The Best TSX ETFs – Top ETFs Tracking the TSX in December 2024

ByDan Kent Published On:

If you’re looking to invest in the Canadian stock market, exchange-traded funds (ETFs) are a great way to gain long-term exposure to a diversified portfolio of stocks. 

The TSX (Toronto Stock Exchange) is the primary stock exchange in Canada. As a result, there are many ETFs available that track the TSX index.

When selecting a TSX ETF, it’s important to consider factors such as the ETF’s expense ratio, diversification, liquidity, and historical performance.

An ETF with a low expense ratio will minimize the amount of money that you pay in fees. This can have a significant impact on your returns over time. 

Diversification is also important, as it helps reduce your overall risk by spreading your investment across a variety of stocks. Canada has many stocks that are sensitive to interest rates, so you’ll want to pick and choose which companies you want to invest in. 

Fortunately, ETFs that track the TSX do a good job of isolating particular sector exposures so investors can pick what they want.

In this article, we’ll examine some of the best TSX ETFs available for Canadian investors. Keep in mind we’ll focus on broad-based equity ETFs in this article, ignoring things like mutual funds, bonds, or specific Canadian dividend ETFs.

Let’s dive right into it.

What are the best ETFs to track the TSX today?

  • iShares Core S&P/TSX Capped Composite Index ETF (TSE:XIC)
  • iShares S&P/TSX 60 Index ETF (TSE:XIU)
  • BMO S&P/TSX Capped Composite Index ETF (TSE:ZCN)
  • Vanguard FTSE Canada All Cap Index ETF (TSE:VCN)
  • Horizons S&P/TSX 60 Index ETF (TSE:HXT)

iShares Core S&P/TSX Capped Composite Index ETF (TSE:XIC)

If you’re looking for a broad-based ETF that tracks the Canadian equity market with low volatility, then the iShares Core S&P/TSX Capped Composite Index ETF (TSE:XIC) is worth considering.

This ETF seeks to replicate the performance of the S&P/TSX Capped Composite Index, which includes the largest and most liquid securities listed on the Toronto Stock Exchange.

One of the benefits of the iShares Core S&P/TSX Capped Composite Index ETF is its low expense ratio. With a management fee of just 0.06%, this ETF is one of the most cost-effective options for Canadian investors. 

The fund can charge a low fee primarily because of its broad exposure, low turnover rate, and higher assets under management. The larger a fund gets, the lower its fees generally go. In addition, the broader a fund’s exposure, the less management tends to charge to run it.

The ETF is designed to be a core holding in a diversified portfolio, which means it can provide exposure to a wide range of sectors and industries. This isn’t a fund designed to target high yield or a particular sector.

Its top holdings include Royal Bank (TSE:RY), Toronto Dominion Bank (TSE:TD), Shopify (TSE:SHOP), and Canadian National Railway (TSE:CNR), some of the strongest blue-chip stocks in the world.

Another advantage of the iShares Core S&P/TSX Capped Composite Index ETF is its liquidity. With over $11 billion in assets under management and an average daily trading volume of over 2 million shares, this ETF is highly liquid and easy to trade.

One thing to keep in mind is that the iShares Core S&P/TSX Capped Composite Index ETF is a market-cap-weighted ETF. This means that the largest companies in the index will have a greater impact on the ETF’s performance. 

This can be both a positive and a negative, depending on your investment strategy and risk tolerance.

iShares S&P/TSX 60 Index ETF (TSE:XIU)

If you’re looking for an ETF that provides exposure to the Canadian equity market, the iShares S&P/TSX 60 Index ETF (TSE:XIU) is a great option. This fund is designed to track the performance of the S&P/TSX 60 Index, which represents approximately 95% of the Canadian equity market.

An interesting fact? This was the first ever exchange-traded fund, starting up in 1990!

In the United States, the S&P 500 tracks the 500 largest companies in the country. However, here in Canada, our market is much smaller, and it isn’t logical for us to have a TSX 500. For this reason, we have the TSX 60, which represents the 60 largest companies in Canada.

One of XIU’s biggest advantages is its low expense ratio, which is currently 0.18%, considering its targeted approach. This means that you’ll pay just $18 in fees a year for every $10,000 you invest in the fund.

Additionally, the fund and underlying holdings have relatively high trading volume, which means that it’s easy to buy and sell shares at any time.

Another benefit of XIU is its diversification. The fund holds 60 large-cap Canadian stocks, which means that your investment is spread across multiple sectors of the economy. This can help to reduce your overall risk since you’re not relying on the performance of just one or two companies.

There is one downside to this, and that is the fact that many of our large-cap stocks are in the financial and oil and gas sectors. Although it does provide a bit of diversification, it is certainly heavily exposed to these areas.

The TSX 60 has generally outperformed the broader TSX Index, as it excludes many small-cap miners, oil and gas producers, and weaker companies overall.

However, it’s important to note that XIU is not a perfect investment. 

Since the fund is market-cap weighted, it’s heavily weighted towards a few large Canadian companies, such as Royal Bank of Canada, Toronto-Dominion Bank, and Enbridge Inc. This means that if these companies perform poorly, it could significantly impact the fund’s overall performance.

BMO S&P/TSX Capped Composite Index ETF (TSE:ZCN)

If you’re looking for a low-cost way to invest in the Canadian equity market, the BMO S&P/TSX Capped Composite Index ETF (TSE:ZCN) is a great option to consider.

This ETF aims to replicate the performance of the S&P/TSX Capped Composite Index, which is a market-capitalization-weighted index of Canadian equities. It is the same index that XIC aims to track.

The fund tracks 239 total holdings and has a management fee of 0.06%, making it one of the cheapest funds on this list. 

Like XIC, this fund could be a core holding in a portfolio for Canadian exposure. Although it doesn’t contain the entire Canadian market, it contains a much broader set of holdings than something like the TSX 60.

Its top holdings contain some of the largest companies in Canada, like:

  • Shopify Inc
  • Royal Bank of Canada
  • Toronto-Dominion Bank
  • Enbridge Inc
  • Canadian National Railway Co

Overall, there isn’t much to say about ZCN that hasn’t been said about XIC above. The funds are virtually identical, and it is up to the individual investor to choose which fund manager they want to use.

Vanguard FTSE Canada All Cap Index ETF (TSE:VCN)

When looking for a well-rounded ETF to invest in, Vanguard FTSE Canada All Cap Index ETF (TSE:VCN) emerges as a strong contender. This fund seeks to track the performance of a broad Canadian equity index that measures the investment return of large, mid, and small-cap companies.

VCN offers exposure to a wide range of Canadian equities, providing diversification within the Canadian market. With 173 holdings, it doesn’t contain as much as ZCN or XIC. However, the overall makeup is very similar.

With a Management Expense Ratio (MER) of only 0.05%, VCN stands out for its cost-effectiveness. It is 2nd lowest MER on this list. Vanguard is known to provide some of the lowest fees in the industry, and with VCN, it is no different.

With an AUM of just under $6.5B, it is not as large as the other funds on this list but is still very relevant for a Canadian-listed ETF. 

The top holdings are much the same as any other fund on this list, comprising mostly of Canada’s banks, railways, telecoms, and pipelines.

Horizons S&P/TSX 60 Index ETF (TSE:HXT)

Horizons S&P/TSX 60 Index ETF (TSE:HXT) takes a unique spin on a Canadian ETF. It doesn’t pay a dividend. Instead, it utilizes all of the dividends it receives from the underlying holdings and reinvests it back into the fund. This can create tax-efficient results for the investor.

This ETF seeks to replicate the performance of the S&P/TSX 60 Index, so it is a more targeted ETF rather than a broad-based TSX fund. However, considering the TSX 60 makes up the vast majority of the market cap of the entire index, it can certainly be viewed as a core holding.

One of the key advantages of HXT is its low management fee of only 0.03%. This makes it one of the lowest-cost ETFs in Canada, and it is the lowest on this list.

Additionally, as mentioned, HXT is a tax-efficient ETF, which means that investors are not expected to receive any taxable distributions. Instead, any distributions which are paid by the index constituents are reflected automatically in the net asset value (NAV) of the ETF.

HXT is also a good option for investors who prefer a passive investment approach. The ETF uses an innovative investment structure known as a total return swap to deliver index returns at a low cost and tax-efficient rate.

Unlike a physical replication ETF that typically purchases the securities found in the relevant index in the same proportions as the index, HXT uses a synthetic structure that never directly buys the securities of an index.

Instead, the ETF receives the total return of the index through entering into a Total Return Swap agreement with one or more counterparties.

These counterparties are typically large financial institutions.

These products are a bit more complex than your standard ETF. However, they’ve done quite well over the years, and they are certainly one you can consider today.