As we step into 2025, investors are eyeing opportunities to set the tone for a successful financial year. Exchange-traded funds (ETFs) offer a diversified, cost-effective, and convenient way to invest in the stock market. For Canadian investors, there is no shortage of excellent ETFs to consider, but three stand out as top picks for January. These ETFs are designed to provide broad market exposure, diversify portfolios, and minimize risk. Here is why these three ETFs deserve a spot in your portfolio to kick off 2025.
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iShares Core MSCI EAFE IMI Index ETF
The iShares Core MSCI EAFE IMI Index ETF (TSX: XEF) offers exposure to international markets outside of North America, including Europe, Asia, and Australasia. This ETF is an excellent choice for investors looking to diversify globally.
XEF provides access to thousands of large, mid and small-cap stocks from developed countries. Major markets include Japan, the UK, France, and Germany. This ETF is available in both hedged and unhedged versions, allowing investors to choose how to manage currency risk.
In addition, the global economy is expected to gain momentum in 2025, with easing inflation and strong consumer demand in developed markets. Investing in XEF at the start of the year positions you to benefit from this recovery. Moreover, international equities are trading at attractive valuations compared to North American markets, making this a great time to gain exposure. Its focus on stability and innovation makes it a strong contender for 2025.
Vanguard FTSE Canada All Cap Index ETF
The Vanguard FTSE Canada All Cap Index ETF (TSX: VCN) is a cornerstone investment for those looking to gain exposure to the Canadian stock market. It tracks the FTSE Canada All Cap Index, which includes large, mid and small-cap companies.
VCN covers nearly the entire Canadian market, including sectors like financials, energy, and materials. The ETF includes blue-chip stocks such as Royal Bank of Canada (RBC), Shopify, and Enbridge, which offer a blend of growth and stability.
Canada’s economy is expected to benefit from a rebound in commodity prices and strong export demand in 2025. In addition, the Bank of Canada is projected to maintain a balanced approach to interest rates, which should support corporate earnings. VCN is an ideal pick for investors looking to capitalize on these trends while enjoying the stability of Canadian equities. For investors seeking exposure to both traditional and innovative sectors within Canada, VCN delivers a well-rounded approach.
BMO S&P/TSX Capped Composite Index ETF
The BMO S&P/TSX Capped Composite Index ETF (TSX: ZCN) is a popular choice for those who want to invest in the broader Canadian market. This ETF replicates the performance of the S&P/TSX Capped Composite Index, Canada’s benchmark index.
ZCN includes over 200 of the largest publicly traded companies of Canada, covering all major sectors. As one of the most traded ETFs in Canada, ZCN offers high liquidity and tight bid-ask spreads, making it easy to buy and sell. In addition, ZCN provides a solid dividend yield, appealing to income-focused investors.
January is an excellent time to invest in ZCN, as Canadian equities often experience a seasonal boost early in the year due to the “January Effect.” Furthermore, the diversification within this ETF helps mitigate sector-specific risks, allowing investors to start the year with confidence. Its dividend-paying stocks offer an added layer of income stability, making it a strong option for growth and income-focused portfolios.
