks an index, sector, commodity or asset class.
How it differs from mutual funds: ETFs usually trade intraday on the TSX, have lower fees and less minimums.
Types: Market-cap index ETFs, equal-weight ETFs, dividend ETFs, bond ETFs, smart-beta ETFs, sector ETFs.

Key considerations for long-term ETF investors

Fees (MER): Lower is generally better. Even a 0.50% vs 0.10% difference compounds over decades.
Tracking error: How closely the ETF follows its index; smaller is preferable.
Liquidity and bid-ask spread: Important when trading; larger funds usually trade tighter spreads.
Currency exposure: Unhedged U.S. ETFs expose you to USD/CAD exchange-rate movement; hedged funds reduce that risk but have costs.
Distribution type: Accumulating (reinvest dividends inside the fund) vs distributing (pays out dividends). In Canada, most domestic ETFs distribute.
Tax treatment: Understand withholding on U.S. dividends, eligible dividend tax credits for Canadian equities, and capital gains treatment.

Useful starting resources: Financial Consumer Agency of Canada (FCAC) investing basics and Canada Revenue Agency (CRA) TFSA and RRSP pages.

How to choose ETFs: step-by-step

Define your objectives and time horizon.
- Are you saving for retirement (20–40 years) or a short-term goal?
Decide on strategic asset allocation.
- Typical rule: equity % = 100 − age (adjust to risk tolerance).
Pick core ETFs for each asset class.
- Canadian equities, U.S. equities, international equities, and bonds.
Compare ETFs on MER, AUM, tracking error and distributions.
Decide on account placement (TFSA/RRSP/non‑registered) by tax rules.
Rebalance annually (or semi‑annually) to your target allocation.
Monitor costs and tax changes; avoid frequent trading.

Checklist: What to compare when evaluating an ETF

Fund objective and index tracked
MER and other fees
Assets under management (AUM)
Average daily volume / liquidity
Bid-ask spread
Distribution policy (monthly/quarterly/annual, accumulating vs distributing)
Currency (CAD vs USD, hedged vs unhedged)
Tax implications for your account type

Top ETF categories and popular Canadian examples

Below are widely used ETFs in Canada for long-term investors. These are examples, not personalized recommendations. Always check the ETF factsheet and prospectus before investing.

1) Canadian equity ETFs

Vanguard FTSE Canada All Cap Index ETF (VCN) — broad coverage of Canadian equities including small-caps.
iShares S&P/TSX 60 ETF (XIU) — tracks the S&P/TSX 60, focused on the largest Canadian companies.
BMO S&P/TSX Capped Composite Index ETF (ZCN) — a fuller representation of the TSX with cap limits.
Why consider: Canada-heavy portfolios give you exposure to financials and energy sectors, and eligible dividends get favourable tax treatment in non‑registered accounts.

2) U.S. equity ETFs

Vanguard S&P 500 Index ETF (VFV) — Canadian-listed exposure to the S&P 500 (unhedged).
iShares Core S&P 500 ETF (XUS) — S&P 500 exposure (different providers use different tickers).
Why consider: U.S. stocks dominate global large-cap growth. Watch currency exposure and U.S. dividend withholding rules depending on account type.

3) International (ex‑North America) equity ETFs

Vanguard FTSE Developed ex‑North America ETF (VIU?) — look for funds that give broad non‑U.S., developed world exposure.
iShares Core MSCI EAFE IMI ETF — covers Europe, Australasia and Far East developed markets.
Why consider: Diversifies away from North American market concentration.

4) Emerging markets ETFs

iShares Core MSCI Emerging Markets IMI — exposure to faster-growing economies.
Why consider: Higher long-term growth potential but higher volatility; keep allocation modest.

5) Bond and fixed-income ETFs

BMO Aggregate Bond Index ETF (ZAG) — broad Canadian investment-grade bond exposure.
Vanguard Canadian Aggregate Bond Index ETF (VAB) — core Canadian bond ETF.
iShares Canadian Universe Bond Index ETF (XBB) — diversified bond holdings.
Why consider: Bonds reduce volatility and provide income; consider duration/risk.

6) Dividend and income ETFs

iShares Canadian Select Dividend Index ETF (XDV) or Vanguard Canadian High Dividend Yield Index ETF (VDY) — focuses on high dividend-paying Canadian companies.
Why consider: Income but watch sector concentration and tax treatment.

7) Specialty ETFs (REITs, commodity, factor)

REIT ETFs for real estate exposure (REIT-specific ETFs).
Factor/smart-beta ETFs for value, momentum or low-volatility strategies.
Why consider: Use as satellite holdings to tilt or diversify portfolios.

Note: ETF tickers and fund availability change; always confirm current ticker on the provider's site. See ETF issuer pages like Vanguard Canada, iShares Canada and BMO ETFs for up-to-date listings.

Account placement: where to hold which ETFs

TFSA (Tax-Free Savings Account)
- Best for tax-efficient U.S. growth (but note: U.S. dividend withholding tax still applies inside a TFSA and is not recoverable).
- Use for high-growth ETFs or tax‑efficient Canadian dividend ETFs.
- See CRA TFSA information.

RRSP (Registered Retirement Savings Plan)
- U.S. dividends are generally exempt from U.S. withholding tax when held in an RRSP due to tax treaty protection.
- Hold U.S. equity ETFs and taxable foreign bond funds here when possible.
- See CRA RRSP basics.

Non‑registered accounts
- Use for assets you need access to before retirement or when contribution room is exhausted.
- Be mindful of capital gains, dividend taxes and foreign withholding taxes.

RESP (Registered Education Savings Plan)
- Use for education savings; tax-sheltered growth and government grants; ETF holdings can be held inside RESPs.

Tax tips and traps for Canadian ETF investors

Capital gains are taxed at 50% inclusion rate.
Eligible Canadian dividends get dividend tax credits in non-registered accounts — favourable relative to interest income.
Foreign withholding taxes: U.S. dividends are subject to 15% withholding when held in TFSA or non‑registered; generally exempt inside RRSP. For non‑U.S. domiciled funds, withholding varies.
Return of capital (ROC): Some funds pay ROC which reduces adjusted cost base — track ROC carefully to avoid surprise gains on disposition.
Foreign tax credits: May apply in non‑registered accounts; consult CRA or a tax professional.

Helpful resources: CRA — investment income and taxes and FCAC — taxes and investing.

Sample long-term ETF portfolios (examples only)

Conservative (lower volatility, income focus)
- 40% Bond ETF (ZAG/VAB/XBB)
- 30% Canadian equity (VCN/ZCN/XIU)
- 20% U.S equity (VFV/XUS)
- 10% International (IEFA/VIU)

Balanced (moderate growth)
- 60% Equity (30% U.S, 15% International, 15% Canada)
- 40% Bonds

Growth (higher equity tilt)
- 85% Equity (45% U.S, 25% International, 15% Canada)
- 15% Bonds

All-equity (long horizon, maximum growth)
- 60% U.S, 25% International, 15% Canada (or include emerging markets and small-cap ETFs)

Note: Rebalance annually and adjust to your risk tolerance, time horizon and financial goals. Consider automatic contributions and dollar-cost averaging.

How to implement and maintain your ETF portfolio: step-by-step

Open a brokerage account (discount online broker, robo-advisor or full-service). Options include Questrade, Wealthsimple Trade, RBC Direct Investing, etc.
Choose account type(s) (TFSA, RRSP, non‑registered) based on tax planning.
Fund the account and set up recurring contributions if desired.
Buy core ETFs according to your target allocation. Focus on low-cost core funds first.
Set a rebalancing schedule (annual or semi-annual) and thresholds (e.g., 5% drift).
Track MERs and tax documents (T3/T5 slips for tax filing).
Review annually for major life changes or strategy shifts.

Checklist for brokers and trading:

Look for commission-free ETF trading programs (some brokers offer free ETFs).
Compare currency conversion fees for USD trades.
Confirm whether the broker offers registered accounts for ETFs (TFSA/RRSP).

Risks and common mistakes

Chasing past performance: Don't pick ETFs only on recent returns.
Ignoring fees: Small differences compound over time.
Under-diversification: Overloading on Canadian banks or energy through a single sector ETF.
Tax inefficiency: Holding U.S dividend-heavy ETFs in a TFSA instead of an RRSP.
Frequent trading: Increases costs and triggers taxes; ETFs are best used for buy-and-hold investors.