In this article, we will take a look at the 10 Best Canadian ETFs to Buy.

The State of the Canadian Stock Market

After a slow start in 2024, the Canadian stock market saw a strong third quarter, fueled by domestic rate cuts and a recovery in global markets. Year-over-year headline inflation has cooled to align with the Bank of Canada’s target rate of 2%. As a result, policymakers have implemented four consecutive rate cuts, with an additional 50 basis point reduction anticipated in December. With the central bank expected to keep cutting interest rates to support the economy, stock market strategists are cautiously optimistic that the rally will continue. In this context, Brent Joyce, chief investment strategist at BMO, shared the following:

“The environment is very attractive for equities. It’s been this trifecta of better global growth, interest-rate-sensitive companies themselves, and the interest rate sensitivity of dividends. These were headwinds for the two years that rates were going up, [but they] have flipped into tailwinds for the Canadian stock market now that rates are falling.”

While most stocks are influenced by global factors, many companies on the Toronto Stock Exchange are also cyclically driven, meaning their performance is closely tied to the economy and the business cycle. Given the strong connection between the US and Canadian economies, stable growth in the US has provided a boost to Canadian equities. On that front, Tim Hayes, chief global investment strategist at Ned Davis Research, advises clients to allocate 5% of their equity portfolio to Canadian stocks, making it the second-largest weighting after the 69% recommended for US stocks. The S&P/TSX Composite Index is on track to have its best year since 2009, having set new records 42 times this year and risen 21.09% year-to-date, closely following the S&P 500’s 27.58% gain. Hayes highlighted the broad rally and noted that the market is largely driven by energy and financial stocks, which offer the highest trailing and forward earnings yields, contrasting with the tech sector’s lower yields.

On the other hand, U.S. President-elect Donald Trump rattled the markets earlier in November with a proposal to impose a 25% tariff on imports from Canada and Mexico, aimed at addressing drug trafficking and border issues, along with a 10% tariff on imports from China. This decision had an immediate impact on Canada’s energy sector, which experienced a 2.2% decline amid concerns that rising US crude production would meet domestic demand. At the same time, the Canadian dollar dropped to its lowest level against the US dollar since May 2020, sparking worries about potential inflationary pressures on imports.

Canadian ETFs: Strong Performers in 2024

While the future remains uncertain, the Canadian ETF industry, which began with the world’s first ETF launched in Canada in 1990, has shown notable resilience over the past 30+ years, and continued growth is expected in the years to come. Despite the market volatility this year, Canadian ETFs have managed to navigate the challenges effectively and are well-positioned for another strong year. With only a couple of weeks remaining in the year, the industry is on track to surpass the previous annual record of $58 billion set in 2021. Moreover, following recent data from IFIC showing Canadian ETF sales reached their third-best month ever in October, a new report from research firm ETFGI highlights additional gains in November, along with impressive year-to-date figures. The firm reported net inflows of US$7.5 billion in November, slightly down from the C$8.2 billion reported in IFIC’s October report, but still a strong performance that contributes to the 29th consecutive month of net inflows.

Our Methodology

We have selected the top Canadian ETFs to buy and hold based on their 5-year performance as of December 10, listed in ascending order for clarity. Additionally, we’ve highlighted the top holdings of each ETF to provide valuable insights for potential investors.

Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).

10. FTSE Canadian High Dividend Yield Index ETF (TSX:VDY)

5-year Share Price Performance as of December 9, 2024: 43.79%

The Vanguard FTSE Canadian High Dividend Yield Index ETF (TSX:VDY) is designed to closely follow the FTSE Canada High Dividend Yield Index, focusing primarily on dividend-paying Canadian stocks. Its portfolio leans heavily toward the financial sector, particularly Canada’s Big 5 banks. The ETF stands out for its cost-effectiveness, featuring a low management expense ratio (MER) of just 0.22%. It also offers an attractive yield exceeding 4% and boasts significant scale with $3.32 billion in assets under management. In terms of performance, the fund has consistently outpaced the TSX index over 1-, 3-, and 5-year periods.

Royal Bank of Canada (NYSE:RY), the largest holding in the Vanguard FTSE Canadian High Dividend Yield Index ETF (TSX:VDY), is Canada’s biggest bank and continues to deliver impressive results. RBC surpassed quarterly profit expectations, driven by its acquisition of HSBC’s Canadian operations and strong performance in its wealth management division. The $10 billion acquisition contributed C$86 million to RBC’s earnings, bringing in approximately 780,000 clients and expanding its mortgage and corporate loan portfolios. Moreover, CEO Dave McKay highlighted that the bank added over 600,000 new clients to its Canadian banking business. The wealth management arm, which includes U.S. subsidiary City National, saw a threefold income increase to C$969 million, supported by higher fees and a C$25 million recovery in loan loss provisions.

Following these results, BMO Capital Markets revised its price target for RBC shares slightly, from $195 to $193, while maintaining an Outperform rating. Additionally, RBC announced a 4% dividend increase, raising the payout to $1.48 per share and continuing its 52-year streak of consecutive dividend payments, with a current yield of 3.27%.

9. Fidelity Canadian High Quality ETF (TSX:FCCQ)

5-year Share Price Performance as of December 9, 2024: 45.75%

The Fidelity Canadian High Quality ETF (TSX:FCCQ) aims to mirror the performance of the Fidelity Canada Canadian High Quality Index. As of December 9, it holds net assets of $214.4 million and has a management expense ratio of 0.39%. This ETF focuses on equity securities from large- and mid-cap Canadian companies, emphasizing higher-quality profiles compared to the broader Canadian equity market.

Shopify Inc. (NYSE:SHOP) holds the largest position in this Fidelity ETF. On December 4, Loop Capital upgraded the company’s stock from Hold to Buy, citing its innovative use of artificial intelligence to enhance merchant tools and optimize internal operations. The brokerage also raised its price target to $140, representing a 23% potential upside. Loop Capital emphasized that these AI-driven advancements are enabling Shopify Inc. (NYSE:SHOP) to grow revenue faster than expenses, improving operating and free cash flow margins. With consistent annual sales growth exceeding 20%, the company is well-positioned to enhance profitability and valuation further.

Additionally, Shopify Inc. (NYSE:SHOP) reported record-breaking Black Friday Cyber Monday (BFCM) sales of $11.5 billion, a 24% increase from the previous year. This robust performance suggests the company is on track to meet or surpass consensus expectations for fourth-quarter Gross Merchandise Volume (GMV) growth, currently forecasted at 23.5%.

Rowan Street Capital, an investment management company, released its second-quarter 2024 investor letter. Here is what the fund said:

Shopify Inc. (NYSE:SHOP) has been an incredibly rewarding investment for those lucky enough to get in early after the company’s initial public offering (IPO) in 2015. The shares have delivered a return of 2,600% or 42% annual. Its revenues have grown at 49% per annum since the end of 2014 from $105 million to estimated $8.6 billion in 2024. The massive e-commerce market is a huge opportunity, as the company’s growth indicates. As you tell from the chart below, revenues are forecasted to grow above 20% for the next 3 years. Keep in mind, Shopify has been around for more than a decade — and it’s still growing at these high rates.

We have owned Shopify for only 2.5 years, establishing our position in the first quarter of 2022 at a cost basis of $60, after the stock collapsed from its highs of $169 in November 2021. In hindsight, our entry may have been a bit premature, as the stock continued to plunge, eventually reaching a low of $27 in October 2022. However, such market movements are inherently unpredictable, and we seized the opportunity to invest in a company we had long admired…” (Click here to read the full text)

8. iShares Jantzi Social Index ETF (TSX:XEN)

5-year Share Price Performance as of December 9, 2024: 47.29%

The iShares Jantzi Social Index ETF (TSX:XEN), managed by BlackRock Asset Management Canada Limited, is an exchange-traded fund that tracks the performance of the Jantzi Social Index. The fund focuses on stocks of companies recognized for socially responsible business practices. Over the past year, XEN delivered a total return of 24.93%, with an average annual return of 6.11% since inception, including dividends.

Agnico Eagle Mines Limited (NYSE:AEM) is one of the ETF’s largest holdings. In the third quarter of 2024, the company achieved record-breaking results, producing 863,000 ounces of gold at cash costs of $921 per ounce, meeting its annual projections. The strong performance was driven by operational efficiency and cost control, enabling the company to return approximately $700 million to shareholders and reduce net debt by $1 billion, lowering it to $490 million. Revenue grew by 31% to $2.2 billion, while adjusted EBITDA increased by 64% to $1.26 billion.

On November 21, Jefferies initiated coverage of Agnico Eagle Mines Limited (NYSE:AEM), assigning a Hold rating and an $85 price target. The firm praised the company’s robust operational performance, cost management, and high-quality asset portfolio. Additionally, margin expansion is expected as Agnico Eagle develops underground ore sources at its Canadian Malartic and Detour Lake mines, which will provide access to higher-grade materials.

7. iShares ESG Aware MSCI Canada Index ETF (TSX:XESG)

5-year Share Price Performance as of December 9, 2024: 50%

The iShares ESG Aware MSCI Canada Index ETF (TSX:XESG) aims to closely replicate the price and yield performance of the MSCI Canada IMI Extended ESG Focus Index. The fund primarily invests in a diversified portfolio of 116 stocks, including large, mid, and small-cap Canadian companies that align with ESG criteria. Established in 2019, it currently manages C$472 million in total net assets.

On December 4, RBC Capital Markets updated its financial outlook for Enbridge Inc. (NYSE:ENB), a major player in energy transportation and distribution with a market capitalization of $95.9 billion and a top holding of the iShares ESG Aware MSCI Canada Index ETF (TSX:XESG). RBC raised its price target for ENB from $59 to $63 while maintaining an Outperform rating. This adjustment reflects a positive view of Enbridge’s 2025 outlook, which highlights a projected EBITDA range of $10.8 billion. RBC noted that consensus estimates remain at the lower end of this range and are based on what it considers conservative assumptions regarding Mainline volumes and the USD/CAD exchange rate.

Enbridge’s renewables segment continues to expand, with projects like the Sequoia Solar Project in Texas becoming one of the largest in North America. This project is largely supported by long-term fixed-price power purchase agreements with investment-grade clients, including AT&T and Toyota. Furthermore, Enbridge Inc. (NYSE:ENB) announced a 3% increase in its quarterly dividend, raising it to C$0.9425 per share, reinforcing its commitment to shareholder returns.

6. Vanguard FTSE Canada All Cap Index ETF (TSX:VCN)

5-year Share Price Performance as of December 9, 2024: 53.67%

The Vanguard FTSE Canada All Cap Index ETF (TSX:VCN) provides investors with exposure to a broad spectrum of Canadian companies, ranging from large-cap blue-chip stocks to smaller, high-growth firms. Designed to track the FTSE Canada All Cap Domestic Index, VCN offers diversified exposure across key Canadian industries, including financials, energy, and technology. In 2024, the ETF delivered an impressive return of 29.8%, driven by strong performance in Canada’s financial and energy sectors. Its quarterly dividends, yielding 2.47% most recently, further enhance its appeal to passive income investors.

One of the fund’s top holdings is Brookfield Corporation (NYSE:BN), a financial services company specializing in alternative asset management and real estate investment management. In the third quarter of 2024, Brookfield Corporation (NYSE:BN) reported record distributable earnings of $1.3 billion, a 19% increase year-over-year. The company also completed over $17 billion in asset monetizations and committed $20 billion to new investments. Additionally, its Wealth Solutions business is projected to generate $2 billion in annualized earnings, contributing significantly to its strong financial position.

On November 15, BMO Capital Markets raised its price target for Brookfield Corporation (NYSE:BN) from $50 to $62 while maintaining an Outperform rating. The firm cited favorable conditions for asset monetizations, carry realizations, and benefits from lower yields as key drivers of its optimism.

5. TD Canadian Equity Index ETF (TSX:TTP)

5-year Share Price Performance as of December 9, 2024: 54.73%

The TD Canadian Equity Index ETF (TSX:TTP), offered by TD Asset Management under Toronto-Dominion Bank, is a Canadian index fund known for its low fees. Despite being a relatively new entrant in the Canadian ETF market, it has gained attention for its affordability. The ETF tracks the Solactive Canada Broad Market Index, featuring a management fee of just 0.04% and a management expense ratio of 0.05%.

Ranked among the fund’s top 10 holdings, The Bank of Nova Scotia (NYSE:BNS) provides a comprehensive range of banking and financial services across Canada, the U.S., and international markets. RBC Capital Markets recently revised its outlook for The Bank of Nova Scotia (NYSE:BNS), raising its price target from $65 to $74 while maintaining a Sector Perform rating. The adjustment reflects expectations of approximately 10% core earnings per share growth in 2025, despite a recent downward adjustment in estimates.

In terms of performance, The Bank of Nova Scotia (NYSE:BNS) reported International Banking earnings of $634 million—a 6% decline quarter-over-quarter but a 14% increase year-over-year. However, these results fell short of the $706 million estimate due to lower-than-expected revenues. On a positive note, the bank posted strong adjusted earnings of $2.2 billion, with a diluted EPS of $1.63. Additionally, the acquisition of a 14.9% stake in KeyCorp is anticipated to boost the bank’s earnings per share and return on equity.

4. iShares S&P/TSX Capped Materials Index ETF (TSX:XMA)

5-year Share Price Performance as of December 9, 2024: 57.66%

The iShares S&P/TSX Capped Materials Index ETF (TSX:XMA) seeks to replicate the performance of the S&P/TSX Capped Materials Index, which focuses on Canadian materials stocks. Year-to-date, the ETF has delivered returns of 29.37%. It also distributes quarterly dividends with a yield of 0.97%.

Nutrien Ltd. (NYSE:NTR), a leading Canadian agriculture and fertilizer company and one of the world’s largest producers of potash and nitrogen fertilizers, is ranked among the top 10 largest holdings of the ETF. On December 4, BMO Capital Markets reaffirmed its Outperform rating for Nutrien Ltd. (NYSE:NTR) and maintained a $70 price target. This decision followed a strategic update from Nutrien’s leadership, outlining the company’s plans through 2025 and 2026. BMO highlighted Nutrien’s commitment to maintaining substantial potash capacity, a market that has shown steady recovery with increasing demand over the past two years. The company’s strategy positions it to capitalize on market growth while prioritizing operational efficiency and profitability.

In its Q3 2024 earnings report, Nutrien Ltd. (NYSE:NTR) showcased significant achievements despite challenges. While lower benchmark potash prices and reduced nitrogen adjusted EBITDA impacted results, the company reported higher upstream sales volumes and adjusted EBITDA for the first nine months of 2024.  also announced plans to achieve $200 million in annual operational efficiencies by 2025. For the quarter, adjusted EBITDA totaled $4.3 billion, with retail adjusted EBITDA increasing 10% year-over-year.

3. iShares Canadian Growth Index ETF (TSX:XCG)

5-year Share Price Performance as of December 9, 2024: 59.52%

The iShares Canadian Growth Index ETF (TSX:XCG) employs a straightforward strategy, ranking large- and mid-cap Canadian stocks based on a composite score of growth and value characteristics. Stocks with the strongest growth metrics are included, and holdings are weighted by market capitalization. Over the past year, the C$104.2 million ETF delivered a 28.43% return, closely matching the average gain of funds in the Canadian equity category.

Waste Connections, Inc. (NYSE:WCN), a leading provider of non-hazardous waste collection, transfer, disposal, and resource recovery services, is one of the top holdings in the iShares Canadian Growth Index ETF (TSX:XCG). The company delivered a strong financial performance in Q3 2024, showcasing notable growth in both revenue and adjusted EBITDA. Revenue rose to $2.338 billion, reflecting a 13.3% increase compared to the previous year, while adjusted EBITDA surged 17.3% year-over-year to $787.4 million. The company also raised its full-year guidance, projecting revenue of approximately $8.9 billion and adjusted EBITDA of around $2.91 billion. In addition, Waste Connections, Inc. (NYSE:WCN) announced a 10.5% increase in its quarterly cash dividend, continuing its streak of double-digit dividend growth.

In October, Oppenheimer revised its outlook on Waste Connections, Inc. (NYSE:WCN), lowering the price target slightly from $194 to $192 but reaffirming an Outperform rating on the stock. While the company faced challenges in waste volumes and the construction and demolition segment, analysts remain optimistic, projecting mid- to high single-digit revenue and EBITDA growth for 2025.

2. Global X S&P/TSX 60 Index ETF(TSX:HXT)

5-year Share Price Performance as of December 9, 2024: 77.76%

The Global X S&P/TSX 60 Index ETF (TSX:HXT) aims to replicate the performance of the S&P/TSX 60 Index, which comprises 60 of the largest companies listed on the Toronto Stock Exchange. Launched in September 2010 and managed by Global X ETFs Canada, the ETF has significant exposure to the financial sector, which accounts for 36.30% of its assets.

Among its largest holdings is Canadian Natural Resources Ltd (NYSE:CNQ), one of Canada’s leading independent crude oil and natural gas producers. In the third quarter of 2024, the company reported a profit of $2.27 billion, slightly down from $2.34 billion in the same period last year due to lower commodity prices. Earnings remained steady at $1.06 per diluted share, while adjusted earnings declined to $0.97 per share compared to $1.30 per share in Q3 2023.

In October, BMO Capital Markets raised its price target for Canadian Natural Resources Ltd (NYSE:CNQ) to C$60 from C$57.50 while maintaining its Outperform rating. The revision came after the company announced the acquisition of Chevron’s remaining interests in the Western Canadian Sedimentary Basin, including its stake in the Athabasca Oil Sands Project. BMO Capital commended the deal, citing an attractive purchase price and the inclusion of the Duvernay asset, which is strategically located near Canadian Natural’s Montney operations and has shown improved productivity.

1. iShares S&P/TSX Capped Information Technology Index ETF (TSX:XIT)

5-year Share Price Performance as of December 9, 2024: 152.92%

The iShares S&P/TSX Capped Information Technology Index ETF (TSX:XIT) offers investors exposure to leading Canadian IT companies through an index-driven strategy. Ideal for those seeking to capitalize on the growth of Canada’s technology sector, the ETF has delivered a year-to-date return of 42.24%, reflecting steady performance. While the fund’s price-to-earnings ratio stands at a high 65.97, this is typical for tech-focused funds with significant growth prospects.

One of its notable holdings, Celestica Inc. (NYSE:CLS), an American-Canadian multinational electronics manufacturing services company, holds the fourth-largest position in the ETF with an 8.05% weighting. In Q3 2024, Celestica Inc. (NYSE:CLS) reported a revenue surge of 22% year-over-year, reaching $2.50 billion. Its gross profit increased by 25% to $259.1 million, driven by higher revenues and operational efficiencies, while diluted earnings per share rose 15% to $0.77.

Stifel remains optimistic about Celestica’s outlook, raising its price target to $100 from $70 and maintaining a Buy rating on December 10. The firm attributes its confidence to strong growth driven by demand from hyperscale clients, who contribute around 40% of Celestica’s revenues, and a recovery in industrial markets. Stifel projects Celestica’s earnings per share to range between $5.50 and $5.60, excluding potential benefits from mergers, acquisitions, or significant share repurchase activities.

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