Finding a suitable growth exchange-traded fund (ETF) is less about reading headlines and more about understanding methodology. What matters is how an ETF selects and weights its holdings. Despite popular belief, you do not need to pile into U.S. technology stocks or take leveraged bets to access growth. There are solid opportunities right here on the TSX.
Canadian investors often default to dividend strategies, which tend to emphasize mature, cash-paying companies that may be undervalued. If you flip that logic around and look for ETFs with low yields, you often find portfolios designed to compound through share price appreciation instead. Below are two Canadian growth ETFs from iShares that fit that profile.
Broad Canadian growth ETF
The first pick is the iShares Canadian Growth Index ETF (TSX: XCG).
This ETF passively tracks the Dow Jones Canada Select Growth Index. The methodology screens for companies with forward earnings growth expected to exceed the broader market. As a result, its composition looks very different from a standard TSX index ETF.
While the TSX overall is heavily tilted toward dividend-paying financials and energy stocks, XCG places more weight on materials, industrials, and information technology. These are sectors where companies tend to reinvest retained earnings or deploy capital through buybacks rather than paying dividends. Management believes it can earn returns above its cost of capital.
That philosophy shows up in the income profile. The trailing 12-month yield is just 0.43%. Income is not the goal here. Total return is. Over the past 10 years, XCG has delivered an annualized total return of 10.5%.
The main drawback is cost. The management expense ratio sits at 0.55%, which is high for a passive ETF. That said, for investors who want a hands-off way to access Canadian growth, the simplicity may justify the fee. It can also serve as a useful reference point for building a diversified growth-oriented stock portfolio.
Canadian consumer staples ETF
At first glance, consumer staples may seem like an odd choice for a growth discussion. In the U.S., these stocks are often defensive, low-volatility, and income-oriented. Canada is different.
The consumer staples sector here is much smaller, competition is intense, and many companies do not pay high dividends. That is by design. Instead of returning cash to shareholders, these firms often reinvest in store expansion, new product lines, logistics, or tax-efficient share buybacks.
That dynamic is captured by the iShares S&P/TSX Capped Consumer Staples Index ETF (TSX: XST).
XST is also more concentrated than a broad market ETF. It offers pure-play exposure to Canada’s largest food retailers and packaged food, meat, and personal care companies.
The ETF has a trailing 12-month yield of just 0.68%. Like XCG, income takes a back seat to capital appreciation. The expense ratio is higher at 0.61%, but long-term performance has been strong. Over the past 10 years, the ETF has compounded at an annualized 10.9%.
