The Tax-Free Savings Account (TFSA) is an excellent tool for Canadian investors. Any income or capital gains earned inside the account are completely tax-free, making it ideal for long-term compounding. The key is to fill it with high-quality investments you can confidently hold through market cycles.
Here are three Canadian ETFs that jump out as strong, long-term TFSA candidates.
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Build a strong Canadian core
iShares S&P/TSX 60 Index ETF (TSX:XIU) is a foundational exchange-traded fund (ETF) for Canadian investors seeking reliable, long-term growth. It tracks the S&P/TSX 60 Index, giving you exposure to many of Canada’s largest and most established companies in a single investment.
With approximately $20.6 billion in assets, XIU is one of the most liquid ETFs in the country. Its low management expense ratio (MER) of 0.18% keeps costs minimal, while a yield of about 2.3% provides a steady stream of income. Importantly, the ETF is heavily weighted toward sectors where Canada excels, including financials (37% of the fund), energy (19%), and materials (15%).
Top holdings include the Big Five Canadian banks, as well as leading names, such as Enbridge, Canadian Natural Resources, and Shopify. Over the past decade, XIU has delivered an annual return of roughly 13.4%, illustrating its ability to build wealth over time. For investors seeking a dependable Canadian core, XIU is hard to beat.
Don’t miss global growth
While Canadian stocks are solid, limiting your portfolio to one country may not provide sufficient diversification. That’s where iShares Core MSCI All Country World ex Canada Index ETF (TSX:XAW) comes in.
XAW provides instant global diversification by investing in U.S., international, and emerging market equities. With about 63% allocated to the U.S. and meaningful exposure to countries like Japan (5.9% of the fund) and the U.K. (3.5%), it ensures you benefit from growth wherever it occurs.
The ETF holds around $3.7 billion in assets and maintains a low MER of 0.22%. Its sector allocation includes: information technology (25% of the fund), financials (16%), industrials (12%), consumer discretionary (9.7%), health care (9.0%), complementing Canada’s more traditional sectors.
Over the last 10 years, XAW has returned approximately 12.7% annually. Adding this ETF to your TFSA helps reduce concentration risk and positions your portfolio to capture global growth.
One-stop simplicity for long-term investors
For investors who prefer a hands-off approach, iShares Core Equity ETF Portfolio (TSX:XEQT) offers a complete, all-in-one solution.
XEQT holds a diversified mix of underlying ETFs, providing exposure to thousands of stocks worldwide. It maintains a 100% equity allocation designed for maximum long-term growth and is automatically rebalanced to stay aligned with its target weights.
With approximately $15.2 billion in assets and a competitive MER of 0.20%, XEQT combines convenience with cost efficiency. Its geographic exposure includes about 43% in the U.S., 25% in Canada, and smaller allocations to international markets.
Although its yield is modest at around 0.9%, the focus here is growth. The ETF has delivered a five-year annual return of about 14%, making it an attractive option for investors who want simplicity along with domestic and global growth.
Investor takeaway
A successful TFSA strategy focuses on long-term growth, diversification, and low costs. XIU provides a strong Canadian foundation, XAW adds global exposure, and XEQT delivers an all-in-one solution for effortless investing.
By holding a combination of these ETFs — or even just one aligned with your style — you can build a resilient, tax-free portfolio designed to compound wealth for decades. Investors can utilize dollar-cost averaging to build their positions over time.
