Diversify your portfolio with exchange-traded funds that balance performance, cost, and risk.
The best ETFs in Canada span multiple categories, from equity and fixed income to thematic and sector-specific funds. Recent data shows precious metals ETFs dominated short-term performance in early 2026, while all-equity portfolios delivered steady long-term returns. This guide examines top-performing options across key categories to help you make informed decisions.
Understanding ETFs
An exchange-traded fund is an investment vehicle that holds a basket of securities and trades on stock exchanges like individual stocks. Unlike mutual funds, ETFs trade throughout the day at market prices.
ETFs track indexes, sectors, commodities, or other assets. They offer instant diversification, typically at lower cost than actively managed mutual funds. Canadian investors can access domestic equity, global markets, bonds, and alternative investments through ETFs.
The management expense ratio (MER) represents the annual cost of holding an ETF. Lower MERs mean you keep more of your returns. Canadian ETF MERs range from 0.20% for broad-market index funds to 0.77% for specialized strategies.
Top-Performing ETFs
Performance varies significantly by asset class and timeframe. In February 2026, precious metals equity funds led returns, driven by strong gold market performance. Longer-term evaluations reveal different patterns across equity, allocation, and fixed income categories.
Recent Performance Leaders
The BMO Junior Gold Index ETF (ZJG) delivered a 28.99% return in February 2026, outperforming its category average. Over one year, it gained 216.98%, though precious metals carry high volatility. The fund tracks junior gold mining companies with a 0.61% MER.
The BMO Equal Weight Global Gold Index ETF (ZGD) followed closely with a 27.05% monthly return and 221.98% annual gain. This fund provides equal-weight exposure to global gold producers with a 0.60% expense ratio and modest 0.22% dividend yield.
| ETF | Ticker | 1-Year Return | MER | Category |
|---|---|---|---|---|
| BMO Junior Gold Index ETF | ZJG | 216.98% | 0.61% | Precious Metals |
| BMO Equal Weight Global Gold | ZGD | 221.98% | 0.60% | Precious Metals |
| iShares S&P/TSX Small Cap | XCS | 85.72% | 0.60% | Canadian Small/Mid Cap |
| Vanguard FTSE Developed Asia Pacific | VA | 48.52% | 0.22% | Asia Pacific Equity |
| Manulife Multifactor Canadian SMID | MCSM | 79.23% | 0.56% | Canadian Small/Mid Cap |
Small and mid-cap Canadian equity ETFs also showed strong performance. The iShares S&P/TSX Small Cap Index ETF (XCS) gained 85.72% over 12 months, significantly outperforming its category average of 49.67%.
All-in-One Portfolio ETFs
All-in-one ETFs provide complete portfolio diversification in a single fund. These products automatically rebalance and typically hold other ETFs to achieve global equity and fixed income exposure. They suit investors who prefer simplicity over customization.
iShares Core Equity ETF Portfolio
The iShares Core Equity ETF Portfolio (XEQT) offers exposure to over 9,000 global stocks with a 0.20% management fee. This 100% equity fund returned 15.47% over one year and 59.57% over five years. It distributes dividends quarterly with a 1.69% yield.
XEQT holds underlying iShares ETFs covering Canadian, U.S., international developed, and emerging markets. The fund suits investors with long time horizons who can tolerate equity market volatility without fixed income allocation.
Vanguard All-Equity ETF Portfolio
The Vanguard All-Equity ETF Portfolio (VEQT) delivered 16.43% over one year and 61.67% over five years. With a 1.41% dividend yield and comprehensive global equity exposure, it provides similar benefits to XEQT through Vanguard’s underlying funds.
VEQT maintains approximately 30% Canadian equity, 40% U.S. equity, 20% international developed markets, and 10% emerging markets. The fund rebalances automatically to maintain target allocations, removing the need for investor intervention.
BMO All-Equity ETF
The BMO All-Equity ETF (ZEQT) features a competitive 0.20% MER and returned 15.56% over one year. The fund offers approximately 2.88% dividend yield, higher than competing all-in-one equity portfolios, making it attractive for income-focused investors.
- Single-fund simplicity: Complete portfolio diversification without managing multiple holdings or rebalancing
- Low management costs: MERs of 0.20% to 0.25% significantly undercut actively managed mutual funds
- Automatic rebalancing: Fund providers maintain target allocations without investor action
- Global diversification: Exposure to thousands of companies across multiple markets and sectors
Low-Cost Index ETFs
Management fees directly reduce investment returns over time. A 0.25% difference in MER compounds significantly across decades. Canadian investors can access broad market exposure through ETFs with expense ratios below 0.35%.
Canadian Equity
The BMO S&P/TSX Capped Composite Index ETF (ZCN), iShares Core S&P/TSX Capped Composite Index ETF (XIC), and Vanguard FTSE Canada All-Cap Equity ETF (VCN) all track Canadian equity markets with MERs between 0.05% and 0.06%.
These funds provide exposure to Canada’s largest companies across financial services, energy, materials, and other sectors. They distribute quarterly dividends reflecting underlying stock payments, typically yielding 2% to 3% annually.
U.S. and Global Markets
The Vanguard S&P 500 Index ETF (VFV) tracks U.S. large-cap stocks with a 0.08% MER. For broader U.S. market coverage, the Vanguard US Total Market Index ETF (VUN) includes mid and small-cap companies at 0.16%.
International exposure comes through the Vanguard FTSE Developed All-Cap ex-North America Index ETF (VIU) at 0.22% and Vanguard FTSE Emerging Markets All Cap Index ETF (VEE) at 0.24%. These funds exclude Canadian and U.S. stocks, covering developed and emerging markets respectively.
| ETF | Ticker | Market Coverage | MER |
|---|---|---|---|
| BMO S&P/TSX Capped Composite | ZCN | Canadian Equity | 0.06% |
| Vanguard S&P 500 Index | VFV | U.S. Large Cap | 0.08% |
| Vanguard US Total Market Index | VUN | U.S. Total Market | 0.16% |
| Vanguard FTSE Developed ex-NA | VIU | International Developed | 0.22% |
| Vanguard FTSE Emerging Markets | VEE | Emerging Markets | 0.24% |
High-Dividend ETFs
Dividend-focused ETFs target companies with established histories of regular cash distributions. These funds appeal to investors seeking income generation alongside potential capital appreciation. Distribution yields typically range from 3% to 5% annually.
Vanguard FTSE Canadian High Dividend
The Vanguard FTSE Canadian High Dividend Yield Index ETF (VDY) holds Canadian companies with above-average dividend yields. With a low 0.22% MER, it provides cost-effective income exposure. The fund distributes dividends monthly, simplifying cash flow planning.
VDY concentrates holdings in financial services, energy, and telecommunications sectors. These industries traditionally offer higher dividend yields but may experience less growth than technology or consumer discretionary sectors.
BMO Canadian High Dividend
The BMO Canadian High Dividend ETF (ZDV) targets diversified dividend income with approximately 3.03% monthly yield. The fund screens for companies with sustainable payout ratios and dividend growth potential, not just current yield.
Sector-Specific Dividend Options
The BMO Equal Weight Banks Index ETF (ZEB) provides exposure to Canadian banking sector dividends with a 2.92% yield paid monthly. Banking ETFs concentrate risk in one sector but offer stability through Canada’s oligopolistic financial system.
The BMO Equal Weight REITs Index ETF (ZRE) holds 20 Canadian real estate investment trusts with a 4.61% dividend yield. REITs distribute most income to shareholders, creating higher yields, but face interest rate sensitivity affecting unit prices.
- Sector concentration: Dividend ETFs often overweight financials, energy, and utilities, reducing diversification
- Limited growth potential: High-yield companies may sacrifice capital appreciation for current income distribution
- Tax implications: Dividend income outside registered accounts faces higher taxation than capital gains
- Distribution cuts: Companies can reduce or eliminate dividends during economic downturns
Fixed Income ETFs
Bond ETFs provide income, capital preservation, and portfolio diversification. Fixed income reduces overall portfolio volatility compared to all-equity strategies. Canadian bond ETFs track government, corporate, and mixed debt instruments across various maturities.
Aggregate Bond Funds
The BMO Aggregate Bond Index ETF (ZAG) and iShares Core Canadian Universe Bond Index ETF (XBB) track broad Canadian bond markets. These funds hold federal, provincial, and corporate bonds with varying maturities, providing balanced fixed income exposure.
Current yields on aggregate bond ETFs reflect prevailing interest rates. Duration measures sensitivity to rate changes—longer duration means greater price volatility when rates shift. Aggregate funds typically maintain intermediate duration around 7 to 9 years.
Short-Term Bond Options
The iShares Core Canadian Short Term Bond Index ETF (XSB) and Vanguard Short-term Canadian Bond ETF (VSB) focus on bonds maturing within five years. Shorter duration reduces interest rate risk but typically offers lower yields than longer-term bonds.
Short-term bond ETFs suit investors who prioritize capital preservation and need liquidity within a few years. They provide higher returns than high-interest savings accounts while maintaining lower volatility than equity investments.
How to Select ETFs
Choosing appropriate ETFs requires evaluating investment objectives, time horizon, and risk tolerance. Consider these factors when building your portfolio or adding to existing holdings.
- Investment timeline: Longer horizons support higher equity allocations, while near-term needs favor bonds and cash alternatives
- Risk capacity: Assess how portfolio declines would affect your financial goals and emotional comfort
- Cost structure: Compare management expense ratios, as seemingly small differences compound over decades
- Tax efficiency: Consider whether investments sit in registered accounts (TFSA, RRSP) or taxable accounts
- Geographic exposure: Balance home country bias against international diversification benefits
- Asset allocation: Determine appropriate equity versus fixed income mix based on your financial situation
All-in-one ETFs simplify portfolio construction by providing preset allocations. They suit investors who prefer delegating asset mix decisions to fund providers. Building custom portfolios from individual ETFs offers more control but requires ongoing rebalancing.
For more guidance on investment accounts and strategies, explore our resources on investing in Canada. Understanding account types like TFSAs and RRSPs helps optimize tax efficiency alongside ETF selection.
Performance Evaluation
Focus on long-term returns across market cycles rather than short-term performance. One-month or one-year returns can mislead when sectors experience temporary strength or weakness. Three, five, and ten-year periods provide better insight into fund quality.
Compare ETF returns against appropriate benchmarks. A Canadian equity ETF should match the S&P/TSX Composite Index, while a U.S. equity fund should track the S&P 500. Underperformance relative to the benchmark suggests high fees or tracking error.
Bottom Line
The best ETFs for Canadian investors balance low costs, broad diversification, and alignment with financial goals. All-in-one portfolios like XEQT and VEQT offer simplicity through single-fund solutions, while targeted ETFs allow customized asset allocation. Recent performance shows precious metals funds led short-term gains, though long-term success requires consistency across market cycles.
Focus on management expense ratios below 0.25% for passive index funds. Higher fees erode returns over time without guaranteeing better performance. Consider your investment timeline when choosing between equity, fixed income, and balanced allocations. Longer horizons support higher equity weightings despite short-term volatility.
Before committing to any ETF strategy, evaluate how it fits within your complete financial picture. Compare multiple options using our investing resources to understand trade-offs between growth, income, and stability. Stay informed about market developments and portfolio performance by subscribing to our newsletter for regular updates on investment opportunities.
