Canada’s Top Technology ETFs to Buy in December 2024

ByDylan Callaghan Published On:

Canadians aren’t surprised that interest in technology is soaring. The COVID-19 pandemic shook up daily life, pushing many to work from home and try out cool new tech gadgets.

And although life has somewhat returned to normal in a post-pandemic environment, technology stocks still took a bit of a hit in 2022 before rebounding in 2023. Despite this hiccup, the tech sector is still on pace to achieve rapid growth over the next 5-10 years. Having exposure to a tech-related investment strategy will be critical.

In fact, all the pandemic has done is guarantee more rapid adoption of technology here in Canada.

However, buying individual stocks is extremely hard. As such, many Canadians are looking for Canadian tech ETFs to not only get exposure here in Canada but south of the border as well.

In this article, I’m going to go over some Canadian ETFs that can get you single-click exposure to all of the popular technology options in North America.

First, let’s start with Canada’s number one option.

The top Canadian tech ETFs to buy right now

  • iShares S&P/TSX Capped Information Tech Index ETF (TSE:XIT)
  • TD Global Technology Leaders Index ETF (TSE:TEC)
  • BMO NASDAQ 100 Equity Index ETF (TSE:ZNQ)

iShares S&P/TSX Capped Information Tech Index ETF (TSE:XIT)

The iShares Capped Information Tech ETF (TSE:XIT) is arguably the most popular technology ETF here in Canada.

In fact, it’s pretty much the only Canadian tech ETF in the country. There aren’t a lot of technology companies trading on the Toronto Stock Exchange, which is why this is practically the only pure-play Canadian tech ETF on the markets.

In terms of company exposure, you are truly getting the best of the best Canadian tech stocks with this ETF.

Its top 4 holdings are some of the biggest technology companies in the country in: Shopify (TSE:SHOP), Constellation Software (TSE:CSU), CGI Inc (TSE:GIB.A) and Open Text Corp (TSE:OTEX).

Despite a pretty substantial 2022 drawdown, this technology ETF has posted outstanding returns in the last 3, 5, and even 10-year periods. If you have owned this ETF over the last decade, you have simply crushed the broader TSX Index.

The ETF has an average annual return of 18.36% over the last 10 years. The two main drivers of this performance have been Shopify and Constellation. Yes, Shopify suffered a very large drawdown in 2022, but let’s not forget that $10,000 invested at its 2015 IPO is still worth more than $300,000 today.

Don’t discount the other major players in Constellation Software either. $10,000 ten years ago in Constellation is a cool $225,000 now.

The reason I’m focusing in on these two companies is because a purchase of XIT is essentially a massive bet on both Shopify and Constellation. This is because the two stocks make up over 50% of the fund’s total holdings.

In fact, the top 5 holdings of this Canadian tech ETF make up over 80% of assets.

The tech ETF is diversifying and continually adding new holdings, like the recent addition of Hut 8 Mining Corp (TSE:HUT) and Quarterhill (QTRH), but the exposure is very minimal.

This is by far the best Canadian tech ETF you can buy today if you want pure-play exposure to the top Canadian tech companies. Just understand that it comes with a severe degree of concentration risk because of the heavy allocation to two stocks.

In terms of fees, you’ll pay $6.10 on every $1000 invested (0.61%) to own XIT. But considering its near 19% average annual total returns over the last decade, this fee is a non-factor.

TD Global Technology Leaders Index ETF (TSE:TEC)

Canadian tech investors rejoice! We finally have a low-fee option from TD, which trades in Canada, that exposes us to some of the best technology options here in North America, and that is the TD Global Technology Leaders Index ETF (TSE:TEC).

TEC is a relatively new Canadian tech ETF, having been launched in early 2019. The ETF aims to track the Solactive Global Technology Leaders Index ETF and primarily contains mid to large-cap technology companies in North America.

In terms of Canadian exposure, this ETF contains next to none. In fact, the largest Canadian-related option inside of this portfolio used to be Shopify. But due to its large drawdown and the stellar performance of many other companies in the ETF, it isn’t even in the top 25 anymore.

89% of the fund is targeted toward North American technology companies, including some big allocations towards US tech giants Apple (15%) and Microsoft (13%). Overall, it has 257 total holdings.

In terms of the top 10, Apple and Microsoft are the only 2 with double-digit weightings. Still, this tech ETF contains some of the most prominent companies in the world, including Amazon, Facebook, Alphabet, Via, Tesla, NVIDIA and Paypal.

The ETF is a global tech option, with 6%~ of holdings in the Greater Asia region and 6%~ in the Greater Europe region. But make no mistake about it: this is essentially pure US technology.

The ETF has over $2 billion in assets under management and a daily volume of more than 22,000 shares. So, liquidity shouldn’t be an issue at all for the average retail investor.

Expenses are quite reasonable, and total fees are lower than XIT, coming in at 0.39%. The fees are offset by the 0.7% dividend yield paid by this ETF. A tech ETF that pays a dividend is a rare sight, mostly because the sector is known for growth, not income. 

Let’s not kid ourselves; we aren’t buying these Canadian tech ETFs for distribution. So, it’s really nice that it can at least offset the fees to the point where this fund is effectively free.

In terms of performance, there isn’t much to go off of because the fund is new. Its returns are also going to be skewed because of COVID-19 and the tech surge. I’ll want to see half a decade’s returns before I judge the true effectiveness of the ETF.

But for now, it looks very promising with an annual rate of return of more than 15% annually since its inception date.

BMO NASDAQ 100 Equity Index ETF (TSE:ZNQ)

This is a relatively unknown Canadian tech ETF primarily because the hedged version (which is ZQQ, by the way, if you’d like to look at it) takes all the attention.

But I like unhedged ETFs, as I believe the back-end fees and work required to hedge have historically made these currency-hedged ETFs underperform. This is why I’ve included the unhedged version of the BMO NASDAQ 100 Equity Index ETF (TSE:ZNQ).

The non-hedged version has outperformed over the last three years, returning more than 11% annually versus 8.54% annually for the CAD-hedged version.

Ultimately, however, this outperformance could change depending on how the Canadian Dollar does compared to the U.S. Greenback. And, as always, past performance is no guarantee of future results.

The ETF’s top holdings mimic that of, you guessed it, the NASDAQ 100. In fact, the ETF’s goal is to simply replicate the performance of the NASDAQ 100 Index.

It has struggled to do so in 2022 as the Canadian Dollar performed well, but this is still an ETF that has posted outstanding returns since its inception in early 2019, turning $10,000 into nearly $24,000 during that time period.

The ETF’s largest holding is Apple at just over 11% of assets, and after that, we see much the same as TEC with the rest of the top five holdings consisting of Microsoft, Amazon, Nvidia, and Meta Platforms. Other top holdings include Alphabet, Tesla, and Adobe. 

There are no Canadian companies in this ETF. Shopify would likely be included, but the company trades on the New York Stock Exchange. If you’re looking for exposure to the NASDAQ 100 with some relatively low fees, this is an ETF you’ll want to take a look at.

With fees of 0.39%, this fund will cost you around $3.90 per $1000 invested. Not bad for single-click exposure to 100 of the best tech companies in North America.

However, keep in mind that this unhedged variant is much smaller than its hedged counterpart, with assets under management of only $500 million and an average daily volume of 2222, compared to $1.3 billion and 52,000 in average volume for the hedged version.

However, it provides more than enough liquidity for the average retail investor.

Overall, these Canadian tech ETFs provide solid exposure to a variety of markets

If you’re looking for exclusive Canadian tech exposure, then XIT is going to be the best Canadian tech ETF around.

However, globally, TEC provides some very unique exposure and also does so with some pretty low management fees.

And finally, if you’re looking for exclusive exposure for tech south of the border and to the NASDAQ 100, the unhedged version of BMO’s product should serve you fine. However, if you feel you still want to be hedged to the Canadian dollar, look at ZQQ.

On a side note, if you’re looking for tech exposure in international markets, have a look at our top emerging market ETFs in Canada.

These Canadian tech ETFs all sport higher yet completely reasonable fees due to the fact they are “niche” ETFs and not broad index funds. They require a little more active management, and as such, you’ll pay for this.

But in all situations, the fees are essentially non-factors because of the returns.