What are the largest ETFs in Canada?

In this post, our main objective is to delve into the top ten largest ETFs in Canada. We’ll begin by providing a comprehensive explanation of what ETFs are and why they have gained significant popularity. Afterward, we will examine each ETF in detail, shedding light on their individual fund objectives, fees, dividend yields, and historical performance.

10 Best Dividend ETF in Canada

Top 10 Largest ETFs in Canada

As evident from the aforementioned list, index ETFs dominate the majority of the entries. Notably, the most widely recognized indexes include the S&P/TSX and the S&P 500.

Top 10 Largest ETFs in Canada: Performance comparison

Largest ETF in Canada – Average returns – updated daily

What are the Fees associated with ETFs

Management Expense Ratio (MER):

The percentage of a fund’s average net assets paid out of the fund each year to cover the day-to-day and fixed costs of managing the fund. The figure is reported in the Fund’s annual management report of fund performance. MER includes all management fees and GST/HST paid by the fund for the period, including fees paid indirectly as a result of holding other ETFs.

Management Fee:

The annual fee payable by the fund to the manager of the fund for acting as trustee and manager of the fund. This fee forms the largest portion of the MER. Typically, included in the management fee are the costs associated with paying the custodian and valuation agents, registrar and transfer agents, and any other service providers retained by the manager.

Operating Expenses:

Other operating costs such as fees and expenses relating to the independent review committee, brokerage expenses and commissions, and taxes.

XIC vs XIU: Best Canadian Index ETFs

What does S&P/TSX and S&P500 stand for?

S&P/TSX

The S&P/TSX Composite Index is a capitalization-weighted index that tracks the performance of companies listed on Canada’s largest stock exchange, the Toronto Stock Exchange (TSX).

S.P. 500 Index

The S&P 500 Index, or the Standard & Poor’s 500 Index, is a market-capitalization-weighted index of the 500 largest publicly-traded companies in the U.S.

The S&P 500 stands out as an exceptional index due to its composition primarily consisting of prominent and established US corporations. It offers a high level of diversification across multiple sectors within the US economy. Widely recognized as the premier benchmark for large-cap US equities, it serves as a reliable gauge for evaluating the overall performance of these stocks. Consequently, if you hold a positive long-term outlook on the American economy, the S&P 500 emerges as the most suitable index.

Advantages of Index ETFs

Ishares S&P TSX 60 Index ETF (XIU.TO)

iShares S&P/TSX 60 Index ETF as its’ name implies, it’s a fund that is constituted with the 60 largest companies that are members of the TSX. It’s the largest ETF in Canada with 10 Billion dollars in Assets. This ETF is representative of the Canadian economy which is dominated by the Energy and Financial sector as you can see below n the sector allocation table.

The number of holdings for the ETF is 60. It has the highest MER in the list but this did not really impact its long term performance in comparison with the other funds.

XIU Holdings

Please consult issuers’ website for up-to-date data

XIU Sector allocation

Please consult issuers’ website for up-to-date data

ZSP – BMO S&P 500 Index ETF

ZSP Strategy

The BMO S&P 500 ETF seeks to replicate, to the extent possible, the performance of the S&P 500 Index, net of expenses. ZSP invests in the constituent securities of the index and holds these securities in a proportion equal to that which they represent in the index.

ZSP-U is a Canadian ETF however it only trades in US $.

ZSP is a Canadian ETF that trades in Canadian $ and is not hedged against currency risk.

ZSP is the second largest ETF in Canada.

ZSP-U vs ZSP which one to choose

If you are uncertain between a hedged, unhedged or US $ ETF, please refer to the table below:

Ishares Core S&P TSX Capped Comp ETF (XIC.TO)

Seeks long-term capital growth by replicating the performance of the S&P®/TSX® Capped Composite Index, net of expenses. While XIU has 60 holdings in total, XIC is much larger with 219 Canadian companies. In terms of performance both XIU and XIC are quite close. XIC has a lower MER 0.06% in comparison to XIU at 0.18%. The Ishares Core S&P TSX Capped Composite ETF is dominated by Energy and Financial companies which is the same case for XIU.

XIC is the third largest ETF in Canada.

XIC Ishares Core S&P TSX Capped Comp ETF Holdings

Please consult issuers’ website for up-to-date data / Largest ETF in Canada

XIC Ishares Core S&P TSX Capped Comp ETF Sector allocation

Please consult issuers’ website for up-to-date data

Ishares Core S&P 500 ETF CAD Hdg ETF

Seeks long-term capital growth by replicating the performance of the S&P 500 Hedged to Canadian Dollars Index.

Holdings

ZCN – BMO S&P TSX Capped Comp ETF

The BMO S&P/TSX Capped Composite Index ETF (ZCN) is an index ETF (passive strategy). It has been designed to replicate the performance of the S&P/TSX Capped Composite Index (Index). The ETF invests in and holds the Constituent Securities of the Index in the same proportion as they are reflected in the Index.

ZAG – BMO Aggregate Bond Index ETF

ZAG is a fixed income ETF. It invests primarily in Bonds. The fund invests in a variety of debt securities primarily with a term to maturity greater than one year.

ZEA – BMO MSCI EAFE ETF

The BMO MSCI EAFE Index ETF (ZEA) is an index ETF. It invests in developed equity markets, excluding Canada and the U.S.

XEF – Ishares Core MSCI EAFE IMI Index ETF

XEF invests in an international portfolio of stocks. It’s a simple way to get exposure to over 1500 stocks from Europe, Asia and Australia. The index tracked is the MSCI EAFE® Investable Market Index.

VFV – Vanguard S&P 500 Index ETF

Vanguard S&P 500 Index ETF seeks to track the performance of a broad U.S. equity index that measures the investment return of large-capitalization U.S. stocks. The S&P 500 Index, or the Standard & Poor’s 500 Index, is a market-capitalization-weighted index of the 500 largest publicly-traded companies in the U.S. 

The S&P 500 is an excellent index because most of its constituents are large, established US corporations. Besides, It’s well-diversified across various sectors of the US economy. The S&P 500 is widely regarded as the best gauge of large-cap U.S. equities. It can be easily used to express an opinion on the US economy in general. In other words, if you are bullish on the performance of the American economy in the long term, it’s probably the best index for you.

VFV ETF Holdings

please consult issuers website for up-to-date data

XUS – Ishares Core S&P 500 Index ETF

XUS is ideal if you would like to invest in a diversified portfolio of US Companies (mainly Large Capitalization). It tracks the S&P 500 Index.

What’s an ETF?

An ETF is a basket of securities (that part of an index) that you can buy or sell through a brokerage firm on a stock exchange. ETFs are offered on virtually every conceivable asset class from traditional investments to so-called alternative assets like commodities or currencies.

Why ETFs are popular?

The short answer answer is fees. ETFs compete directly with traditional mutual funds which fees can range from 2 to 4%. Mutual funds are managed actively by the manager thus they are expensive. While the ETF track usually an index (so there is no portfolio manager picking stocks). For example, an ETF that tracks the S&P/TSX will have to have in its holdings the majority of the stocks that are part of that index.

The manager of an index ETF will seek to replicate the performance of the index, he cannot exclude, overweight or underweight a stock. He will just buy the stocks at the same proportion that are represented in the index itself. Because, the manager role is limited, the fees are cheaper.

Several empirical studies looking at the performance of ‘active’ managers found that for most, their performance was less than the performance of the market index! So why bother paying 4% fees when you can simply ‘buy’ the index.

What are the types of ETF?

There are so many types of ETFs in the market. Below are the most common ones:

Equity ETFs
Bond/Fixed Income ETFs
Commodity ETFs
Currency ETFs
Specialty ETFs
Factor ETFs
Sustainable ETFs (or ESG)

What should I know before buying an ETF?

Investors should pay close attention to the following:

• The fund’s objective;
• Risk level
• Management Expense Ratio (Total fees charged by an ETF)
• Liquidity

Are ETFs good for beginners?

ETFs are great for both beginners and Experts.

• They are ideal if you want to bet on a particular sector or commodity;
• ETFs are used by large number of investors as a mean of generating passive income (for instance with Dividend ETFs);
• Actively managed ETFs allow investors access to sophisticated investment styles: Value investing, Covered call,…etc).

Disclaimer

The data on this website is for your information only. It does not constitute investment advice, or advice on tax or legal matters. Any information provided on this website does not constitute investment advice or investment recommendation nor does it constitute an offer to buy or sell or a solicitation of an offer to buy or sell shares or units in any of the investment funds or other financial instruments described on this website. Should you have any doubts about the meaning of the information provided herein, please contact your financial advisor or any other independent professional advisor.