Updated March 2025 · 9 min read

Best Index Funds for Canadians 2025

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Bottom Line: Index investing beats most active fund managers over the long run. For Canadians, low-cost ETFs from Vanguard, iShares, and BMO offer the best combination of diversification, simplicity, and cost efficiency.

Index funds track a market index — like the S&P 500 or TSX Composite — instead of trying to beat it. Decades of data show that most active fund managers underperform their benchmark index over 15+ years, especially after fees. For Canadian investors, index funds are the cornerstone of evidence-based investing.

Why Index Funds Beat Active Funds

Lower fees: index ETFs charge 0.06–0.25% vs 1.5–2.5% for active mutual funds
Broad diversification: instant exposure to hundreds or thousands of companies
No manager risk: no single person's bad decisions can sink the fund
Tax efficiency: lower turnover means fewer capital gains distributions
Simplicity: buy, hold, rebalance — no complex analysis required

Best All-in-One Index ETFs for Canadians

All-in-one ETFs hold a mix of global equities and bonds in a single fund. They're the simplest starting point for new investors.

ETF	Allocation	MER	Best For
VEQT (Vanguard)	100% global equity	0.24%	Long horizon, high risk tolerance
XEQT (iShares)	100% global equity	0.20%	Long horizon, slightly lower cost
VGRO (Vanguard)	80% equity / 20% bonds	0.24%	Growth with some stability
XGRO (iShares)	80% equity / 20% bonds	0.20%	Growth with some stability
VBAL (Vanguard)	60% equity / 40% bonds	0.24%	Balanced, moderate risk
XBAL (iShares)	60% equity / 40% bonds	0.20%	Balanced, moderate risk
VCNS (Vanguard)	40% equity / 60% bonds	0.24%	Conservative, near retirement

One-ETF Portfolio: Many Canadian financial experts recommend VEQT or XEQT for investors with a 20+ year horizon and VGRO/XGRO for those within 10–15 years of retirement. One ETF, automatic rebalancing, low cost — it's hard to beat.

Best Canadian Market Index ETFs

ETF	Index Tracked	MER	Holdings
VCN (Vanguard)	FTSE Canada All Cap	0.05%	~180 Canadian stocks
XIC (iShares)	S&P/TSX Capped Composite	0.06%	~240 Canadian stocks
ZCN (BMO)	S&P/TSX Capped Composite	0.06%	~240 Canadian stocks

Best U.S. Index ETFs for Canadians

ETF	Index Tracked	MER	Currency
VFV (Vanguard)	S&P 500	0.09%	CAD
XUS (iShares)	S&P 500	0.10%	CAD
ZSP (BMO)	S&P 500	0.09%	CAD
VUN (Vanguard)	U.S. Total Market	0.16%	CAD

Best International Index ETFs

ETF	Coverage	MER
VIU (Vanguard)	Developed markets ex-North America	0.23%
XEF (iShares)	Developed markets ex-North America	0.22%
VEE (Vanguard)	Emerging markets	0.24%
XEC (iShares)	Emerging markets	0.27%

Index Mutual Funds vs Index ETFs

ETFs are generally preferred over index mutual funds in Canada because:

ETFs typically have lower MERs
ETFs trade on exchanges (buy/sell anytime during market hours)
Index mutual funds can be purchased commission-free at banks but often carry higher fees

Exception: TD e-Series mutual funds (MER ~0.33–0.50%) are available directly through TD and are a solid low-cost option, especially for those without a discount brokerage account.

The Canadian Couch Potato Strategy

The Canadian Couch Potato portfolio strategy popularized by Dan Bortolotti advocates for holding a simple mix of low-cost index ETFs covering Canada, the U.S., and international markets. The modern version often simplifies to a single all-in-one ETF. See our full Couch Potato guide.

Where to Buy Index Funds in Canada

Wealthsimple Trade: Commission-free ETF and stock trading
Questrade: ETF purchases are free; sells have a commission
TD Direct Investing, RBC Direct, etc.: Full-service brokers with index fund access
Robo-advisors (Wealthsimple Invest, Justwealth): Automated index investing for hands-off investors

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