This year’s surge of Canadian nationalism in reaction to U.S. President Trump tariffs and annexation threats inspired renewed interest in “investing Canadian.” From a fiduciary perspective, this is a lousy reason for buying Canadian equity ETFs. Geographic diversification should probably top political signalling as a priority for your portfolio.
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Still, there remain good reasons for holding Canadian stock ETFs:
Preferential tax treatment in non-registered accounts, including a lower tax rate on dividend income.
Diversification away from the technology skew of American markets, especially the S&P 500, which represents more than half of global market capitalization. Canadian markets are more weighted to commodities, which can serve as an inflation hedge.
Canadian markets and ETFs generally offer a higher dividend yield than their U.S. counterparts, in the neighbourhood of 2.8% for broad index funds. By comparison, the S&P 500 yields 1.3% currently. This bias to dividends makes them well-suited for income-oriented investors in Canada, such as seniors.
Best Canadian Equity ETFs 2025
Our Best ETFs in Canada panel had some novel candidates to consider in this category this year. For example, Hamilton ETFs is waiving the management fees on its new Champions Canadian Dividend Index ETF (CMVP) until Jan. 1, 2026. Ultimately, though, the ETF judges’ consensus settled on some old standbys that have vanishingly small management expense ratios (MERs) to begin with and have proven their worth over the years.
iShares’ Core S&P/TSX Capped Composite Index ETF (XIC) and Vanguard’s FTSE Canada All-Cap Equity ETF (VCN) tied for the most votes, with BMO’s S&P/TSX Capped Composite Index ETF (ZCN) close on their heels. Both XIC and ZCN seek to track the country’s leading stock index, the S&P/TSX Composite. VCN adds a dash of small-cap exposure by following the competing FTSE Canada All Cap Domestic Index, but you can expect its performance to be substantially the same.
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