One of the biggest mistakes many investors make when they first start building a portfolio of Canadian stocks or ETFs is trying to overcomplicate things.
They buy a handful of stocks across different sectors, add a few more names to “diversify,” maybe sprinkle in a dividend payer or two, and before long, they’re juggling 15 or 20 positions without a clear strategy. However, as important as diversification is to help mitigate risk, it also doesn’t have to be complicated.
In fact, one of the simplest and most effective ways to build a well-balanced portfolio is by buying high-quality ETFs. ETFs are ideal for many Canadian investors because with a single purchase, you can gain exposure to dozens, sometimes hundreds, of companies at once.
That reduces single-stock risk immensely, smooths out volatility, and makes it far easier to stay disciplined over the long haul.
So if you’ve got cash you’re looking to put to work and want reliable investments with built-in diversification, here are three top Canadian ETFs to consider today.
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One of the very best ETFs that Canadian investors can buy
Although ETFs offer instant diversification and exposure to dozens, if not hundreds of stocks, it’s still a smart idea to diversify your cash among different ETFs. That said, if I were forced to only hold a single ETF, the iShares Core S&P 500 Index ETF (TSX: XSP) would be my top choice.
If you want exposure to some of the largest and most dominant companies in the world, the XSP is one of the easiest ways to get it.
This ETF tracks the performance of the S&P 500, giving investors exposure to 500 leading U.S. companies across a wide range of industries, including technology, healthcare, financials, and consumer goods.
That means with a single ETF, you gain ownership in global giants with massive competitive advantages and long track records of growth. That’s why it’s one of the very best ETFs Canadians can add to their portfolio.
Furthermore, in addition to the companies the XSP offers exposure to, it also offers a currency-hedged structure, which helps reduce the impact of U.S. dollar fluctuations on returns.
So, if you’re looking for exposure to the U.S. economy and some of the largest and most dominant companies in the world, the XSP is easily one of the best ETFs Canadians can buy today.
A top ETF offering exposure to reliable Canadian stocks
In addition to the XSP, another top ETF to add to your watchlist today is the iShares S&P/TSX 60 Index ETF (TSX: XIU).
While U.S. exposure is important, Canadian investors shouldn’t ignore their home market, which is why the XIU, which offers exposure to 60 of the largest and most established companies in Canada, is one of my top recommendations.
In fact, many of the companies that the XIU holds are blue-chip stocks that dominate sectors like financials, energy, materials, and telecommunications.
Therefore, owning the XIU ETF gives you exposure to Canada’s largest banks, utilities, pipelines, and resource companies all in one fund. That’s attractive because these businesses tend to generate significant cash flow and many pay attractive dividends, making the XIU a solid foundation for income-focused investors as well.
Furthermore, because it focuses on large-cap companies, the XIU tends to be less volatile than smaller-cap Canadian stocks, which can make it easier to hold through market corrections.
A top ETF for growth investors
If you’re an investor looking for a bit more growth potential in your investments or just want even broader diversification, the BMO Growth ETF (TSX: ZGRO) is an excellent choice.
The ZGRO is an asset allocation ETF, meaning it doesn’t just hold stocks. It holds a mix of global equity ETFs and fixed-income investments in a single portfolio.
That means by buying the ZGRO ETF, you’re gaining exposure to thousands of companies around the world, plus the added balance of fixed income, making it perfect for investors who want simple diversification from high-quality Canadian ETFs.
So, if you’ve got cash you’re looking to put to work right now, the ZGRO ETF, combined with the XIU and XSP are undoubtedly three of the top picks Canadians can consider right now.
