Exchange-traded funds (ETF) can be the perfect way to accumulate passive income in your Tax-Free Savings Account (TFSA). These types of investments offer a simple, diversified way to invest in a whole collection of stocks or bonds without needing to pick individual ones.
Whether you’re looking for dividend-paying stocks or bonds that provide steady interest, buying an ETF can do the heavy lifting by spreading your risk across multiple assets. And with their low management fees, ETFs leave more money in your wallet.
Here are two ETFs I’d consider buying in October.
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VXC
Vanguard FTSE Global All Cap ex Canada Index ETF (TSX:VXC) is a fantastic choice for making passive income in your TFSA. It offers broad global diversification, investing in stocks across major markets like the U.S., Europe, and Asia, as well as in emerging economies. With exposure to over 99.5% stocks, VXC provides investors with access to industries ranging from tech and healthcare to financial services and consumer goods. Its top holdings, such as Vanguard Large-Cap ETF and FTSE Developed ex-North America ETF, ensure that you’re investing in a wide range of companies, reducing the risk associated with picking individual stocks. This makes it a reliable option for long-term growth and income.
One of the best things about VXC is that it simplifies global investing while still being incredibly affordable. With Vanguard’s reputation for low fees, you can maximize your returns without worrying about management costs eating into your gains. Additionally, VXC has a 1.51% yield. This may not sound high, but over time, the combination of reinvesting dividends and compounding can provide a solid income stream. Plus, with sectors like technology and healthcare making up a substantial portion of the ETF, investors are positioned to benefit from industries that are likely to see continued growth.
VXC also offers stability with its broad mix of industries. Whether it’s industrials, consumer cyclical, or utilities, this ETF is designed to withstand market fluctuations while capturing growth opportunities. The combination of global exposure and sector diversification means you’re not overly reliant on any one market or industry. It’s an ideal choice for investors looking to build up a nest egg in their TFSA.
XIU
Then there’s the iShares S&P/TSX 60 Index ETF (TSX:XIU). As one of the oldest and largest ETFs in Canada, it tracks the top 60 blue-chip companies on the TSX, giving you exposure to some of the biggest names in Canadian finance, energy, and industrial sectors. With a yield of 2.92%, this ETF offers a solid stream of dividend income while providing broad market exposure, which makes it smart choice for long-term investors.
What makes XIU especially appealing is its stability. With a price/earnings (P/E) ratio of 14.77 and an impressive year-to-date return of 16.75%, this ETF combines growth potential with reliable income. Its holdings are well-diversified across various sectors, with financial services making up over 35% of the portfolio, followed by energy and industrials. This diversification helps reduce risk while giving you exposure to Canada’s economic powerhouses and ensuring your portfolio is balanced and resilient through market ups and downs.
On top of that, XIU is incredibly cost-effective, with a very low expense ratio. This means more of your money stays invested and working for you. With a track record dating back to 1999, this ETF has proven itself as a reliable choice for Canadians looking to generate passive income in their TFSA.
