The Best Canadian ETFs $1,000 Can Buy on the TSX Today

Investing in these Canadian ETFs can help you benefit from inflation-beating returns in the next decade. Here’s why.

Aditya Raghunath

Aditya Raghunath joined the Motley Fool Canada team in 2019 and has close to seven years of experience in covering publicly-listed companies. With a post-graduate degree in finance, Aditya aims to educate and engage Canadians by writing extensively about growth, dividend, and value stocks. If you are considering investing in the stock market, he recommends reading The Intelligent Investor by Benjamin Graham before taking the plunge.

Published February 10, 2025 10:30 am EST

Analyzing individual stocks is quite tricky and time-consuming for the average investor. Alternatively, investing in exchange-traded funds, or ETFs, is the best way for most Canadians to gain exposure to the equity market.

Generally, ETFs own a basket of stocks across multiple sectors that provide you with diversification, lowering overall risk. In this article, I have identified the three best Canadian ETFs you can buy for $1,000 today and begin your investment journey.

ETF chart stocks — Image source: Getty Images

The VSP ETF

Vanguard S&P 500 Index ETF (TSX: VSP) should be a core holding in your portfolio, given it has returned 209% to shareholders in dividend-adjusted gains over the past decade. The VSP ETF tracks the S&P 500, an index that provides you with exposure to the largest companies in the U.S.

The median market cap of companies in the VSP is $459.7 billion, with a return on equity of 24.6%. In addition to capital gains, the VSP ETF provides a dividend yield of 1.3%. Moreover, the VSP ETF is hedged to the Canadian dollar, shielding you from exchange rate fluctuations.

With a management fee of 0.09%, the VSP ETF is a low-cost fund and has attracted more than $4.3 billion in assets under management.

The XIU ETF

iShares S&P/TSX ETF (TSX: XIU) seeks to replicate the performance of the S&P/TSX 60 index. It offers you exposure to the 60 largest companies in Canada and is among the country’s most liquid and largest funds.

In the last 10 years, the XIU ETF has returned 134% to shareholders after adjusting for dividend reinvestments. With a management fee of 0.15% and an expense ratio of 0.18%, the TSX ETF holds blue-chip stocks such as Royal Bank of Canada, Enbridge, and Canadian National Railway. The fund also offers you a yield of 3%.

With close to $16 billion in assets under management, XIU is well-diversified. The financial sector accounts for 36% of the fund, followed by energy at 16.7%, information technology at 11.8%, industrials at 11.3%, and materials at 10.3%.

The XIT ETF

The final ETF on the list is iShares S&P/TSX Capped Information Technology Index ETF (TSX: XIT). This fund has returned more than 600% to shareholders since it was launched in March 2001. The XIT offers you exposure to Canadian companies in the tech sector.

The top holdings of the XIT ETF include Constellation Software, Shopify, CGI, Celestica, and Descartes Systems. These companies account for 85% of the fund and do not offer much diversification.

The application software accounts for. 43.8% of the fund, followed by internet services at 24.1%, IT Consulting at 18%, and electronic manufacturing at 11.3%.

With $858 million in assets under management, XIT is gaining popularity among Canadians, especially those with a higher risk appetite.

The Foolish takeaway

A $333 investment in each of these three ETFs 10 years back would be worth close to $4,000 today. While past returns don’t matter much to current and future investors, we can see that investing in diversified ETFs can help you generate inflation-beating returns over time.