4 Canadian ETFs to Buy and Hold Forever in Your TFSA

These ETFs provide investors with the perfect portfolio of options for those seeking long-term growth in a TFSA.

Amy Legate-Wolfe

Author Bio Amy became interested in investing in 2018 after having her first daughter. After receiving a masters degree in journalism from Western University, she became frustrated that the finance industry remained a confusing place for Canadians like her: new parents, millennials, and other young people who needed to understand their finances. Now, Amy focuses on tech companies and renewable energy for growth opportunities, coupling that with long-term investing strategies and equities. She also provides investors with a daily newsletter, Canada Stock Digest, for daily market updates. Her work can also be found at Canada's National Observer, where she writes on the business side of climate action. Before joining Motley Fool Canada, Amy wrote for major news organizations including HuffPost, CTVNews.ca, and CBC. When she’s not researching investing strategies, Amy’s time is pretty much monopolized by her two wild daughters, but in what little spare time she has she loves to do yoga, go on walks with her dog, and travel with her husband. Social Media Follow Amy on LinkedIn and Canada Stock Digest. Favorite Investment Quote “October: This is one of the particularly dangerous months to speculate in stocks. The others are July, January, September, April, November, May, March, June, December, August and February.” – Mark Twain

Published December 2, 2024 3:30 pm EST

Investing in exchange-traded funds (ETFs) within a Tax-Free Savings Account (TFSA) is a savvy strategy for Canadians aiming to grow their wealth over the long term. ETFs offer diversification, cost efficiency, and simplicity, making them ideal for TFSAs, where investment income and capital gains are tax-free. Let’s explore why long-term ETFs are a top choice for your TFSA and delve into the specifics of four standout options.

ETF chart stocks — Image source: Getty Images

Why ETFs?

First, let’s get into why ETFs can be such a strong choice for your TFSA. In this case, ETFs provide instant diversification by pooling together a variety of assets, such as stocks and bonds, into a single fund. This broad exposure reduces the risk associated with investing in individual securities. For TFSA investors, this means you can achieve a balanced portfolio without the complexity of managing multiple investments.

Cost efficiency is another significant advantage. ETFs typically have lower management fees compared to mutual funds, allowing more of your money to work for you. Over time, these savings can compound, enhancing your overall returns within the tax-free environment of a TFSA.

Moreover, ETFs offer flexibility and liquidity. These are traded on stock exchanges, so you can buy and sell them throughout the trading day at market prices. This accessibility makes it easier to adjust your investment strategy as your financial goals evolve. Now, let’s examine four ETFs that are particularly well-suited for long-term holding in a TFSA.

The ETFs

iShares Core MSCI All Country World ex Canada Index ETF (TSX: XAW) provides exposure to global equities, excluding Canadian companies, making it ideal for investors seeking international diversification. It includes holdings from developed and emerging markets across various sectors. As of writing, XAW had a year-to-date return of 25.52%, reflecting strong global market performance.

Then there’s Vanguard All-Equity ETF Portfolio (TSX: VEQT), which holds 100% equities, offering diversified exposure across Canadian, U.S., and international stocks. It’s designed for investors with a higher risk tolerance seeking long-term capital growth. As of writing, VEQT had a year-to-date return of 25.77%, indicating robust performance.

For growth, Vanguard Growth ETF Portfolio (TSX: VGRO) maintains an asset mix of approximately 80% equities and 20% fixed income, providing broad exposure across Canadian, U.S., and international markets. This diversification balances growth potential with some degree of stability. As of writing, VGRO had a year-to-date return of 20.89%, showcasing solid growth.

Finally, Vanguard FTSE Canadian High Dividend Yield Index ETF (TSX: VDY) focuses on Canadian companies with high dividend yields, primarily in the financials, energy, and telecommunications sectors. It’s suitable for investors seeking regular income through dividends. As of writing, VDY had a year-to-date return of 18.50%, reflecting steady performance, making it an ideal investment for extra income.

Bottom line

When selecting ETFs for your TFSA, consider your investment goals, risk tolerance, and the importance of diversification. Combining these ETFs can help create a balanced portfolio tailored to your financial objectives. Remember, while TFSAs offer tax advantages, it’s crucial to invest in products that align with your long-term strategy. That way, investors will always maximize growth potential.