Crafting a lifelong investment portfolio requires choosing assets you can trust through decades of market cycles. The ultimate goal is establish a simple, durable investment foundation for retirement. This often means building a core portfolio with low-cost, strategically sound exchange-traded funds (ETFs) that you can buy and confidently hold forever.
Here are three best-in-class Canadian ETFs I’d personally buy and hold forever. Each serves a distinct and essential portfolio role, and you may consider them for the core of your forever portfolio.
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iShares Core S&P/TSX Capped Composite ETF: Your Canadian foundation
For investors who want to own the broad Canadian market with zero fuss, the iShares Core S&P/TSX Capped Composite ETF (TSX:XIC) is the definitive choice. It is designed to do one job perfectly: passively track the S&P/TSX Capped Composite Index at an exceptionally low cost.
With a management expense ratio (MER) of just 0.06%, you pay only $0.60 annually for every $1,000 invested. This cost efficiency is crucial for long-term compounding by reducing cost drag on returns. The ETF holds over 200 stocks in its $23.9 billion portfolio, providing instant diversification across the Canadian economy. Over the past decade, it has delivered average annual returns of 12.6%, virtually matching its benchmark net of fees.
The takeaway is that with the XIC ETF, you will never significantly underperform the Canadian market. You get a low-cost, set-and-forget foundation.
Take note that the Canadian market is heavily weighted toward financials (31.4%), materials, and energy stocks. This introduces sector concentration, but for a core Canadian equity holding, accepting this market-weighted exposure is part of the “market returns” strategy.
Sleep easy knowing your portfolio will reliably capture Canada’s stock market returns.
BMO Canadian High Dividend Covered Call ETF: Your monthly income-producing investment
If your forever strategy prioritizes generating steady passive income, the BMO Canadian High Dividend Covered Call ETF (TSX:ZWC) is a powerful tool. It enhances a portfolio of high-quality Canadian dividend stocks by writing (selling) covered call options on the 90 curated holdings in its $2 billion portfolio. This strategy boosts cash flow, and the ETF converts traditional quarterly dividends into consistent, high-yield monthly distributions.
The result is a formidable annualized yield of roughly 6%, paid monthly. This makes the ZWC ETF highly attractive for passive income-focused investors, especially within tax-advantaged accounts like TFSAs or RRSPs. The dividend ETF’s strategy has proven successful, delivering an average annual return of 12.4% over the past five years, turning a $10,000 investment into approximately $18,000.
The trade-off for high income is the capped upside during strong bull markets, as the call options limit gains on the underlying stocks beyond certain points. For a forever portfolio, however, the ZWC ETF is the high-octane income generating engine that can provide reliable cash flow for decades.
BMO S&P 500 Index ETF (TSX:ZSP): Your global growth anchor
A forever portfolio confined only to Canada misses immense growth and diversification opportunities. The BMO S&P 500 Index ETF (TSX:ZSP) provides essential, low-cost exposure to the 500 largest and most influential companies in the United States.
Holding the ZSP gives you direct access to the world’s leading innovators across technology, healthcare, and consumer sectors. While the TSX has minimal healthcare and technology exposure, the S&P 500 dedicates over 9% to healthcare and 34.3% to information technology sector leaders, including Nvidia, Microsoft, and Alphabet (Google). With an MER of 0.09%, this diversification is a bargain at a cost of $0.90 annually on every $1,000 invested.
The S&P 500 Index ETF’s historical performance speaks for itself. The ZSP ETF has delivered average annual returns of 15.8% over the past five years, growing a $10,000 investment to more than $20,800. Since its inception in 2012, that same investment could have grown to more than $82,000.
ZSP Total Return Price data by YCharts
Canadian investors holding the unhedged version of the S&P 500 ETF also gain natural currency diversification, often benefiting from long-term exchange rate trends.
