Building serious wealth over the long haul is all about owning high-quality investments and letting the power of compounding do the work. That’s why the Tax-Free Savings Account (TFSA) is one of the best accounts for Canadians to buy and hold stocks and ETFs inside, since every dollar of growth, dividends, and capital gains stays tax-free forever.
That tax shelter makes compounding even more powerful. Over decades, the difference from not having to pay tax on any of your gains is massive.
And while many investors typically consider stocks for their TFSA first, ETFs continue to rise in popularity since they help make long-term investing simple and reliable.
One of the biggest advantages of ETFs is that they offer investors instant diversification across dozens or hundreds of stocks, so your risk is spread across many different companies.
That’s why ETFs are some of the best tools for TFSA investors who want steady growth and income with minimal effort or hassle.
So, with that in mind, if you’re looking for high-quality Canadian ETFs you can buy in your TFSA and hold for decades to come, here are three top picks.
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One of the best ETFs to buy for exposure to the Canadian economy
There’s no question that one of the most popular ETFs to buy among Canadian investors is the iShares S&P/TSX 60 Index ETF (TSX: XIU).
The XIU ETF is the simplest way to gain exposure to some of Canada’s largest and most reliable blue-chip stocks. That means exposure to big banks, energy producers, railways, telecoms, utilities, and other essential businesses.
So, not only does the ETF offer exposure to several different stocks, but it also offers diversification across multiple sectors.
That’s why it’s one of the best Canadian ETFs to buy and hold forever. The exposure to reliable blue-chip stocks across multiple sectors not only mitigates a ton of risk for investors, but it also offers significant long-term growth potential, especially if you own it in a TFSA.
A smart way to gain exposure to Canada’s big banks
In addition to the XIU, another high-quality Canadian ETF to buy and hold for the long haul is the BMO Equal Weight Banks Index ETF (TSX: ZEB).
The ZEB ETF tracks an equal-weight index of Canada’s six major banks. So instead of weighting them by their market cap, where the fund would offer investors more exposure to the largest banks, the equal weighting setup gives each bank the same allocation. That’s crucial because it helps to balance exposure and avoids over-reliance on the biggest players.
The main reason the ZEB is one of the best ETFs to buy now and hold for years is that Canadian banks are some of the most stable and profitable companies in the world.
They operate in a regulated industry with strong balance sheets, consistent earnings, and a long history of paying and growing dividends even through recessions.
A top pick for income investors who want global exposure
In addition to the XIU and ZEB ETFs, one pick that typically flies more under the radar is the BMO Global High Dividend Covered Call ETF (TSX: ZWG).
The ZWG ETF invests in a portfolio of global high-dividend companies. In addition, though, it also uses a covered call strategy to generate extra income and boost the yield it can offer to investors.
Since it already owns dividend-paying stocks from around the world, the covered call strategy it employs boosts the overall distribution yield significantly, without adding significant risk
In fact, the only trade-off is some capped upside if stocks rally hard. But in a sideways or moderate-growth environment, the higher-dividend yield more than offsets that small risk.
So, while the XIU and ZEB ETFs offer yields of 2.3% and 2.9%, respectively, the ZWG ETF offers a current yield of roughly 6%.
Therefore, if you’re a dividend investor, there’s no question that the ZWG is one of the best Canadian ETFs to buy for the long haul.
