Hold on there. Before you start investing as a Canadian, there are a few boxes you should check first.
The first is an emergency fund, typically about six months’ worth of expenses set aside in cash or a high-interest savings account
Think rent, groceries, car payments, and anything unexpected that might come up. The goal is simple. If life throws you a curveball, you are not forced to sell your investments at the worst possible time just to cover bills.
The second comes from legendary Fidelity Magellan fund manager Peter Lynch, author of One Up on Wall Street: buy a house.
Lynch argued that a house is one of the few investments people consistently get right. Not because they are experts, but because they treat it seriously. They spend months researching neighborhoods, comparing prices, walking through properties, and thinking long term.
On top of that, it is one of the only investments most people make using low-cost leverage. A mortgage lets you control a large asset with relatively little upfront capital, which can amplify long-term returns if prices rise.
But if you aren’t ready to buy a house yet, a simple way to get started investing is through a Tax-Free Savings Account (TFSA), using low-cost index-based exchange-traded funds (ETFs) instead of picking individual stocks.
Here are two ETFs that you can combine in a simple 50/50 split to build a diversified North American portfolio.
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Invest in the S&P 500
The Vanguard S&P 500 Index ETF (TSX: VFV) gives you exposure to 500 of the largest companies in the United States.
These are not just any companies. They are selected based on size, liquidity, and consistent earnings, making the index a collection of established blue-chip firms. The ETF is market-cap weighted, which means the largest companies take up the biggest share of the portfolio.
This has a useful side effect. As companies grow and succeed, they naturally become a larger part of the index. Underperformers shrink or get removed altogether. That built-in “self-cleansing” mechanism is one reason why the S&P 500 Index has been such a strong long-term performer.
VFV tracks this index very closely and does so at a low cost. The expense ratio is just 0.09%, which means for every $10,000 invested, you are paying about $9 per year in fees.
The dividend yield is modest at around 0.97%, but that is not really the point here. This ETF is designed for growth. Any dividends you receive are best reinvested to compound over time.
Invest in the Canadian market
To balance out your U.S. exposure, you can add the iShares Core S&P/TSX Capped Composite Index ETF (TSX: XIC).
This ETF tracks the broad Canadian stock market, holding over 200 companies across sectors like financials, energy, materials, and industrials. Like VFV, it is market-cap weighted. That means Canada’s largest banks and energy companies make up a significant portion of the portfolio.
One key difference is income. Canadian stocks tend to pay higher dividends than U.S. stocks. XIC currently offers a trailing 12-month yield of about 2.1%. That provides a bit more income, though again, if you are still in the growth phase, reinvesting those dividends is usually the better move.
It is also very cost-efficient, with a 0.06% expense ratio. That works out to about $6 per year for every $10,000 invested.
