Want to know how to buy an ETF in Canada but not sure where to start? Our Canadian ETF investing guide can help.
Buying ETFs, or exchange-traded funds, is one of the easiest ways to dip your toes into the investing world.
Unlike picking individual stocks, which can feel like a gamble, ETFs spread your money across a basket of investments, tracking the ups and downs of the market. That means less risk, more stability, and no need to be an investing pro to start. If you’re ready to grow your wealth without overthinking it, ETFs might be the perfect fit.
How to buy ETFs in Canada
The easiest way to invest in ETFs is to open a discount brokerage account, contribute to it by adding new funds or transferring existing investments, and then purchase your desired ETF(s).
Do your research on discount brokerages and find one that works best for your situation. I started off investing at TD Direct Investing simply because I did my everyday banking at TD, but today I’d recommend starting with Questrade. If you don't want to actively manage the buying and selling of ETFs yourself, you can use a robo-advisor like Wealthsimple. These platforms automatically invest user funds in various exchange-traded funds (ETFs) based on individual risk tolerance and financial goals.
| Questrade self-directed | Wealthsimple robo advisor |
|---|---|
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â—¦ Free ETF purchases: Save money on every trade.
â—¦ Low fees: Keep more of your investment returns. â—¦ Easy platform: User-friendly tools for beginners and experts. |
â—¦ Hassle-free investing: Let experts manage your portfolio automatically.
â—¦ 0.5% management fee: Enjoy affordable management for long-term growth. â—¦ Globally diversified portfolios: Invest in ETFs tailored to your goals |
| Go to Questrade | Go to Wealthsimple |
Why invest in ETFs?
Investing in ETFs offers several advantages:
- Diversification: Buying one ETF gives you exposure to hundreds, sometimes thousands, of individual investments. This spreads your risk across many companies or bonds.
- Low fees: ETFs generally have much lower fees than mutual funds. While mutual funds often charge 2% or more in annual fees, ETF fees (known as MERs) typically range from 0.05% to 0.5%.
- Simplicity: ETFs are easy to understand and manage, making them a popular choice for self-directed investors.
- Performance: By passively tracking an index, ETFs deliver returns that align with the market—a strategy that often outperforms active management.
By investing in Index ETFs, you can aim for market-average returns, which historically have been around 7-10% annually before inflation, depending on the index and time horizon.
How to choose the right ETF for you
A good rule of thumb for any investor is to keep their costs low, diversify broadly across the entire globe, and to simplify their portfolio whenever possible. It also helps to know the best ETFs in Canada your money should go towards.
For most beginners, that means choosing an all-in-one asset allocation ETF that best suits your risk tolerance and time horizon.
I waited to start investing in ETFs until the product landscape evolved enough to allow me to meet those goals (low cost, globally diversified, simple).
So, when the All World, ex-Canada ETFs came out I knew it was time for me to invest in ETFs.
I bought a Canadian equity ETF (Vanguard’s VCN) and a global equity ETF (Vanguard’s All World ex Canada VXC). Later, when asset allocation ETFs were introduced, I switched to VEQT (see below for their performance).
It’s okay to adopt a new ETF strategy as the product landscape evolves and as your personal situation changes. Stick to that rule of thumb and you’ll find an ETF portfolio (e.g. Canadian couch potato) that works for you.
Comparing ETFs | VCN vs. VXC vs. VEQT
My takeaway from this research is to not only buy and hold VEQT throughout my working years but also to maintain that 100% global equity allocation all throughout retirement. It’s to literally VEQT and chill, for life.
Robb Engen
Types of ETFs in Canada for a diversified portfolio
Building a diversified portfolio is key to managing risk and achieving long-term growth, and ETFs make this easier than ever.
With a single purchase, you can own a mix of stocks, bonds, or other assets that align with your financial goals. But not all ETFs are created equal — choosing the right types of ETFs for your portfolio depends on factors like your risk tolerance, time horizon and investment objectives.
From broad-market equity ETFs to specialized bond funds and even alternative investments like gold or real estate ETFs, there’s something for every type of investor. Here's a few examples:
Rule of thumb for buying ETFs: Asset allocation for a diversified portfolio
The 100 minus your age rule of thumb is a simple guideline to help determine the percentage of your portfolio that should be invested in stocks (or equities) versus bonds (or fixed income). The idea is to subtract your age from 100 to get the percentage of your portfolio that should be allocated to stocks, with the remaining percentage going to bonds.
- In your 20s: Allocate 80% to equity ETFs (e.g., 55% broad-market equity ETFs, 15% crypto ETFs, 10% commodity ETFs) and 20% to bond ETFs. Your long time horizon allows for higher risk and growth potential.
- In your 30s: Shift to 70% equity ETFs (e.g., 50% broad-market equity ETFs, 10% crypto ETFs, 10% sector-specific ETFs like technology or energy) and 30% bond ETFs to balance growth with moderate risk.
- In your 40s: Reduce to 60% equity ETFs (e.g., 50% broad-market equity ETFs, 10% dividend-focused ETFs) and 40% bond ETFs for increased stability as retirement nears.
- In your 50s: Transition to 50% equity ETFs (e.g., 40% broad-market equity ETFs, 10% real estate ETFs) and 50% bond ETFs for greater income and reduced volatility.
- In your 60s and beyond: Focus on 40% equity ETFs (e.g., 30% dividend-paying ETFs, 10% real estate ETFs) and 60% bond ETFs to prioritize capital preservation and income.
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How much money do you need to invest in ETFs?
Most ETFs are priced between $20 and $200 per share, making them accessible for wherever you are on your investing journey. There is also no minimum investment. You can buy as many or as few shares as you can afford. With platforms like Wealthsimple, you can buy fractions of high-priced ETFs, so you don't need to pay the full share price.
Here's some ETF examples and their price range:
- Global X S&P 500 Covered Call ETF (XYLD): Typically in the $10–$20 range.
- iShares Core MSCI Emerging Markets ETF (IEMG): Around $50 USD
- Berkshire Hathaway ETF Equivalent (BRK-B): Over $300 USD
- Vanguard S&P 500 ETF (VOO): Around $400 USD
- SPDR S&P 500 ETF Trust (SPY): Around $450–$500 USD
ETF Price vs. value:
The price of an ETF is not an indicator of its value. Lower-priced ETFs aren’t inherently better or worse; the key is the expense ratio, asset allocation, and performance relative to your goals.
- Expense ratio: An expense ratio is the yearly cost of managing your investment fund or ETF. Low-cost ETFs are typically broad-market ETFs with expense ratios as low as 0.03% to 0.10%. A mutual fund may charge as much as 2%.
- Asset allocation: Asset allocation is how you divide your money among stock, bond and other ETFs.
- Performance: ETF performance measures how well an ETF achieves its investment goals, tracking its returns.
Starting investment amount required by platform
| Wealthsimple | Questrade | Moomoo Canada review |
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| Wealthsimple doesn't have a minimum deposit to open an account or to start investing. | The minimum deposit for a Questrade Tax-Free Savings Account (TFSA) is $250, but it's best to start with $1,000 to avoid fees. Questrade will reimburse transfer fees up to $150 per account. | Moomoo Canada does not require a minimum deposit to open a brokerage account. Moomoo is a commission-free investment platform that offers low-fee investing for Canadians. |
| Go to Wealthsimple | Go to Questrade | Go to Moomoo |
Where to invest your ETFs in Canada
When investing in ETFs in Canada, the type of account you use can significantly impact your returns due to tax implications. Here’s a breakdown of where you might consider holding your ETFs:
1. Registered accounts (tax-advantaged)
| TFSA (Tax-free savings account) | RRSP (Registered Retirement Savings Plan) | RESP (Registered Education Savings Plan) |
|---|---|---|
| Any gains, dividends, or interest earned in a TFSA are completely tax-free, making it an ideal account for long-term investing. | Contributions are tax-deductible, and gains are tax-deferred until withdrawal. Additionally, U.S.-listed ETFs avoid withholding taxes on dividends if held in an RRSP. | Gains are tax-deferred, and you can take advantage of government grants. |
| Use for growth-oriented or high-yield ETFs to shield gains from taxes. | Prioritize U.S.-listed ETFs to save on withholding taxes. | ETFs aimed at long-term growth for education savings. |
Related:TFSA vs. RRSP
2. Non-Registered Accounts (Taxable)
Capital gains are taxed at 50% of your marginal rate, and Canadian dividend-paying ETFs benefit from the dividend tax credit. Interest income and foreign dividends, however, are fully taxable.
For these taxable accounts, it's best to focus on tax-efficient ETFs like Canadian dividend-paying or broad-market ETFs.
Understanding ETF Taxes in Canada
Taxes can eat into your investment returns, so it’s essential to understand how different types of ETFs are taxed:
Dividend reinvestment plan (DRIP)
Most ETFs pay dividends, and you have options for what to do with them. You can take your dividends as cash payments, or you can set up a dividend reinvestment plan (DRIP) to automatically reinvest them into more ETF shares.
Here's how to set it up yourself:
- 1. Open a brokerage account: Make sure your ETFs are held in a brokerage account that supports DRIPs. Most Canadian brokerages, like Questrade, Wealthsimple or big bank platforms, offer this feature.
- 2. Enroll in DRIP: Contact your brokerage (online, by phone, or through your account settings) and ask to enroll in their DRIP program. You’ll usually need to specify which ETFs or stocks you want included.
- 3. Confirm eligibility: Ensure the ETFs you own qualify for DRIP. Some ETFs may have restrictions or require you to hold a minimum number of shares to reinvest dividends.
- 4. Reinvest automatically: Any dividends you earn will automatically purchase more shares of the same ETF, usually without paying additional trading fees.
- 5. Track your investments: Keep an eye on your account to see the reinvested shares. DRIP helps you compound your growth over time by continually investing your dividends.
Note: If you don't want to set up DRIPs on your own, consider some of the best robo advisors in Canada who'll do it for you.
Pros and cons of buying ETFs
Pros
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Diversification: Access to a basket of stocks, bonds, or other assets in one purchase
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Low fees: Typically lower management fees (MERs) than mutual funds
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Flexibility: Buy and sell ETFs like stocks during market hours
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Transparency: Most ETFs disclose their holdings daily
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Tax efficiency: Only taxed on capital gains when you sell
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Wide variety: Options to invest in specific sectors, commodities, bonds, or markets
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Scalability: Suitable for both small and large investors
Cons
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Complexity: The wide variety of ETFs may overwhelm beginners
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Market volatility: ETFs trade throughout the day, making them susceptible to short-term price swings (but you're in it for the long-haul anyway, right?)
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Dividend withholding taxes: Foreign ETFs may be subject to withholding taxes on dividends (so buy foreign ETFs in your RRSP)
When not to invest in an ETF
Two caveats to that advice.
One, if you invest at a discount brokerage that charges $9.95 per trade, and you’re investing frequently with every paycheque, those fees are going to add up in a hurry. You’re better off switching to index mutual funds, like TD’s e-Series funds, or switching to a commission-free discount broker like Questrade or Wealthsimple.
Related: How to switch brokerage accounts
Two, if you’re intimidated by the idea of opening your own self-directed account and buying ETFs yourself, then consider a robo advisor to do it for you. You’ll still get the benefit of investing in a low cost, globally diversified portfolio of ETFs, but the robo advisor will automatically invest, monitor, and rebalance your funds so you don’t have to worry about it.
Get started with Wealthsimple's robo advisorETF don’ts
I’ve mentioned the dos already in this article: stick to low cost, passively managed, broadly diversified ETFs with an emphasis on keeping your portfolio simple. Time to mention some don’ts:
Don’t hold overlapping ETFs. We’re all familiar with the idea of not putting all your eggs in one basket. But when it comes to ETFs, one basket is often enough. Still, I’ve seen many portfolios containing two or more ETFs that track the exact same index or country. It’s not necessary.
Don’t use market orders. When you buy an ETF, your broker will ask if you want to use a market order or a limit order. A market order will fulfill your purchase at the best available price, while with a limit order, similar to what you can do at Questrade, you can choose the highest price you’re willing to pay and the order will only complete if and when the market price is at or below your limit.
Don’t trade after-hours. North American stock markets are open from 9:30am – 4:00pm ET, Monday to Friday. Make sure you do your trading during market hours when you’ll get the most reliable prices and orders can be filled immediately. If you trade after-hours, your order won’t be filled until the market opens on the next trading day, and prices may have fluctuated overnight.
Are buying ETFs your best option?
A quick comparison of the various investment vehicles
Mutual funds and ETFs are simply tools – products that investors can use to build an investment portfolio. The main difference between them is how they are sold, and the cost of the products.
The main reason why mutual fund sales still dwarf ETF sales is because of the distribution channel. Simply put, most mutual funds are sold through banks and investment firms. Their advisors are only licenced to sell mutual funds, not individual stocks and ETFs. Moreover, they’re incentivized to sell their own firm’s mutual funds to generate commissions for themselves and their mutual fund dealer (the bank).
ETFs are predominantly bought by self-directed investors, robo-advisors, and by fee-based advisors who look out for their clients’ best interests.
Then there’s the difference in fees. In Canada, investors pay some of the highest mutual fund fees in the world and get a ‘below average’ grade from Morningstar’s Global Investor Experience study.
True, while an investor can purchase index mutual funds that cost much less than their actively managed mutual fund counterparts, on average an ETF still is much cheaper than even the lowest-cost index mutual fund.
Read more: ETF vs. mutual funds in Canada
ETFs (exchange-traded funds) and index funds are both tools to help you build a diversified, low-cost investment portfolio. The key difference lies in how they’re traded and managed, which impacts costs, flexibility, and how you use them to reach your financial goals.
While ETFs are bought and sold on an exchange like stocks, index funds are typically purchased directly from mutual fund companies or through a brokerage. ETFs give you the flexibility to trade throughout the day, making them ideal for self-directed investors and robo-advisors. Index funds, on the other hand, are valued at the end of the trading day and don’t require the same level of active engagement.
So, why choose an ETF over an index fund?
On average, ETFs have lower expense ratios than index funds, especially for those tracking the same benchmarks. Plus, with ETFs, you avoid the initial investment minimums that index funds often require, meaning you can start small and scale up as you grow your portfolio.
Read more: Index funds vs. ETFs
ETFs and individual stocks are both popular investments, but they serve different purposes in your portfolio. ETFs offer instant diversification by bundling multiple assets into one product, while stocks represent a single company, giving you the chance to directly benefit from its success—or face the full risk of its failure.
For most investors, ETFs are a stress-free way to invest in the market. They spread your money across a variety of stocks, bonds, or other assets, reducing the risk that comes with betting on a single company. For example, a broad-market ETF like Vanguard’s S&P 500 ETF (VOO) gives you exposure to 500 of the largest U.S. companies in one shot.
ETFs also come with low fees and don’t require constant monitoring, making them perfect for beginners and hands-off investors. Plus, they’re tax-efficient—capital gains are only taxed when you sell.
Final thoughts on buying ETFs
The best ETFs in Canada tend to come with an extremely low MER and invest passively in a broad market index like the TSX or S&P 500. Better still, invest in an asset allocation ETF that holds stocks and bonds from the entire world in just one fund.
Indeed, as more and more ETFs come on the scene, it’s important for investors to simplify their approach and choose an ETF or selection of ETFs that are easy to monitor and rebalance.
How to buy ETFs in Canada FAQs
Robb Engen is a leading expert in the personal finance realm of Canada and is also the co-founder of Boomer & Echo, an award-winning personal finance blog.
Tyler Wade has worked in personal finance for over 5 years writing for brands like Ratehub, Forbes, KOHO, and now Money.ca.
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