Best ETF Canada – Full guide 2023

In this post, we will be going over the Best Exchange Traded Funds (ETF) in Canada. First, we will discuss the benefits of investing in ETFs. Then, we will be presenting the best ETFs by category:

Why should I consider buying an ETF?

The quick answer is diversification. Assume you have 5,000 $, you can’t buy a lot of stocks with that amount (may be 4 or 5). Also, you will incur fees to trade them. Your portfolio will be certainly too dependent on a performance of 1, 2 …or even 5 sectors that your stocks are in. If you buy with that 5,000 $ an ETF that tracks let’s say the TSX/S&P 60, it basically means you just bought share in 60 of the largest companies that are trading in the stock exchange in Canada. It’s clearly a powerful tool to diversify your portfolio with a small amount of money.

ETFs offer a wide variety of choices, you can basically decide the allocation yourself based on your risk tolerance or rely on Robo advisers services (such as Questrade or Wealth simple).

What are the risks?

An ETF trades like a stock. So it’s volatile. You have to accept the fact the value can go up or down like any stock. There is no question that an ETF covering let’s say the TSX is for most of the time less volatile than holding 1 stock. Because the TSX ETF is a bundle of over 100 stocks not just one. It’s diversified by nature so it’s less volatile.

Best Canadian Dividend ETFs

VDY – FTSE Canadian
High Dividend
Yield Index
XDV – iShares
Canadian Select
Dividend Index

FIE – Ishares CDN
Financial Monthly
Income
Top 3 Best Canadian Dividend ETF in Canada

In my opinion, XDV iShares Canadian Select Dividend Indx and VDY FTSE Canadian High Dividend Yield Indx are the best Canadian diversified dividend ETFs. They combine low volatility, attractive returns, and good performance. VDY has a Morningstar Rating of 5 Stars and a low MER 0.21%!

Canadian Banks are known for their financial strength. Their Dividends are attractive and stable. FIE Ishares CDN Fin Mthly Income is a great choices. If you want exposure to the Canadian banking industry focusing on earning dividends, this ETF will undoubtedly answer your goals.

For a full comparison of the most popular Canadian dividend ETFs in Canada, please visit: Best Canadian dividend ETF 2023- Top 16

VDY – Vanguard FTSE Canadian High Dividend Yield Index ETF

FTSE Canadian High Dividend Yield Index ETF tracks the performance of the FTSE Canada High Dividend Yield Index, which consists of Canadian stocks having a high dividend yield. Due to the nature of the Canadian market, this fund has large portion of its investment portfolio in Energy and Financials.

VDY holdings

NameWeight
Royal Bank of Canada14.1%
The Toronto-Dominion Bank12.5%
Enbridge Inc7.9%
Bank of Nova Scotia7.7%
Bank of Montreal6.5%
Canadian Imperial Bank of Commerce4.9%
TC Energy Corp4.7%
BCE Inc4.4%
Canadian Natural Resources Ltd4.1%
Manulife Financial Corp3.7%
Please consult issuers’ website for up-to-date data

S

XDV – iShares Canadian Select Dividend Index ETF

XDV seeks long-term capital growth by replicating the performance of the Dow Jones Canada Select Dividend Index, net of expenses.

NameWeight
Canadian Imperial Bank of Commerce8.5%
Canadian Tire Corp Ltd Class A6.8%
Bank of Montreal6.3%
Labrador Iron Ore Royalty Corp6.2%
Royal Bank of Canada6.0%
BCE Inc4.7%
TC Energy Corp4.7%
Bank of Nova Scotia4.7%
The Toronto-Dominion Bank4.3%
National Bank of Canada3.9%
Please consult issuers’ website for up-to-date data

FIE – Ishares CDN Fin Mthly Income

Ishares CDN Fin Monthly Income seeks to maximize total return and to provide a stable stream of monthly cash distributions. FIE has a high exposure to the financial sector.

FIE holdings

NameWeight
iShares S&P/TSX Cdn
Prefr Shr ETF Comm
20.7%
iShares Core Canadian
Corporate Bd ETF
10.0%
Canadian Imperial Bank of Commerce9.1%
Royal Bank of Canada8.5%
The Toronto-Dominion Bank7.0%
Sun Life Financial Inc6.5%
Manulife Financial Corp6.5%
National Bank of Canada6.5%
Power Corporation of Canada6.0%
Please consult issuers’ website for up-to-date data

Best US Dividend ETFs

VGH – Vanguard US
Dividend Appreciation

CAD Hdg
ZWH – BMO US High
Dividend Covered Call
Top 2 Best Canadian Dividend ETF in Canada

Link to full post: Best US Dividend ETFs in Canada (2023)!

VGG – Vanguard US Div Appr and VGH – U.S. Dividend Appreciation Index ETF (CAD-hedged)

VGG seeks to track the performance of the NASDAQ US Dividend Achievers Select Index. The latter is comprised of a select group of securities with at least ten consecutive years of increasing annual regular dividend payments.

VGH is hedged: Meaning the manager will seek actively to reduce currency risk. VGG is not hedged against currency fluctuation risk.

Index funds can be great especially from an MER perspective. VGG and VGH (hedged version) charge 0.30% MER which the lowest among the ETFs selected in our list. They offer an exposure to large number of established US corporations, mostly Bluechips such as Microsoft, Walmart…etc.

The choice between VGG and VGH depends solely on the investor take on currency. If the Canadian dollar appreciates then a hedged ETF will be a better choice. On the other hand, if the US dollar appreciates, then the non hedged ETF will have a better performance.

VGG Holding details

Company NameAllocation
Microsoft Corp4.5%
JPMorgan Chase & Co3.9%
Johnson & Johnson3.8%
UnitedHealth Group Inc3.3%
Visa Inc Class A3.2%
The Home Depot Inc3.1%
Please consult issuers’ website for up-to-date data

VGG Geographic allocation

CountryFund
USA99.3%
Please consult issuers’ website for up-to-date data

VGG Sector allocation

Sector% Allocation
Financial Services17.0%
Industrials16.9%
Healthcare15.5%
Please consult issuers’ website for up-to-date data

ZWH – BMO US High Dividend Covered Call ETF

ZWH has been designed to provide exposure to a dividend focused portfolio, while earning call option premiums. The underlying portfolio is yield-weighted and broadly diversified across sectors. The Fund utilizes a rules-based methodology that considers the following criteria:

dividend growth rate,

yield,

payout ratio,

liquidity.

What’s unique about this ETF is that it uses covered calls to protect against downside risk. This being said, the covered call strategy provides limited downside protection. Also, when you write a covered call, you give up some of the stock’s potential gains. These ETFs will tend to have a higher yield and a lower performance.

ZWH Holding details

Weight (%)Name
4.48%BANK OF AMERICA CORP
4.29%CISCO SYSTEMS INC/DELAWARE
4.21%HOME DEPOT INC/THE
4.12%JPMORGAN CHASE & CO
4.09%MICROSOFT CORP
3.92%INTERNATIONAL BUSINESS MACHINES CORP
3.85%CHEVRON CORP
3.83%ABBVIE INC
3.71%AT&T INC
3.65%COCA-COLA CO/THE

Please consult issuers’ website for the most recent data

ZWH Geographic allocation

CountryFund
USA100.0%

ZWH Sector allocation

SectorFund
Information Technology22.52%
Industrials8.25%
Consumer Discretionary9.60%
Health Care12.53%
Financials16.30%
Materials4.19%
Communication9.54%
Consumer Staples7.25%
Energy3.92%
Utilities3.77%
Real estate2.12%

Please consult issuers’ website for the most recent data

Best Growth ETF from BMO

ZQQ – BMO Nasdaq 100
Hedged To CAD Index
ZUQ – BMO MSCI USA
High Quality Index
Top 2 Best Growth ETF from BMO

Link to full post: Best ETF Canada: Top 7 offered by BMO – 2023

ZQQ  – BMO Nasdaq 100 Hedged To CAD Index ETF

ZQQ Strategy

BMO Nasdaq 100 Equity Hedged to CAD seeks to replicate, to the extent possible, the performance of an index of securities of companies listed on the NASDAQ, net of expenses. ZQQ ranks first in our ranking of the best BMO ETFs to hold for long term.

The ZQQ is hedged for currency risk.

The Nasdaq-100 is one of the world’s leading large-cap growth indices. It includes 100 of the largest national and international non-financial companies listed on the Nasdaq by market capitalization.

This index is dominated by companies in the technology sector.

47.93% Technology

19.77% Communications Services

18.25% Consumer Discretionary

ZQQ Holdings

Weight
(%)
Name
10,52%APPLE INC
9,47%MICROSOFT CORP
8,17%AMAZON.COM INC
3,98%ALPHABET INC
3,97%FACEBOOK INC
3,73%TESLA INC
3,56%ALPHABET INC
3,08%NVIDIA CORP
2,33%PAYPAL HOLDINGS INC
2,00%COMCAST CORP
Please consult issuers’ website for up-to-date data

ZUQ – BMO MSCI USA High Quality Index

ZUQ strategy and sector allocation

The BMO MSCI USA High Quality seeks to replicate, to the extent possible, the performance of the MSCI USA Quality Index, net of expenses. The index is 100% invested in the United States.

The fund selects the securities according to the criteria below:

• Large or medium-sized business;

• High return on equity;

• Sustained growth in revenues;

• Low debt ratio

ZUQ Sector allocation – Top 3

45.83% Technology

20.49% Healthcare

10.80% Communication service

ZUQ Holdings

Weight
(%)
Name
5,11%FACEBOOK INC
5,00%MICROSOFT CORP
4,84%APPLE INC
4,50%JOHNSON & JOHNSON
4,01%MASTERCARD INC
3,87%NVIDIA CORP
3,80%VISA INC
3,74%UNITEDHEALTH GROUP INC
2,71%PAYPAL HOLDINGS INC
2,71%ADOBE INC
Please consult issuers’ website for up-to-date data

Best REITS ETF in Canada

ZRE – BMO Equal
Weight Reits

Index
RIT – CI First
Asset Canadian
REIT
Top 2 Best REITS ETF in Canada

Link to full post: Top 5 Best Canadian REITs ETF in 2023

RIT – CI First Asset Canadian REIT ETF

RIT is an actively managed portfolio comprised primarily of securities of Canadian real estate investment trusts, real estate operating corporations and entities involved in real estate related services. Up to 30% of the Fund’s assets may be invested in foreign securities.

RIT ETF Distribution

RITTotalCash
21-May$0.0675$0.0675
26-Apr$0.0675$0.0675
25-Mar$0.0675$0.0675
22-Feb$0.0675$0.0675
25-Jan$0.06750$0.0675

Sector breakdown

SectorWeight %
Residential30.73
Industrials21.07
Retail18.64

 

RIT ETF Holdings

Name%
CANADIAN APARTMENT PPTYS REIT4.96
TRICON RESIDENTIAL INC4.88
DREAM INDUSTRIAL REIT4.87
SUMMIT INDUSTRIAL INCOME REIT4.70
INTERRENT REIT4.68
GRANITE REIT4.62
KILLAM APT REAL ESTATE INVT TR4.21
MINTO APARTMENT REIT4.06
CHARTWELL RETIREMENT RESIDENCE4.01
CHOICE PROPERTIES REIT3.74

ZRE – BMO Equal Weight Reits Index ETF

ZRE is an index fund that tracks the Solactive Equal Weight Canada REIT Index. It invests in Canadian securities that fall within the Real Estate Investment Trust sector. Each security in the Index is allocated a fixed weight rather than a market capitalization weight. This is the largest REITS ETF by asset under management with 1.3 Billion.

Sector allocation

SectorWeight %
Retail27.87%
Residential21.94%
Industrial18.55%
Diversified13.63%
Office8.90%

ZRE ETF Holdings

Weight (%)Name
4.98%WPT INDUSTRIAL REAL ESTATE INVESTMENT TRUST
4.96%SUMMIT INDUSTRIAL INCOME REIT
4.76%CROMBIE REAL ESTATE INVESTMENT TRUST
4.63%SMARTCENTRES REAL ESTATE INVESTMENT TRUST
4.63%RIOCAN REAL ESTATE INVESTMENT TRUST
4.61%INTERRENT REAL ESTATE INVESTMENT TRUST
4.61%CHARTWELL RETIREMENT RESIDENCES
4.59%MINTO APARTMENT REAL ESTATE INVESTMENT TRUST
4.58%CHOICE PROPERTIES REAL ESTATE INVESTMENT TRUST
4.57%H&R REAL ESTATE INVESTMENT TRUST

Best Covered Call ETFs in Canada

ZWB – BMO Covered
Call Canadian Banks
ZWC –BMO CDN High
Div Covered Call

Link to full post: 8 Best Covered Call ETF Canada – High dividend yield

ZWB – BMO Covered Call Canadian Banks

The ZWB aims to provide exposure to a portfolio of dividend-paying securities (Canadian Banks), while collecting premiums related to call options. The portfolio is chosen on the basis of the criteria below:

• dividend growth rate,

•  yield

• payout ratio and liquidity.

ZWB holdings

NameWeight
BMO Equal Weight Banks ETF27.2%
  Bank of Montreal12.9%
Canadian Imperial Bank of Commerce12.7%
Royal Bank of Canada12.1%
National Bank of Canada11.9%
  The Toronto-Dominion Bank11.9%
Bank of Nova Scotia11.4%

Please visit issuers’ website for up-to-date figures

ZWC –BMO CDN High Div Covered Call

The BMO Canadian High Dividend Covered Call ETF (ZWC)  has been designed to provide exposure to a dividend focused portfolio, while earning call option premiums. The underlying portfolio is yield-weighted and broadly diversified across sectors.

The fund selection methodology uses 4 factors: – Liquidity; – Dividend growth rate; – Yield and payout ratio.

ZWC is an excellent option for conservative investors looking for a steady income and low volatility. It’s tax-efficient because the dividends are all coming from Canadian companies. The financial sector and Energy represents 53% of the total overall sector allocation.

ZWC ETF Holdings

Company NameAllocation
Canadian National Railway Co5.4%
BCE Inc5.2%
TELUS Corp5.1%
Enbridge Inc5.0%
Royal Bank of Canada5.0%
Canadian Imperial Bank of Commerce4.9%
Bank of Nova Scotia4.7%
The Toronto-Dominion Bank4.6%
Manulife Financial Corp4.3%

As of October 29th Source: TD Market research

Best Growth ETFs in Canada in terms of performance

HXE – Horizons S&P
TSX Capped
Energy Index
XEG – Ishares S&P TSX
Capped Energy Idx
ZEO -BMO S&P TSX
Eql Weight Oil Gas Index 
Top 3 Best Growth ETF in terms of performance

Link to full post: Top 10 Best Growth ETF so far in 2023 in Canada!

XEG – Ishares S&P TSX Capped Energy Index ETF XEG 

Funds objective: Seeks long-term capital growth by replicating the performance of the S&P/TSX Capped Energy Index, net of expenses.

In terms of holdings, Canadian Natural Resources and Suncor Energy make up almost 50% of the holdings. This high exposure reduces the benefit of diversification that’s usually desired by investors when buying an ETF.

The management fee is 0.55%.

NameWeight (%)
SUNCOR ENERGY INC26.21
CANADIAN NATURAL RESOURCES LTD23.48
CENOVUS ENERGY INC13.50
TOURMALINE OIL CORP8.97
IMPERIAL OIL LTD6.47
ARC RESOURCES LTD5.73
WHITECAP RESOURCES INC2.40
MEG ENERGY CORP2.29
ENERPLUS CORP2.25
CRESCENT POINT ENERGY CORP2.23

ZEO – BMO S&P TSX Eql Weight Oil Gas Index

The BMO Equal Weight Oil & Gas Index ETF (ZEO) has been designed to replicate, to the extent possible, the performance of the Solactive Equal Weight Canada Oil & Gas Index, net of expenses. The Fund invests in and holds the Constituent Securities of the Index in the same proportion as they are reflected in the Index.

Rating: 3 out of 5.

Weight (%)Name
14.35%CENOVUS ENERGY INC
13.34%SUNCOR ENERGY INC
12.13%IMPERIAL OIL LTD
11.82%CANADIAN NATURAL RESOURCES LTD
11.04%TOURMALINE OIL CORP
9.56%PEMBINA PIPELINE CORP
9.44%TRANSCANADA CORP
9.37%ENBRIDGE INC
8.87%KEYERA CORP

Why should I consider buying an ETF?

The quick answer is diversification. Assume you have 5,000 $, you can’t buy a lot of stocks with that amount (may be 4 or 5). Also, you will incur fees to trade them. Your portfolio will be certainly too dependent on a performance of 1, 2 …or even 5 sectors that your stocks are in. If you buy with that 5,000 $ an ETF that tracks let’s say the TSX/S&P 60, it basically means you just bought share in 60 of the largest companies that are trading in the stock exchange in Canada. It’s clearly a powerful tool to diversify your portfolio with a small amount of money.

ETFs offer a wide variety of choices, you can basically decide the allocation yourself based on your risk tolerance or rely on Robo advisers services (such as Questrade or Wealth simple).

What are the risks?

An ETF trades like a stock. So it’s volatile. You have to accept the fact the value can go up or down like any stock. There is no question that an ETF covering let’s say the TSX is for most of the time less volatile than holding 1 stock. Because the TSX ETF is a bundle of over 100 stocks not just one. It’s diversified by nature so it’s less volatile.

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