The Top Canadian Growth ETFs to Buy in December 2024

ByDan Kent Published On:

Exchange-traded funds (ETFs) have become super popular for Canadian investors aiming to diversify their portfolios and achieve long-term growth. Big rewards come from picking individual Canadian stocks, but there’s a catch – higher risk.

So, if you’re an investor who doesn’t have the time or ability to pick individual stocks, you may be looking to grow ETFs to maximize your long-term overall returns.

Growth ETFs are designed to give you exposure to companies with the potential for above-average revenue and earnings growth, which are often found in sectors like technology.

Identifying the best growth ETFs can depend on various factors, including the fund’s performance history, expense ratios, and asset allocation.

Let’s dig into some of the top ones today. Keep in mind that most of the ETFs below will give you exposure outside of Canada, as there is often more growth in larger economies like the United States.

If you’re looking for income over growth, we have an extensive list of some of the best Canadian dividend ETFs here.

What are the best Canadian ETFs for growth?

  • iShares S&P/TSX Capped Information Technology Index ETF (TSE:XIT)
  • Vanguard S&P 500 Index ETF (TSE:VFV)
  • iShares NASDAQ 100 Index ETF (CAD-Hedged) (TSE:XQQ)
  • T.D. Global Technology Leaders Index ETF (TSE:TEC)
  • iShares Core Equity ETF Portfolio (TSE:XEQT)
  • iShares Canadian Growth ETF (TSE:XCG)

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

Investing in the technology sector can be a strategic move to diversify your portfolio. One Canadian ETF to consider in this regard is the iShares S&P/TSX Capped Information Technology Index ETF (TSE:XIT)

This fund aims to replicate the performance of the S&P/TSX Capped Information Technology Index.

We don’t have many technology options here in Canada. This is why the top two holdings of this fund, Shopify (TSE:SHOP) and Constellation Software (TSE:CSU), make up nearly half the fund.

Outside of this, it contains large single-digit weightings to other major technology companies, such as Open Text (TSE:OTEX), CGI Inc (TSE:GIB.A), and Descartes (TSE:DSG).

The fees are relatively high, coming in at 0.61%. This means you’ll pay $6.10 every year per $1000 you have invested. However, for the most part, the fees have been well worth it in terms of performance.

Because of the success of Shopify and Constellation Software, the fund has produced nearly 20% annualized returns over the long term. This outperforms not only the TSX index but also the S&P 500 and even the NASDAQ.

It doesn’t pay a dividend, but this is because most of the underlying holdings don’t. This is certainly a growth ETF and shouldn’t be relied on for income.

If the high degree of concentration on Shopify and Constellation Software is something you’re comfortable with, this one is a must-add to your watchlist.

Vanguard S&P 500 Index ETF (TSE:VFV)

If you’re considering a cost-effective way to invest in the U.S. stock market, the Vanguard S&P 500 Index ETF (TSE:VFV), commonly known by its ticker VFV, could pique your interest.

This ETF aims to provide returns similar to those of the S&P 500, but it trades in Canadian dollars. Given its broad exposure to large-cap U.S. stocks, most of which are involved in faster-growing verticals than Canadian stocks, it is perfectly suited as a Canadian growth ETF.

One of VFV’s key attributes is its low management expense ratio (MER) of 0.09%. Because of its large assets under management, the fund can operate at a lower fee. In addition to this, Vanguard tends to offer the best rock-bottom fees in the industry. VFV is no different.

The fund’s top holding is simply VOO, which is Vanguard’s USD S&P 500 ETF. However, you’re still getting exposure to Apple (AAPL), Alphabet (GOOG), Amazon (AMZN), Tesla (TSLA), Microsoft (MSFT), and many more of the top growth stocks in the United States.

The fund does pay a distribution, but it’s only around 1%. This growth ETF should be utilized for growth and not income and is meant to be a core position in a long-term portfolio.

One warning about this particular ETF, however. Even inside of an RRSP, you’ll pay a withholding tax on a portion of the distribution. This is because the fund is a Canadian-domiciled fund that contains a US ETF.

If you owned VOO, the USD version, you would not be charged this withholding tax. For most Canadians, this is going to be a small amount of money. However, it is something you need to take into consideration prior to buying regardless.

If you’re looking for U.S. exposure, VFV is as solid as it comes for a Canadian ETF. The S&P 500 is arguably the most prominent index on the planet, and the vast majority of investors have some form of exposure.

iShares NASDAQ 100 Index ETF (CAD-Hedged) (TSE:XQQ)

If you’re looking into growth ETF options available in Canada, the iShares NASDAQ 100 Index ETF (TSE:XQQ) deserves your attention.

I know we mentioned the growth of the S&P 500 above. However, the growth of the NASDAQ has been far greater. This is because it typically contains some of the fastest-growing technology companies on the planet.

This ETF offers you exposure to some of the largest non-financial companies in the tech-centric NASDAQ-100 index. 

Your investment in XQQ is managed in Canadian dollars, much like VFV, with currency hedging strategies employed to mitigate the risks associated with forex fluctuations. If you’re looking for an unhedged version, just look to XQQU.

The fund’s top holdings include similar companies to the S&P 500. You’ll have exposure to Microsoft, Apple, NVIDIA (NVDA), Amazon, Meta Platforms (META) and Broadcom (AVGO).

However, don’t mistake the NASDAQ as solely a technology index. It also includes the likes of Pepsi (PEP), Costco (COST), and even T-Mobil (TMUS).

The fund has fees of around 0.39%, meaning you’ll pay just $3.90 every year for every $1000 you have invested. It’s a relatively cheap fee considering you gain exposure to the NASDAQ and keep your money in your home currency, hedged.

Hedging is all a personal choice, of course. Often, the longer your time horizon, the less incentive you have to hedge. But that is an entirely different subject, worthy of its own article.

T.D. Global Technology Leaders Index ETF (TSE:TEC)

If you’re looking at diversifying your portfolio in the technology sector, you might consider the T.D. Global Technology Leaders Index ETF (TSE:TEC).

This ETF provides exposure to a large selection of global mid- and large-capitalization companies in the technology field.

One of the appealing features of TEC is its focus on technology giants such as Apple, Microsoft, Amazon, Alphabet, and Tesla, alongside a notable Canadian tech presence from Shopify.

The fund has exploded in popularity recently and is one of the youngest funds on this list, starting in early 2019. T.D. Bank is not well known for its selection of exchange-traded funds. I’d argue that this is by far its most popular.

It has a competitive fee of 0.39% and gives an investor a little wider exposure over the NASDAQ 100. It contains a total of 230~ holdings. 

Make no mistake about it; however, this is still a large bet on U.S.-based tech. Nearly 90% of the fund is U.S.-based companies, with the other 5% coming from European countries and the remaining from Canada and Japan.

Like the other funds on this list, it pays a negligible distribution, as the fund’s main objective is to maximize total returns for its investors.

iShares Core Equity ETF Portfolio (TSE:XEQT)

The iShares Core Equity ETF Portfolio (TSE:XEQT) caters to investors seeking long-term capital growth through a diversified portfolio of equities. And by diversified, I mean one of the most diversified funds you can buy.

Managed by BlackRock, XEQT is designed to simplify your investment process by providing broad exposure to over 10,000+ securities.

These are meant to be a one-click solution for investors, and their popularity is certainly rising as more investors ditch their financial advisors and take a DIY approach.

If you’re into picking individual stocks or taking advantage of trends in the market, XEQT likely won’t be for you. If you want to buy a single holding and track the market’s returns, it’s one you need to look at.

The fund has fees of 0.2%, which, considering the amount of exposure it gets you, is dirt cheap in my eyes. If you consider how hard it would have been to grab exposure to a 5-figure list of companies even 15 years ago, it’s crazy you can now do it for a 0.2% fee.

The fund gives you this exposure by holding 4 ETFs: an ETF that tracks the U.S. market, the Canadian market, the developed international markets, and the emerging international markets.

It is a relatively new fund, debuting in 2019, and I doubt it loses popularity over the years. All-in-one solutions are quickly replacing a lot of advisors, whether they like it or not.

The fund pays a nearly 2% distribution. However, make no mistake about it, this fund is centered around providing the best possible total returns.

If you’re interested in other all-in-one ETFs, make sure to check out funds like VGRO, XGRO, VBAL, XBAL, and event VEQT.

iShares Canadian Growth ETF (TSE:XCG)

The iShares Canadian Growth ETF (TSE:XCG) is designed for long-term capital growth. This ETF replicates the performance of the Dow Jones Canada Select Growth Index.

The aim is to give you exposure to large and mid-sized Canadian companies expected to grow at an above-average rate compared with the market.

The fund’s top holdings contain the likes of Shopify (TSE:SHOP), Canadian Pacific Kansas City (TSE:C.P.), Canadian National Railway (TSE:CNR), Brookfield Corporation (TSE:B.N.), and Constellation Software (TSE:CSU).

These are some of the most prominent, fastest-growing companies in the country. Because of how small our economy is and the overall lack of growth within TSX-traded stocks, the fund only contains 40 holdings. With a 10% weighting to Shopify, the fund is also relatively concentrated.

It has a management fee of 0.55%, meaning you’ll pay $5.50 every year for every $1000 you have invested in it. The fund is relatively small, with under $100M in assets under management. I imagine that, as the fund grows, it might be able to reduce this fee. But only time will tell.

It pays a 1% distribution, but like every other ETF on this list, the focus is not income but total return.

This is a relatively unknown fund here in Canada, but it’s certainly one you could consider choosing if you want a broader, Canadian-specific growth ETF.

What exactly are growth ETFs?

Growth ETFs, or Exchange-Traded Funds, represent a category of investments specifically designed for investors seeking capital appreciation over time. 

Unlike funds that pay a regular income, growth ETFs are weighted towards sectors and stocks that possess the potential for higher-than-average returns.

Generally, the approach with growth ETFs involves targeting companies that are expected to grow at an above-average rate compared to their industry peers. These growth stocks are often from the tech sector, which is poised for innovation and expansion.

A key benefit of holding growth ETFs is the diversification they offer. Instead of purchasing individual stocks, investing in a growth ETF provides exposure to a basket of growth-oriented stocks.

This helps to spread risk across various assets and potentially mitigates the impact of volatility on your investment portfolio.

Growth ETFs differ from value ETFs, which focus on undervalued companies likely to appreciate over the long term. Growth ETFs are more about capitalizing on current and future momentum within specific companies and sectors that are scaling rapidly.

Remember that growth investing can involve more risk than other strategies. This is because the companies are often trading at much more expensive valuations.

Why most investors should aim for total return over dividends

Total return is a comprehensive measure which includes interest, dividends, and capital gains. It reflects a portfolio’s full performance. Focusing solely on dividends can be limiting, especially if you’re not yet in retirement.

Most investors should prioritize capital gains and reinvest dividends to fuel further growth. This approach might offer more significant potential for appreciation over time.

Many avoid this type of strategy out of fear they may panic and make mistakes while the market is volatile. While this is a very realistic possibility, training yourself to be able to withstand the market movements and taking a total return approach will ultimately lead to higher returns over the long term, assuming you don’t panic and make a mistake, that is.

As you approach retirement, you might consider shifting toward income-generating assets like bonds or higher-yield funds. This is because you will generally start drawing down on your accounts, not continuing to accumulate.

A 1-2% increase in annualized return for someone with a 20-30% time horizon can lead to hundreds of thousands of dollars in extra capital in retirement.