Best Canadian ETFs

You can always download an ETF’s prospectus from the website of its manager (provider). The prospectus is generally a lengthy disclosure document about each security which is published before that security is offered to retail investors. You should be able to download a much shorter document called a fact sheet containing the most important and relevant information about an ETF.

On this page, we build a table which contains the largest and most liquid Canadian ETFs together with many smaller ETFs for specific investment or speculation purposes. We have tabulated the essential characteristics of those ETFs. Several bar charts on this page show the best Canadian ETFs based on different characteristics. On this page, we use total return values to compare ETFs. Total return takes into account both capital appreciation (depreciation) as well as all distributions (dividends). You can think of total return as your return on investment (ROI).

There is a consensus among investment professionals that every balanced portfolio should include bonds. But trading bonds is more complicated than trading stocks. For one, unlike stocks that trade on transparent public exchanges, bonds trade over the counter, except for a few corporate bonds listed on exchanges. Also, each bond trade often involves much larger dollar values than a typical stock trade. As a result, direct access to the bond market is quite limited for retail investors, and they need to use a mutual fund or an ETF to access the bond market.

Examples of Bond ETFs:

• VDY - Vanguard FTSE CDN High Div Yld Index ETF
• XBB - iShares Core CDN Universe Bond ETF

XEG - iShares S&P TSX Capped Energy Index ETF

XEG, which is a BlackRock ETF, provides targeted exposure to companies in the Canadian energy sector. Net Assets of XEG as of Jun 30, 2022, was CAD 2,159,456,483. S&P/TSX Capped Energy Index Units Outstanding as of Jun 30, 2022, were 145,800,000. The management Fee for this fund is 0.55% and the Management Expense Ratio (MER) is 0.61%.

This ETF replicates the performance of the S&P/TSX Capped Energy Index. The ETF primarily invests in equity securities issued by Canadian issuers participating in the energy sector. The Index is composed of constituents of the S&P TSX Composite Index that are assigned to Energy and which are not assigned to any of the oil & gas refining & marketing, oil & gas storage & transportation and coal & consumable fuels. Individual constituents are capped at 25% weight.

Example of an Energy Sector ETF:

• ZEO - BMO S&P TSX Eql Weight Oil Gas Index ETF

Some commodity ETFs buy and store the physical commodity. Other commodity ETFs enter into futures contracts to gain exposure to the price of that commodity. Still, other commodity ETFs invest in the stocks of commodity producers or miners to gain exposure to the price of that commodity. Oil ETFs and Gold ETFs are among the most commonly used commodity ETFs.

Examples of Commodity ETFs:

• HUC - Horizons Crude Oil ETF
• XGD - iShares S&P/TSX Global Gold Index ETF
• CGL - iShares Gold Bullion ETF
• PSLV - Sprott Physical Silver Trust ETF
• COW - iShares Global Agriculture Index ETF
• U - Sprott Physical Uranium Trust

You can use a currency ETF to hedge your currency exposure (for example, to mitigate the risk of increasing payments for a USD-denominated loan) or to mitigate the risk of a USD-denominated income decreasing) or to speculate on future changes in exchange rates.

Example of a Currency ETF:

• DLR - Horizons US Dollar Currency ETF

Cryptocurrency ETFs

There are problems with fiat currencies like the Canadian or US dollar. One problem is the sizable cost of cross-border transactions, and the other is the ability of central banks to inflate the money supply. Such problems are much worse and more numerous for unstable currencies like the Iranian Rial, Vietnamese Dong, and Indonesian Rupiah.

The invention of blockchain technology made decentralized money possible; decentralized currencies created based on blockchain technology are called cryptocurrencies. Bitcoin was the first cryptocurrency; it relies on the information about each transaction being stored in all nodes immutably, thus making cheating or robbery practically impossible.

As the name suggests, cryptocurrencies are currencies. In other words, they are means of facilitating trade and not an investment. Buying Apple shares is an investment since Apple makes and sells gadgets with a hefty profit margin, buying a house is an investment since the home provides shelter (which is valuable), and purchasing an orchard is an investment since an orchard produces fruit. Neither the Swiss Franc nor Bitcoin delivers or provides anything, so keeping them is not an investment.

One might speculate that prices may rise or fall in Bitcoin (or Ethereum). To make money from such speculation, you might buy crypto on a crypto exchange or use the following ETFs. The following ETFs were all created during 2021 when central banks were quite busy creating money and governments were very busy distributing that money.

BTCC - Purpose Bitcoin ETF

BTCC is a product of Purpose Investments that offers exposure to Bitcoin by buying Bitcoins and storing them in an electronic wallet. BTCC units are offered in three different flavours. The default flavour is traded in Canadian dollars while your currency exposure is hedged. BTCC.B is traded in Canadian dollars with no currency hedging. BTCC.U is traded in US dollars. It incurs a 1% management fee.

EBIT - Evolve Bitcoin ETF

Evolve Bitcoin is offered in two flavours. One trades in Canadian dollars with ticker symbol EBIT and the other trades in US dollars with ticker symbol EBIT.U. This incurs a Management fee of 0.75% and has 0.00037791 BTC per share.

BTCX.B - CI Galaxy Bitcoin ETF

CI Investments in partnership with Galaxy Digital Capital Management created and manages this ETF. BTCX.B trades in Canadian dollars while BTCX.U trades in US dollars. The management fee for BTCX is 0.40%, and it has 0.000192 BTC per unit. It also stores 100% of its assets in a cold wallet.

Examples of Cryptocurrency ETFs:

• ETHX - CI Galaxy Ethereum
• ETHR - Evolve Ether ETF
• ETC.T - Evolve Cryptocurrencies ETF

To speculate on a decline in an asset's price or hedge your exposure to the price of an asset, you might need to short sell that asset. Selling an asset short means borrowing that asset and selling it. At some point in the future, you must buy the asset and return it. The lower the asset price goes, the greater your gain, and the higher the asset price goes, the greater your loss. Short sales are hazardous trades as the potential for gain is limited while potential loss is unlimited. Many people use a tax shelter for growing their wealth and short sales are not permitted in tax-sheltered accounts, like a tax-free savings account, a registered retirement savings plan or a tax-free first home savings account. Inverse ETFs can act as a substitute for short sales.

Examples of Inverse ETFs:

• HIU - Horizons BetaPro S&P 500 Daily Inverse ETF
• HMJI - Horizons BetaPro Marijuana Companies Inverse ETF
• HIX - Horizons BetaPro S&P/TSX 60 Daily Inverse ETF
• HOD - Horizons BetaPro Crude Oil Inverse Leveraged Daily Bear ETF
• HQD - Horizons BetaPro Nasdaq-100 -2x Daily Bear ETF
• BITI - Horizons BetaPro Inverse Bitcoin ETF
• HBD - Horizons BetaPro Gold Bullion -2x Daily Bear ETF

When you expect a price movement in the short term, you can use leveraged ETFs to enhance the return on your speculation. Be forewarned that leveraged ETFs enhance your risk as well. First, if you are mistaken about the direction of the price move, their leverage would enhance your loss. Second, to keep their leverage at a constant number, leveraged ETFs have to buy the underlying asset each time the price increases and sell each time the price decreases. Thus with a leveraged ETF, time is against you.

Examples of Leveraged ETFs:

• HBU - Horizons BetaPro Gold Bullion 2x Daily Bull ETF
• HCAL - Hamilton Enhanced Canadian Bank ETF
• HGU - Horizons BetaPro Canadian Gold Miners 2x Daily Bull ETF
• HOU - Horizons BetaPro Crude Oil 2x Daily Bull
• HQU - Horizons BetaPro NASDAQ-100 2x Daily Bull ETF
• HED - BetaPro S&P/TSX Capped Energy -2x Daily Bear ETF
• HEU - BetaPro S&P/TSX Capped Energy 2x Daily Bull ETF
• HFD - BetaPro S&P/TSX Capped Financials -2x Daily Bear ETF
• HFU - BetaPro S&P/TSX Capped Financials 2x Daily Bull ETF
• HGD - BetaPro Canadian Gold Miners -2x Daily Bear ETF
• HGU - BetaPro Canadian Gold Miners 2x Daily Bull ETF
• HMJU - BetaPro Marijuana Companies 2x Daily Bull ETF
• HND - BetaPro Natural Gas -2x Daily Bear ETF
• HNU - BetaPro Natural Gas 2x Daily Bull ETF
• HQD - BetaPro NASDAQ-100 -2x Daily Bear ETF
• HQU - BetaPro NASDAQ-100 2x Daily Bull ETF
• HSD - BetaPro S&P 500 -2x Daily Bear ETF
• HSU - BetaPro S&P 500 2x Daily Bull ETF
• HXD - BetaPro S&P/TSX 60 -2x Daily Bear ETF
• HXU - BetaPro S&P/TSX 60 2x Daily Bull ETF
• Vanguard Growth ETF Portfolio

The data in this table was collected between July 10, 2022 and July 17, 2022.

An ETF, just like a mutual fund, is an investment vehicle committed to executing a particular investment strategy with the difference that investors can trade their share in the ETF with each other (on an exchange) and thus achieve greater liquidity. Whether you use a mutual fund or an ETF, an institution is engaged in executing your investment strategy of choice. This institution would charge you a management fee for its service.

The most valuable possession for most of us is our labour. In other words, our ability to work and earn an income is our greatest asset. But the payout from our labour is concentrated in the middle years of life. More generally, our income and our expenses do not match. To resolve this mismatch, we need to save and periodically move some money from our chequing account into our savings account.

The future is uncertain compared to now, so generally, humans prefer to consume what they have now rather than the future. If we want someone to save in the hope of future consumption, we need to offer them more significant consumables in the future compared with what they have now. This is the origin of interest rates in finance.

The problem with saving is that the interest earned on savings is influenced by the Central bank, whose actions resulted in negative real rates of interest over the past 15 years. In other words, the money you have saved would earn less interest than it loses purchasing power to inflation.

As a result, you are almost forced to move your savings into investments if you want to receive any payout or reward for postponing consumption. To perform an investment, you need an investment strategy. Your investment strategy can be as simple as buying a successful corporation's stock to have a share in the income and growth of that company. Such a simple investment strategy might work great but is quite risky as unexpected changes in the circumstance can create difficulties for any corporation and ruin your investment. According to finance theory, you must diversify your investments to reduce risks.

Executing the diversification strategy, like many other investment strategies, is impractical with small investments. Their execution requires economies of scale and thus significant investments. Mutual funds were created to resolve this issue by pooling many investors' money and making an investment vehicle large enough to execute various investment strategies successfully and economically.

Mutual funds are investment vehicles that each investor can inject or withdraw their money whenever they choose. Each mutual fund is committed to executing a specific investment strategy on behalf of its investors. The practical mechanism involved in withdrawing money imposes some limitations on mutual funds' liquidity. A successful innovation created Exchange Traded Fund (ETF) to solve this problem.

ETFs have two sets of prices: market price and net asset value (NAV).

Market Price

ETFs are bought and sold on exchanges at the market price. The market price can change throughout the trading day. Factors like supply, demand, and changes in the value of an ETF’s investments can affect the market price.

You can get price quotes any time during the trading day. Quotes have two parts: bid and ask. The bid is the highest price a buyer will pay if you want to sell your ETF units. The ask is the lowest price a seller is willing to accept if you wish to buy ETF units. The difference between the two is called the “bid-ask spread.” In general, a smaller bid-ask spread means the ETF is more liquid.

Net Asset Value (NAV)

Like mutual funds, ETFs have a NAV. ETF NAV is calculated after the close of each trading day and reflects the value of an ETF’s investments. NAV is used to calculate financial information for reporting purposes.

S&P Global is a publicly-traded company formerly called McGraw Hill Financial Inc. Its subsidiaries publish research on various financial assets and provide credit ratings. Assets on which S&P publishes research and analysis include stocks, bonds and commodities. It is headquartered in New York. S&P Global has a joint venture with the CME Group and News Corp called S&P Dow Jones Indices LLC.

S&P Dow Jones Indices produces and maintains stock market indices as benchmarks. This company's most famous indices are the S&P 500 and Dow Jones Industrial Average (DJIA). It has designed S&P/TSX 60 Index to represent leading companies in leading industries whose shares are trading on the Toronto Stock Exchange.

BlackRock is the world's largest asset management corporation. At the beginning of 2022, it had $10 trillion in assets under management (AUM). It was founded in 1988 and is headquartered in New York. It started in risk management and fixed income; it is currently active in all investment and asset management areas. BlackRock uses iShares as the trade-mark introducing its ETF products. This page covers some ETFs created and managed by BlackRock Asset Management Canada Limited, the Canadian subsidiary of BlackRock.

Solactive is a German company providing and maintaining financial indices since 2007.

BMO Global Asset Management, which manages BMO ETFs, comprises BMO Asset Management and BMO Investments and is a subsidiary of the Bank of Montreal. Bank of Montreal is a large bank in North America which has not missed a single dividend payment since 1829.

Horizons is the fourth-largest ETF provider in Canada. It was called BetaPro Management Inc and was a subsidiary of Jovian Capital Corp. In 2011 Jovian sold BetaPro to Mirae Asset Global Investment, based in Seoul.

Vanguard is an investment advice and management service provider based in Malvern, Pennsylvania. It is the largest mutual fund provider and the world's second-largest ETF provider. Vanguard also offers brokerage services and annuities.

It's Canadian subsidiary Vanguard Investments Canada offers various investment products to Canadians, including Vanguard ETFs.

ETFs are treated as stocks for tax purposes. Dividends are added to your income for tax purposes, and one incurs capital gains or losses when ETF units are sold. This is unlike mutual funds, where trades done by the fund would have tax implications for you. You can buy your ETF or other investment under a tax shelter to avoid paying tax on your gains. For example, Tax-Free Savings Account, Tax-Free First Home Savings Account and Registered Education Savings Plan are tax sheltered.

ETFs publish their assets every day. Thus, they are far more transparent than other investment pools, which might publish their assets every month or quarter.

To invest in an ETF, you would buy units of that ETF. The mechanism for buying units of an ETF is the same as the mechanism of buying stocks in Canada.

FTSE (pronounced footsie) stands for Financial Times Stock Exchange. It is a brand for indexes used by FTSE Russell's solutions. FTSE Russell's solutions also own the Russel brand for indexes and is a London Stock Exchange Group (LSEG) subsidiary.