The Top Canadian Index Funds to Buy for March 2025

ByMathieu Litalien Published On:

​
​
My Best ETF for 2025

I like the diversified element of this fund and the lack of certain industries, at a reasonable fee. I think this ETF has significant potential in Canada's market moving forward. Grab my report for yourself for free below:

    We won't send you spam. Unsubscribe at any time.

    ​
    ​Free Report: High Quality Niche ETF

    I like the diversified element of this fund and the lack of certain industries, at a reasonable fee. I think this ETF has significant potential in Canada's market moving forward.

    Get my report below:

      We won't send you spam. Unsubscribe at any time.

      ETF investors: my case study has fundamentally changed how ETF investors look at the markets and their portfolios.

        Key takeaways

        Income-Focused and US Market Access – CDZ is ideal for dividend investors, while XUU provides diversification by tracking the broad U.S. stock market.

        Broad Market Exposure – ZCN and XIC provide exposure to the entire Canadian stock market, while XIU focuses on the 60 largest companies.

        Sector-Specific and Growth-Oriented Options – XIT offers targeted exposure to Canada’s tech sector, which has historically outperformed other sectors.

        One ETF I like way better than the ones on this list.

        Many beginner investors find it a bit overwhelming researching and purchasing individual stocks. The market is stuffed full of them, and the vast majority of them are poor quality and will underperform the broader markets over the long-term.

        As a result, many turn to index investing as a set and forget alternative. In this article, I’m going to go over some of the top index funds available in Canada today so that you can get started.

        First, a bit of education.

        What is index investing, and why should we buy Canadian index funds?

        Simply put, index investing is a passive strategy that attempts to replicate the returns of a particular market index.

        By market index, I mean the TSX, S&P 500, NASDAQ, or any other broad market index that holds a large basket of underlying stocks.

        This is done by purchasing Canadian exchange-traded funds (ETFs) or mutual funds built to track the underlying index closely. It is also one of the most effective ways to diversify your holdings. They’re available on practically every trading platform and brokerage.

        I will speak on Index ETFs only for this article, as they are typically more beneficial than mutual funds, especially on a passive indexing level.

        Index investing is one of the most straightforward investing strategies and one that financial gurus recommend. Don’t take my word for it though. Lets see what they have to say.

        Here is what some of the most well-respected gurus have had to say when it comes to index funds

        “By periodically investing in an index fund, for example, the know-nothing investor can outperform most investment professionals. Paradoxically, when ‘dumb’ money acknowledges its limitations, it ceases to be dumb.” – Warren Buffett

        “The word passive does a disservice to investors considering their options. Indexing provides an effective means of owning the market and allows investors to participate in the returns of a basket of stocks. The basket of stocks changes over time as stocks are added or removed based on its rules.” – Charles R. Schwab

        This article will cover the top Canadian index funds

        By that, I mean this article will go over Canadian ETFs that are tracking Canadian indexes. This means it will not include anything related to the S&P 500, NASDAQ, or the international markets.

        However, for those who insist, I have included one broad based US index fund at the end of this article.

        Let’s dive right into it.

        What are the top Canadian index funds to buy right now?

        Broad exposure to Canadian equities

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

        ZCN tracks the S&P/TSX Capped Composite Index, offering exposure to nearly all publicly traded Canadian companies. It provides diversified exposure across sectors, making it a strong core holding for investors looking for Canadian market representation.

        • Comprehensive Canadian Market Coverage – Tracks almost the entire Canadian stock market, offering exposure to large-, mid-, and small-cap companies.
        • Low-Cost ETF – With a low management expense ratio (MER), it is one of the cheapest ways to gain broad Canadian market exposure.
        • Sector Diversification – Unlike sector-heavy funds, ZCN spreads risk across multiple industries, including financials, energy, and materials.
        • Long-Term Growth Potential – Provides access to Canadian blue-chip stocks with historically stable returns.
        • Oil and Commodity Prices – Canada’s market is highly tied to resource sectors.
        • Interest Rate Policy – Bank of Canada rate decisions impact financial stocks, a major component of the index.
        • Heavy Financials Exposure – Over 30% allocation to financials can be risky in downturns.
        • Limited Global Exposure – Investors may need U.S. or global ETFs for better diversification.

        Similar to ZCN, with a strong track record

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

        XIC tracks the same Canadian index as ZCN, providing nearly identical exposure to the entire TSX market. It is a solid core holding with a low expense ratio and a strong history of performance.

        • Diversified Canadian Exposure – Includes all major sectors of the TSX with a broad range of stocks.
        • Highly Liquid ETF – XIC has strong trading volume, making it easy to buy and sell.
        • Low-Cost Index Investing – MER is competitive, keeping expenses low for long-term investors.
        • Commodity and Banking Performance – These sectors drive TSX returns.
        • Economic Growth in Canada – GDP growth impacts corporate earnings and market sentiment.
        • Sector Overweight in Financials and Energy – Can lead to underperformance in economic downturns.
        • Limited Exposure to High-Growth Sectors – Canadian market lacks major tech players.

        Canada’s largest and most liquid ETF

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

        XIU focuses on the 60 largest Canadian companies, making it more concentrated than ZCN and XIC. It is one of the most traded ETFs in Canada and is known for its stability and liquidity.

        • Exposure to Canada’s Top Companies – Holds blue-chip stocks with strong balance sheets and market leadership.
        • Lower Volatility Than Broader Indexes – Large-cap stocks tend to be more stable.
        • Strong Historical Performance – XIU has a long track record as one of Canada’s best-performing ETFs.
        • Bank and Energy Sector Growth – These industries dominate XIU’s holdings.
        • Dividend Stability – XIU contains some of Canada’s most consistent dividend payers.
        • Higher Concentration Risk – Fewer holdings mean less diversification than broader ETFs.
        • Slow Growth Compared to Tech-Heavy Markets – XIU lacks exposure to fast-growing tech sectors.

        Dividend growth investing in Canada

        S&P/TSX Canadian Dividend Aristocrats Index Fund (TSX:CDZ)

        CDZ tracks the S&P/TSX Canadian Dividend Aristocrats Index, focusing on companies with a history of increasing dividends. It appeals to income-focused investors looking for stable cash flow.

        • Reliable Dividend Growth – Companies in the index have a history of consistently raising dividends.
        • Income Stability – Offers attractive yields compared to other broad-market ETFs.
        • Defensive Investment in Volatile Markets – Dividend-paying stocks tend to be less volatile.
        • Interest Rate Impact on Dividend Stocks – Higher rates can make dividend stocks less attractive.
        • Corporate Profitability and Payout Ratios – Dividend sustainability depends on earnings growth.
        • Potential Underperformance in Growth Markets – Dividend stocks may lag in bull markets.
        • Sector Concentration in Financials and Utilities – May be vulnerable if these sectors decline.

        Canada’s top tech ETF

        iShares S&P/TSX Capped Info Tech ETF (TSX:XIT)

        XIT provides targeted exposure to Canada’s technology sector, focusing on key companies like Shopify, Constellation Software, and CGI.

        • Pure-Play Tech Exposure – Canada’s tech sector is relatively small, but XIT captures its strongest performers.
        • Growth Potential – Tech companies have strong earnings expansion opportunities.
        • Long-Term Upside from Innovation – Canadian tech firms continue expanding globally.
        • AI and Cloud Computing Growth – These trends could benefit XIT’s top holdings.
        • Valuation and Interest Rates – Tech stocks are sensitive to interest rate hikes.
        • High Volatility – Tech stocks tend to have larger price swings.
        • Lack of Diversification – Only a few stocks dominate the index.

        Diversified U.S. stock market exposure

        iShares Core S&P US Total Market Index ETF (TSX:XUU)

        XUU tracks the S&P U.S. Total Market Index, providing exposure to the entire U.S. stock market. It’s an excellent way for Canadian investors to diversify internationally.

        • Broad U.S. Market Exposure – Covers large-, mid-, and small-cap U.S. stocks.
        • Access to High-Growth Sectors – Heavy weighting in tech, healthcare, and consumer stocks.
        • Currency Diversification – Provides exposure to the U.S. dollar, which can hedge against CAD weakness.
        • Federal Reserve Rate Decisions – Impact the valuation of U.S. stocks.
        • Tech and Consumer Sector Strength – Major drivers of U.S. market returns.
        • Foreign Exchange Risk – U.S. dollar fluctuations impact returns.
        • U.S. Market Volatility – While diversified, XUU is still affected by market downturns.

        Canadian index funds can remove emotions from investing

        Research has shown that retail investors consistently underperform the markets. Most hedge funds do as well. At the heart of the issue for retail investors – is emotions.

        Index funds are a passive investing approach that can take emotion out of the equation, as investors don’t get emotionally attached to any particular stock or company.

        As values change in prices on individual stocks, it can cause stress and emotional panic selling. With an index fund, your concentration risk is reduced significantly because you own a basket of hundreds, sometimes thousands of companies.

        Can indexes crash as well? Absolutely they can. But often individual equities can expose you to larger drawdowns and also lower chances of recovery. A broader market index has almost a 100% chance of recovery from a crash, at least if we look to the last 100+ years of data.

        Individual stocks are never guaranteed to recover, as they pose much larger concentration risk. This is something to keep in mind as an individual investor.

        Just announced: Free ETF study

        To give you a taste of what kind of research and opinions are available in my monthly ETF Insights newsletter I am releasing a game changing study I completed for my newsletter.
        ​
        In this study I scrutinize a very popular ETF strategy and investigate the ETFs it involves.
        ​
        This sample newsletter is completely free, no-BS. Just enter your email below and click the button and I will send the sample newsletter direct to your inbox.

          We respect your privacy. Unsubscribe at any time.