Canadian investors are falling in love with exchange traded funds (ETFs). The latest TSX ETF report for the fourth quarter of 2024 says assets under management (AUM) surpassed the half-a-trillion record set during the summer as money continues to flow into various ETF strategies, growth-seeking mandates among them.
If you’re a Canadian investor looking for long-term growth opportunities, exchange-traded funds offer a simple and effective way to instantly and cost-effectively diversify your portfolio. Growth-oriented ETFs, in particular, are a great option for tapping into companies poised for above-average investment returns. Two of my favourite growth ETFs for 2025 could help you achieve your financial goals. Let’s check them out.
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iShares Canadian Growth Index ETF
Managed by BlackRock, the largest ETF provider in the world, the iShares Canadian Growth Index ETF (TSX:XCG) is a favourite growth-oriented fund with a proven successful strategy. This fund is designed to achieve long-term capital growth by investing in large and mid-sized Canadian companies with earnings expected to grow faster than the broader market. It has consistently delivered impressive results, with a 10-year average annual return of 8.3%. This performance means that an investment in the fund could double in less than a decade, according to the Rule of 72.
The fund holds more than $110 million in assets, distributed across 35 companies. Brookfield Corporation and Shopify are its largest holdings, making up 10% and 9.3% of the portfolio, respectively. While it offers exposure to multiple sectors, the ETF is tilted heavily toward industrials, which account for 32.7% of its holdings, and technology, which makes up 20.5%. The remaining portion includes financials and other sectors, providing diversification while maintaining a growth focus.
Despite its strong performance and sector tilts, the fund’s management expense ratio (MER) of 0.55% is quite affordable. This translates to an annual cost of just $5.50 for every $1,000 invested, making it a cost-effective way to add growth potential to your portfolio.
CI Morningstar Canada Momentum Index ETF
The second ETF I’d recommend to growth-oriented investors is the CI Morningstar Canada Momentum Index ETF (TSX:WXM). This fund takes a data-driven, multifactor approach to investing in Canadian equities. Its index manager identifies companies with strong fundamentals and positive price momentum by analyzing metrics such as return on equity, price momentum over different timeframes, and earnings estimate revisions.
Since its inception in 2012, the WXM ETF has achieved an average annual return of 11.1%, significantly outperforming the broader Canadian stock market. By the end of 2024, an initial $10,000 investment in the fund would have grown to nearly $39,000, a testament to its strong growth potential.
The CI Morningstar Canada Momentum Index ETF maintains a portfolio of 30 equally weighted holdings, rebalanced quarterly to reflect changes in the underlying index. As of January 2025, the fund’s largest sector allocations include financials (20.2%), energy (16.9%), and basic materials (15.6%), each making up a significant portion of its holdings.
The fund’s strategy ensures it remains flexible and responsive to shifting market conditions, giving investors access to some of Canada’s most dynamic companies. While its MER is slightly higher at 0.65%, the cost of $6.50 per $1,000 invested is reasonable given its potential for superior returns.
Additionally, the fund pays quarterly distributions, offering investors a modest income stream.
Investor takeaway
Both ETFs represent excellent options for growth-focused investors. While the iShares Canadian Growth Index ETF provides exposure to a broad range of established growth companies, making it a reliable choice for those seeking steady, long-term capital appreciation, the CI Morningstar Canada Momentum Index ETF offers a more strategic, momentum-driven approach that could appeal to those looking for higher returns with an actively managed edge.
Growth-focused ETFs not only provide diversification but also simplify the investment process, eliminating the need to pick individual stocks. They are also cost-effective, accessible, and eligible for tax-advantaged accounts like RRSPs and TFSAs.
Whether you’re a seasoned investor or just starting out, these two growth ETFs are worth considering as you plan for 2025 and beyond.
That said, investors looking to gain an extra edge could also consider joining investment forums and services that can help narrow down various opportunities and provide valuable insights to help them stay on course over the long run.
